India's top energy explorer Oil and Natural Gas Corp could spend up to $7 billion to develop its block off the country's east coast and expects to begin gas production there in 2018, its chairman said on Thursday. ONGC's block in the Krishna-Godavari basin should produce 77,000 barrels per day of oil and up to 17 million cubic metres a day of natural gas at peak rate, DK Sarraf told reporters, after ONGC reported a 14 percent jump in quarterly net profit.
He added that the investment figures were based on preliminary estimates and that the company had "no plan" currently to bring in a foreign partner for the deepwater development. The company, which has struggled to maintain production from its ageing wells off India's west coast, is counting on the potentially large reserves of oil and gas from the KG-D5 block to boost future profits.
ONGC, majority-owned by the Indian government, reported a 14 percent rise in net income to 54.59 billion rupees ($839.59 million) in the quarter ended June 30, its fiscal first. The jump was driven by a much lower burden of government-imposed discounts on crude sales to state-run refiners. ONGC's share of the subsidy for the quarter was 11.33 billion rupees, compared with 132 billion a year earlier. India keeps a lid on retail prices of liquefied petroleum gas and kerosene, with upstream companies including ONGC and Oil India offering discounts on crude sales to help cut losses of state refiners.
A prolonged period of low crude oil prices coupled with the government's decision last year to deregulate the price of diesel, the country's most widely consumed fuel, has significantly lowered these discounts. That also helped the company improve net realisation, or earnings per barrel of crude, to $58.92 from $47.15 a barrel a year ago. Net sales for the quarter rose 4.4 percent to 226.96 billion rupees. Shares in ONGC, which has a market valuation of $35.59 billion, closed up 0.15 percent on Thursday, largely in line with the broader Mumbai market which closed up 0.14 percent.