ONGC eyes gas from Shale, pilot project to start in 2011

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ONGC eyes gas from Shale, pilot project to start in 2011

ONGC is looking at the possibility and feasibility of gas production from shale, says DK Pande, Director Exploration, ONGC.

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Q: Would you be sufficiently confident of the supply and demand conditions for gas to say that when the next administered price of natural gas is set in this country, it is likely to be lower than the current USD 4.2 per mmbtu that has been set. Is there atleast that much clarity?

Sethi: First of all USD 4.2 per mmbtu is not an administered price that has been set. I don't believe if that is an administered price. The only administered price that has been set is a price that Oil and Natural Gas Corporation (ONGC) gets for its gas which if I am not wrong is somewhere around USD 2.2 per mmbtu.

Q: I meant the EGOM price?

Sethi: The EGOM price unfortunately is a price driven by a formula which is unique to India and the concept itself is unique to this country. No other country prices natural gas based on a formula first and especially on the kind of formula that the EGOM has used. LNG is price based on a formula and that formula that drives LNG prices is significantly different from the formula that the EGOM has used to price natural gas.

So, personally I was never in support of this formula based pricing for natural gas. So, I don't know what to call that price whether it is a price for assessing the share of the government, is it the market price, there was a lot of lack of clarity on that price that came out of the EGOM. But the administered pricing mechanism (APM) price of gas which ONGC gets for its APM gas is really an administered price and that I think today is somewhere around USD 2.2 per mmbtu.

Q: You cannot even say with confidence that EGOM price can be headed lower next time it is fixed given the demand and supply conditions even that is not very certain?

Sethi: If the demand suddenly picks up as people are saying that we are out of this slowdown then who knows what the price of gas we may again see. Please remember LNG can sell at USD 13-14 but natural gas well at price of natural gas never touched those levels, nowhere did it touch those levels. So, please differentiate between the price of natural gas and LNG because many a times, I find that in the discourse, people are confusing one with the other.