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| Edited By: Swati Khandelwal |Source: Zee Business |Updated: Sep 10, 2019, 06:30 AM IST
About 50% of ONGC's capital expenditure goes into drilling activity, of which 28% goes into development drilling and the remaining 22% is used for exploratory drilling, says Shashi Shanker, its chairman & managing director. During an interview with Swati Khandelwal, Shankar said, "Large investments are needed to increase the production of fields, which are 30-50 years old now".
Subsidy has now become a part of history. We never offered any kind of subsidy in fiscal 2018 or 2019. Whatever little subsidy is given on LPG or kerosene is passed on directly with the help of benefit transfer. So as of now, there are no subsidies on crude oil. As far as oil price movement is concerned, then crude oil is an extremely volatile commodity. You might have seen that the prices of oil slipped below $30 per barrel in fiscal 2016 and then rose to $80 and six months back it dropped to $50, then $65, $70 and again it is back to $60. So, the changes in price levels are a common phenomenon and $60 is a comfortable level for our company and we will make reasonable money at this level.
About 50% of our capital expenditure goes into drilling activity, of which nearly 28% is invested in development drilling while the remaining 22% is used in exploratory drilling. One of the most important components is the rig hiring, whose prices keep moving along with the prices of crude oil. That is to say, if the prices dropped, the expenses incurred are less for carrying the same level of activity, and if the prices move higher then the expenditure is consequently higher to maintain the balance. But since the past five years, our capex plan is consistent at the level of around Rs 30,000 crore.
We have always accumulated funds for capex by the accrual of internal funds till date, and for many years we've been a debt-free company. We took the loan for the acquisition of HPCL. Interestingly, we just didn't fund the capex through the internal accrual but has also repaid the loan, and hopefully we will be a debt-free company once again by the end of this year.
We have decided to accumulate funds amounting to $2 billion through EMTN. EMTN is a new facility and will be listed on the Singapore Stock Exchange. If in future if we require money for any foreign acquisition or internal funding then we will take this money.
Every work is going very fast. We were supposed to create 29 wells, of which 25 have been done and, as of now, we are supposed to work on just four wells. Later, we are supposed to compete for certain things like pipeline laying, creation of surface infrastructure and offshore terminals and we are working on them. We will try to produce the first gas by the end of this year. Thus, the project is likely to be completed by the timeline.
The primary reason behind this decline is that more than 70% of oil comes from 30-50-year-old fields. Thus, its peak period is over and now they are at the decline stage. Huge investments are needed to increase production from these fields. In the process, you will have to introduce redevelopment projects, which is termed as Improved Oil Recovery (IOR), and to enhance its recovery we are supposed to go for an Enhanced Oil Recovery, which is an expensive activity. Interestingly, the government has taken a certain decision under which we will be provided with certain incentives on IOR activity, and for that, an Rs 86,000 crore project is onstream. And, that's why I can say that gas and oil production will go up in the remaining fiscal.
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