New Delhi, Sept. 15: State-run ONGC has made another discovery in its Bay of Bengal block KG-D5, taking the number of finds in the area to 13.

ONGC discovered oil and gas in the well F-1 in the northern part of the KG basin block KG-DWN-98/2 or KG-D5, which sits next to the flagging KG-D6 block of Reliance Industries.

"On conventional testing, exploratory well F-1 produced oil at the rate of 732 barrels per day and gas at the rate of 13,155 cubic meters a day," chairman and managing director Dinesh K. Sarraf said.

ONGC had also made a gas discovery in an onland block in Andhra Pradesh. It has also found a new pool in the Cauvery onland block in Tamil Nadu, Sarraf said.

He said the current low oil and gas prices were "challenging" but was hopeful that rates would rise by the time the block is ready to produce.

Gas price can drop to a low of about $3.8 or $3.9 per million metric British thermal units from $4.66 at present on gross calorific value basis, according to some estimates.

The price cut on October 1 will be the second reduction in rates ever - the first being on April 1.

ONGC, which was hoping to get the benefit of premium pricing on natural gas produced from its KG basin, is disappointed as the oil minister Dharmendra Pradhan had indicated that premium pricing will only be available to the developers of new blocks.

However, the state-owned company is planning to write to the petroleum ministry on the issue so that the fields become economically viable.

Meanwhile, ONGC Videsh, the overseas arm of ONGC, has submitted a $10-billion integrated proposal to Iran for developing the Farzad-B gas field in the Persian Gulf and shipping gas to India.

The oil ministry had, last October, announced a new gas pricing formula for country's existing gas producing blocks. The ministry had also said that blocks operating in deep waters and at high temperatures and high pressures (HT/HP) will be offered a premium.

Using prevailing price in gas surplus nations like the US, Russia and Canada, the government had in October last year announced a new pricing formula that led to rates rising by about 33 per cent to $5.61 per million British thermal unit (mmBtu) for a period up to March 31, 2015 from the long-standing price of $4.2.

The rates, on net calorific value (NCV) basis, dropped to $5.05 per mmBtu for six month period beginning April 1, 2015.

"Preliminary calculations based on average price in the gas hubs stated in the formula indicate that the rate from October 1 is likely to be $4.16 or $4.17 per mmBtu on NCV basis," Oil Ministry officials said. On gross calorific value (GCV) basis, the rate will be about $3.8 per mmBtu as compared to $4.66 currently.

Gas Find

Sarraf said ONGC has made another discovery in its Bay of Bengal block KG-D5, taking the number of finds in the area to 13. ONGC discovered oil and gas in the well F-1 in the northern part of the KG basin block KG-DWN-98/2 or KG-D5, which sits next to the flagging KG-D6 block of Reliance Industries.

"On conventional testing, exploratory well F-1 flowed oil at the rate of 732 barrels per day and gas at the rate of 13,155 cubic meters a day," he said.

Sarraf said besides F-1, ONGC had also made a gas discovery in an onland block in Andhra Pradesh. It also found a new pool in Cauvery onland block in Tamil Nadu.

He said the current low oil and gas prices are "challenging" but was hopeful rates will rise by the time the block is ready to produce. "With oil prices plunging to less than $50 per barrel and gas rates halving, costs of field services like rig rates have also come down. "It is a phase of opportunity... cost of acquisition (of these services) will be lower than what it could have been two years back," he said.

Oil and gas price of the day was not "extremely material for an E&P company for investment decision," he said. Exploration and production (E&P) companies take medium-term outlook of price while deciding on investment proposals.

"We believe this is the best time that one can do development at lower cost. Hopefully, prices will recover by the time oil and gas starts flowing," he said. He predicted that prices will go up in 8-10 quarters. "By how much I cannot say but they will rise in that time horizon."

Iran Plan

ONGC Videsh Ltd, the overseas arm of ONGC, has submitted a $10 billion integrated proposal to Iran for developing the Farzad-B gas field in the Persian Gulf and shipping the gas to India.

A consortium of OVL, Oil India Ltd and Indian Oil Corp had discovered the 12.8 trillion cubic feet of gas reserves in the Farsi block in 2008. The discovery was named Farzad-B.

"In April, we met in Iran and as per discussions, we have worked out a fully integrated proposal and submitted to Iranian authorities," OVL Managing Director Narendra K Verma told reporters here.

Iran, he said, had asked for a plan for developing the field as well as options for taking the gas. "Fully integrated proposal with lots of options has been submitted," he said, adding that OVL has invited Iranian officials to India for discussions on the proposal.

Gas produced from the field can either be converted into LNG by freezing at sub-zero temperature and shipping in cryogenic ships to India or transported through a pipeline - either overland passing through Pakistan or sub-sea.

OVL and IOC hold 40 per cent interest each in Farsi block, while the remaining 20 per cent is with OIL.