New Delhi, Sept. 2: ONGC has sought a natural gas price of $5.99-7.15 per million British thermal unit (mBtu) to break even on the gas it plans to produce from the prolific KG-basin block. The PSU wants more than $5.25 for the new blocks in the Arabian Sea.

According to the state-run explorer, the breakeven price needed for its prime Krishna-Godavari basin KG-DWN-98/2 block was $5.99 per mBtu, while it is $7.15 per mBtu for the ultra-deep sea UD-1 discovery in the southern part of the block.

“The cost of development and production from these fields (Nelp blocks of KG-DWN-98/2 and Mahanadi basin) are significantly high thus making them economically unviable at the current gas price,” ONGC said in its submission to the four-member panel of secretaries working on a new gas price mechanism.

The panel hopes to work out in 2-3 weeks a price mechanism, which could then be submitted to the cabinet.

Earlier last year, the C. Rangarajan panel had proposed that all domestic gas be priced at an average of liquid gas (LNG) imports into India and the rate prevalent in the US and UK trading hubs as well as LNG imports into Japan. This would have led to the doubling of domestic gas price to $8.4 in April and to $8.8 for the current quarter.

ONGC said any gas not produced by the PSU explorer for being economically unviable at existing price had to be substituted by imported LNG at considerably higher rates.

“Accordingly, a higher remunerative price is well-justified for developing these fields, failing which these gas reserves may remain unexploited,” ONGC added.

In 2013-14, ONGC said its cost of gas production, after including return on capital, came to $4.43 per mBtu, higher than the current price of $4.2 per mBtu.

For new fields and raising output from the matured and ageing fields, higher capital outlays are required, which can be viable only at higher rates.

ONGC said it would have to be paid between $5.25 per mBtu and $17.80 per mBtu to break even from its seven small and marginal fields in the western offshore.

About 20.34 billion cubic meters of gas from its Mahanadi basin blocks MN-OSN-200/2 and MN-DWN-98/3 would need a breakeven rate of $15.30 per mBtu, it said.

Meanwhile, the Association of Oil and Gas Operators (AOGO) have told the panel that the future of exploration and production (E&P) industry will depend a lot on the gas price decision. It insisted that the issue has to be addressed urgently to bring back investor confidence.

They said as many as 10 trillion cubic feet of gas could not be developed at $4.2 per mBtu.