Under GST, ONGC Will Have To Ramp Up Production Spending By Rs 2,500 Crore

Oil and Natural Gas Corporation Ltd. (ONGC) will have to increase its production spending under the Goods and Services Tax regime (GST) since fuel does not come under its ambit.

The oil and gas major will have to bear the burden of an “additional Rs 2,500 crore hit unless crude oil and gas comes within GST,” AK Srinivasan, director of finance at ONGC said at a media briefing on Tuesday. Explaining the hit Srinivasan said, under GST, the company's survey costs will rise, as will the upstream oil and gas cost - to Rs 6,500 crore from Rs 4,000 crore currently.

The management also outlined its plans to reduce import dependence over the next five years. The KG-DWN-98/2 in the deep waters of Krishna-Godavari eastern offshore, the Gujarat State Petroleum Corp.'s (GSPC) Deendayal west field and Vasistha & S-1 fields will together account for 70 percent of the volume of western offshore purchases, said Dinesh Sarraf, chairman and managing director (CMD) of ONGC. Currently, the country imports half of its natural gas needs.

Elaborating on his plans for the development of the KG-DWN-98/2 block, Sarraf said, cluster 2 of the project will start gas production by June 2019 and oil production by March 2020, accounting for 70 percent of the company's oil and 27 percent of its gas production at its peak level. Cluster 3, which is deeper than cluster 2, will add another 40 percent to the company's gas production, he said.

The ambitious KG-DWN-98/2 block was budgeted to cost Rs 34,000 crore by the company's board. Sarraf told reporters that the project, which is stated to add 88,870 barrels of oil per day and 47 million cubic metres of gas, is being closely monitored and will be delivered as per the stipulated schedule.