KOLKATA (miningweekly.com) – India’s national exploration and production (E&P) major, ONGC Limited, will start natural gas production from its Daman offshore fields in the Arabian sea later this month, ending a spell of stagnating domestic production.

According to company officials, once production stabilises by next month, ONGC is confident of rapidly ramping up production to about three-million standard cubic metres a day.

The operationalisation of the Daman offshore fields is key to ONGC’s plans to boost its production to a five-year high of 25-billion cubic metres in the financial year to the end of March 2016, compared with 23-billion cubic metres achieved in the previous financial year.

Officials have pointed out that the Daman project has been delayed owing to problems with contractors and ONGC is confident of soon launching the second phase of development, which will increase potential production from the fields to about eight-million standard cubic metres a day.

To maintain the momentum in production growth, ONGC has stepped up onshore operations across the north-eastern Indian provinces. For example, in Assam the E&P major has lined up the drilling of 31 wells during the current financial year, having already drilled 33 in the previous year.

In the neighbouring province of Tripura, also in the north-east, ONGC has established gas reserves of about 40-billion cubic metres of which 13-billion cubic meters of gas has been brought into production over the past few years, the official said.

In Tripura, ONGC is planning to drill 22 wells in the current year, compared with the 12 and 15 wells that were drilled in the two previous years respectively.

Rapid development of new natural gas assets is crucial for ONGC to reverse falling production trends from its existing and ageing fields. For example, according to one forecast, its natural gas production from existing fields is expected to dip from 20-billion cubic metres to 12-billion cubic metres by 2021 and this can only be reversed by developing newer assets which potentially yield an incremental natural gas production of about 29-billion cubic metres during the same period.

However, all Indian E&Ps, including ONGC, have drawn the government’s attention to the “challenges” of developing new natural gas assets in the current environment of falling gas prices.

The companies last month, petitioned the government to set a minimum gas rate to enable E&Ps to maintain economic viability of developing new fields. They are also seeking an amendment to the current pricing regime. They have requested that a floor rate of $4.2 per million British thermal units (mBtu) be set and that this rate should prevail over any rate that the government may periodically revise.

However, this was not considered by the government, which on March 31, following its six-monthly revision of pricing, marginally revised the price to $2.48/mBtu for April to September 2017, compared with $2.50/mBtu during October 2016 to March 2017. The gas price for fields categorised as ‘difficult’ was set at $5.30/mBtu.