State-owned ONGC, the biggest beneficiary of near doubling of gas price from April, on Tuesday said it will gain an additional Rs 16,000 crore in revenue because of the new price, which may not be enough to make all its discoveries viable.
ONGC will get Rs 16,000 crore in incremental revenue from gas price rising from $4.2 to about $8 per million British thermal unit, the company’s new chairman and managing director Dinesh K Sarraf said. “Every dollar increase in gas price results in Rs 4,000 crore additional revenue on an annual basis. On a $4 increase, additional revenue would be Rs 16,000 crore and increase in net profit will be Rs 9,600 crore,” he said.
However, most of this additional revenue would flow back to the government in form of higher taxes, royalty and dividend. Sarraf said the higher gas price will make many of its gas discoveries on the eastern offshore viable. “Our prolific KG-DWN-98/2 block will be now viable.”
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“In Mahanadi basin, we have 26 billion cubic metres of gas (less than one trillion cubic feet) reserves which are viable to be produced only if the price is $11,” he said. “We believe that price (new gas price from April 1) would be around $8 per mmBtu. It appears to be quite significant, but it is not in reality,” Sarraf added.