ONGC's Cheap APM Gas Supply Falls, Costlier New Well Supply Doubles

Oil and Natural Gas Corporation (ONGC) is offsetting the natural decline in output from ageing gas fields by drilling new wells

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India's top oil and gas producer ONGC has seen a drop in natural gas production from aging fields that supply CNG and piped cooking gas, resulting in supply reductions for city gas distributors like IGL, MGL, and Adani Total, officials said.

Oil and Natural Gas Corporation (ONGC) is offsetting the natural decline in output from ageing gas fields by drilling new wells. However, gas from these new wells is sold at a higher price to cover the added costs, officials said.

Natural gas extracted from the ground and seabed is converted into CNG for vehicles and used as cooking fuel when piped to households. Gas from fields allocated to ONGC on a nomination basis is priced by the government and referred to as APM gas. This APM gas serves as the feedstock for city gas distributors.

APM gas is priced at 10 per cent of the monthly average rate of the crude oil basket India imports for its energy needs. However, the price is capped with a floor of $4 per million British thermal units and a ceiling of $6.75. Gas from new wells drilled by ONGC in the same nomination fields is priced at 12 per cent of the Indian crude oil basket.