The Hindu Business Line : Moving up the energy value chain — Tripura power project may make paradigm shift in ONGC plans

End result is ONGC Tripura Power Company will not only pave way for monetising the entire production capacity, but will increase ONGC's realisations by a few times than would have been possible by selling gas locally.

Kolkata , Nov. 5

EVER wondered what makes Oil and Natural Gas Corporation so enthusiastic about setting up a power plant in Tripura? Apparently, it is for monetising the gas reserves there and moving up the energy value chain.

While that argument holds good at any point of time, the project may actually pave the way for a paradigm shift in ONGC's business perspective in the entire North-East, which has so far remained a white elephant — contributing roughly five per cent of the turnover by employing 27 per cent of the total manpower of 37,000 people — in the company's balance sheet.

That Tripura is floating on gas is widely known, but what is not known is its utilisation ratio and, more important, the payback time for such assets to ONGC.

The company has an estimated exploitable reserve of 23.73 billion cubic metre (bcm) from three fields (Sonamura, Gojalia and Agartala Dome) out of the six in the State. Though reserves have been identified in two (Khwai and Baramura) of the remaining three fields, final assessment and production could not begin "due to local problems," as the ONGC Chairman, Mr Subir Raha, puts it. Exploration has not taken off at Tichna. According to official sources, "due to lack of demand 18 out of 54 production wells (having total production capacity of 4.7 million standard cubic metres per day — mmscmd) are not even connected to the gas grid created by GAIL (India). Of the 36 connected wells, only 17 are in continuous production, and the rest are operated by turns to maintain the reservoir health."

The financial side of the story is even more revealing. Considering $3.86 per million British thermal units (mmbtu) at which ONGC now supplies to GAIL (India) in North India as the base price, the Tripura price is as low as $0.98 per mmbtu (or Rs 1,420 per thousand standard cubic metre).

"Annualised value of the idle production of 3.3 mmscmd from a total of 56 wells in three fields in Tripura at the special Tripura price is Rs 120 crore per annum." Needless to say, the estimated loss in idle production will be manifold, if market prices are allowed to rule. The same is true for net returns. Though ONGC does not disclose its returns in Tripura, sources say that the company now incurs heavy operational losses there.

While ONGC will continue selling the 1.4-mmscmd gas locally, even after the commissioning of ONGC Tripura Power Company (OTPC), the company will realise a much higher price by way of captive consumption of 3.3 mmscmd gas. According to an official release, the "net back pricing of gas works out to be more than double than the current controlled price realisation."

End result is OTPC will not only pave way for monetising the entire production capacity, but will increase ONGC's realisations by a few times than would have been possible by selling gas locally.

As ONGC Tripura has standing plans to expand the capacity up to 1,100 MW in the future, the idle gas fields at Khawai and Baramura are likely to come into production in the years ahead, thereby allowing optimisation of opportunities. OTPC has received allocation for up to 5 mmscmd. Deployment of excess workforce in more productive use will enhance the profitability.

Returns are also ensured by way of replacing 150 MW costly grid power, which ONGC now consumes in the western region. The Centre has agreed to grant mega power project (which includes 10 year long tax break) status to OTPC, ensuring a faster pay-back period for the project.

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Moving up the energy value chain — Tripura power project may make paradigm shift in ONGC plans