NEW DELHI, June 22 (Reuters) - India’s Oil and Natural Gas Corp estimates its east coast block, near the huge gas producer D6, has total gas volumes, or “intial in-place” quantities, of 101 billion cubic metres (BCM) or 3.57 trillion cubic feet.
The state-run explorer, which is in talks with Italy’s Eni and BG to sell up to 30 percent in the block, believes its discoveries in the northern part of its deep water block are commercial, it said in a statement on Wednesday.
“The proposal (for declaration of commerciality) is under consideration with the (upstream regulator),” the statement said, adding, “This is only a conceptual development plan and hence would be subject to wide variation”.
ONGC plans to spend $7.7 billion on development of the block, in which Cairn India has a 10 percent stake.
India needs gas to help power its electricity generation, fertiliser sector, city gas distribution and for industries.
ONGC needs the expertise of foreign players to boost its local oil and gas output, as it struggles with declining production from its marginal and aged fields.
Reliance Industries has just brought in BP to help it improve falling output at its D6 block in the same basin, known as Krishna Godavari.
In the last financial year ending March 2011, ONGC’s local oil output rose by 3 percent to 27.28 million tonnes and natural gas production declined 1.1 percent to 25.32 BCM.
Analysts were cautious about the impact on ONGC’s stock price, which rose 1.86 percent to 260.80 rupees ($5.816) on Wednesday in a flat market. The shares are still some way off their 2011 high of 325.65 rupees seen at the end of April.
“This does not mean that discoveries are commercial. For developing the infrastructure in east coast ONGC would require a lot of freedom from the regulatory side,” said Deven Choksey, head of brokerage K R Choksey.
An analyst with an international brokerage firm said it was too early to make any judgment on the estimates.
“These are only initial estimates and these can go anywhere,” the analyst said, adding “There is not much exploration upside built in ONGC’s stock prices as this time, so basically future discoveries or commerciality of existing discoveries do not contribute to the stock prices.” ($1 = 44.845 Indian Rupees) (Reporting by Nidhi Verma; Editing by Jo Winterbottom)