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Gas production in 2016-17-III: Why 2017 is the best year to invest in an offshore gas field in India
May 04: One of the reasons why both RIL-BP combine and ONGC are investing in the geologically unstable and high cost deepwater fields in the KG Basin is because the economics of their production are not the same as gas producers in other parts of the world.
8Their breakeven levels can be far higher than in gas producing countries for the simple fact that given the demand-supply gap in India, the price of fresh domestic supply is pegged to the landed price of LNG in India.
8Indian companies stand to make money even if their cost of production is a multiple of the cost of production in the US or the Gulf as a consequence.
8Given falling price of equipment and services, if the bulk of the expenditure over the next five years can be locked in 2017 before their prices are projected to go up, the rate of return on KG Basin oil production is likely to remain well above the hurdle rate.
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