India's Natural Gas Woes: ONGC's New Well Strategy Amid Declining APM Production

India's ONGC is experiencing decreased natural gas production from aging fields, affecting city gas distributors. To counteract, ONGC is drilling new wells, albeit at higher costs. APM gas supplies now meet only 34% of city gas needs, leading to possible CNG price hikes as distributors adapt to new well gas.

India's leading oil and gas producer, ONGC, is grappling with reduced natural gas output from aging fields, impacting supplies to key city gas distributors such as IGL, MGL, and Adani-Total. As traditional fields decline, ONGC is drilling new wells to sustain production, but the new gas is priced higher, officials reveal.

Natural gas is a critical component for CNG vehicles and household cooking, with APM gas derived from fields allocated to ONGC serving as a vital feedstock for city gas distributors. This government-priced gas is currently set between USD 4 and USD 6.75 per MMBtu, yet ONGC's new wells produce gas priced at a premium due to increased costs.

The constrained APM gas supply has prompted distributors to switch partially to the higher-priced new well gas, causing concerns about profitability and potential CNG price increases. Analysts predict CNG prices may rise by Rs 1-2 per kg to buffer against shrinking margins, as the sector navigates these supply challenges.

(With inputs from agencies.)