ONGC may have to restate production figures

Oil and Natural Gas Corporation may be forced to restate its production volumes if the government continues with the current method of calculating the subsidy mechanism that had left the country's biggest oil producer saddled with about Rs 4,500-crore (Rs 45-billion) additional burden last year.

About two million tonnes (mt) of condensates produced by the oil company were taken into account while apportioning the subsidy burden.

A senior ONGC executive said the company had asked the government to exclude condensate while calculating its share since it was internally consumed by the company.

"If it's not done, we will have to change the mechanism of reporting production excluding condensates.

"We have not done it for the first quarter ended June 30, but will have to consider it if things do not change in the second quarter," said the executive, requesting anonymity.

This could mean that ONGC's reported production could come down by around two mt to 25 mt.

Last financial year was the first time when the government calculated ONGC's share of subsidy based on its production.

Earlier, the share of ONGC and other companies used to be calculated in the ratio of their profits for past three years.

Of the total upstream share, these companies were earlier asked to bear a burden in proportion to their profit after

tax.

"Had we known this, we would have reported oil and condensate separately. We have had this reporting mechanism for more than two decades.

"We are reporting condensate with oil because both are liquid. But condensate is not sold. It is consumed internally for making value-added products," said another company executive, also on condition of anonymity.

ONGC is seeking removal of condensate while calculating subsidy burden. Condensates come to more than two mt, implying 15 million barrels.

If one multiplies it by $56, which is the per barrel subsidy imposed on ONGC, it comes to around Rs 4,500 crore.

Even though the three government-owned oil and gas producing companies -- ONGC, Oil India Ltd and GAIL (India) Ltd--are not into marketing of petroleum products, they are asked to bear a portion of the subsidy incurred by oil marketing companies since, in a trade parity regime, these companies benefit from increases in international oil prices.

ONGC bore a record Rs 44,466 crore (Rs 444.66 billion) subsidy burden during the last financial year, while Oil India bore Rs 7,351 crore (Rs 73.51 billion).

An Oil India official said the mechanism of including condensate while calculating the subsidy burden does not affect them.

"We just produce around 24,000 tonnes of condensate annually, which gets sold to companies that produce value added products. So, it is a part of our sales," he said.