MUMBAI (Reuters) - Oil and Natural Gas Corp <ONGC.NS> expects its natural gas production to reach a 5-year high in the current fiscal year following the start-up in coming weeks of a long-delayed project in the Arabian Sea, two senior company executives said.
State-owned ONGC, which accounts for about two-thirds of India's total natural gas production, is likely to produce close to 25 billion cubic metres (bcm) of gas in fiscal 2018, the executives told Reuters.
The forecast compares with 23.5 bcm in the fiscal year to end March 2017, one of the executives said, representing expected growth of about six percent. The two asked not to be named as the figures have not been released by the company.
Higher output from India's top producer would help the country meet Prime Minister Narendra Modi's target of reducing hydrocarbon imports by 10 percent by 2022. India currently imports 70-75 percent of its energy needs. While gas makes up only 8 percent of the total energy consumed, almost 40 percent of it is imported.
India prices its gas almost 60 percent below imported natural gas, so more cheap domestic gas could also bring down the cost of running stranded power plants and ailing steel mills that account for the biggest chunk of India's soured loans.
"The Daman project is back on track ... The gas from the phase I of Daman will be out by April end or first week of May," ONGC's Director - Offshore, TK Sengupta, told media on Tuesday.
The project should contribute almost 2 to 3 million metric standard cubic metres per day (mmscmd) of gas from May onward, he said.
"ONGC is facing a natural decline of output from its fields so the net impact of additional production is not very high. Having said that, I think ONGC is on track to consistently report increases in production in the coming years," said Dhaval Joshi, analyst with brokerage Emkay Global Financial Services.
ONGC is banking on the Daman offshore project to increase its natural gas output, which has been largely stagnant over the past decade. The project hit delays last year after its contractor, Singapore-based Swiber Holdings <SWBR.SI>, ran into financial difficulties.
"We had handed over the Phase 1 work for the project to the sub-contractors who are now completing it for us. The project is eight months delayed," Sengupta said earlier this week.
Phase 2 will be completed by May 2018 when it will add another 3 mmscmd to the company's production. It will eventually be ramped up to 8 mmscmd by 2020, he said.
(Reporting by Promit Mukherjee; Editing by Euan Rocha and Richard Pullin)