The Gulf of Kutch will be the first basin to start producing after the Cauvery basin more than 30 years ago, and open up a new basin for oil and gas production, helping the government achieve the target to reduce imports by 10% by 2022. India has 26 sedimentary basins, but only 7 — Assam, Cambay, Krishna Godavari, Mumbai Offshore, Assam-Arakan Fold Belt, Rajasthan and Cauvery — have commercial production of oil and gas.

The development comes close to reports in September that ONGC has discovered hydrocarbon reserves west of Mumbai High at well WO 24-3 with in-place reserves of around 20 million tonnes of oil equivalent.

“We are trying to enhance the potential of the Kutch basin to make it commercially viable. We want to establish 1 tcf (trillion cubic feet) of gas and there is a possibility of achieving that much,” said the executive, adding that there is little oil but substantial gas reserves in the region. However, the actual potential would be known after tests are conducted. The executive added that development work is at an advanced stage and simultaneously, the company plans to increase the potential.

The national oil explorer is at present developing GK 28 and GK 42 on the southern side for production, which the company expects to start within two-three years. Though ONGC’s oil production has been falling over the years, its gas production has fluctuated. It produced 23.28 billion cubic metre (BCM) of gas in financial year 2016-17 and plans to achieve a production of 25 BCM in the current financial year.

The executive, however, said pricing of gas is a hurdle in developing such fields. After 5 consecutive fall in gas price that could be charged for shallow fields, natural gas price last week was revised to $2.89 per unit for the October-March period compared with $2.48 for the April-September period. The Kutch basin is a shallow water find. “The issue is with gas pricing. Gas price needs to be $5 to make gas exploration viable in shallow water,” said the executive.

The price ceiling for gas from difficult fields has been revised to $6.30 per unit from $5.56 earlier, a jump of 13%. The Central government uses a formula linked to rates in some of the key gas markets across the globe to determine price for domestic gas.

A note released by Icra on Tuesday said, “The gas price remains well below the average cost of production for many producers for a sustained period, leading to losses, which has forced the industry to seek a floor price for the modified Rangarajan formula from the GoI.” However, it adds that the domestic gas price increase is negative from the consumers’ perspective.