Rangarajan for $8 gas, production-linked payments
Industry sources said natural gas price ought to be linked not only to market forces, but also to geological challenges and hence, cannot be the same for all blocks.
“For gas from ultra-deep water blocks (such as RIL's D6 block), which are more than 3,000 km below sea level, a price of $10-12 per unit may be viable, while production from blocks at depths less than that may be viable for a price of $7.5-9 a unit,” said an industry executive, who asked not to be named.
“The proposed price revision will definitely improve the bottomline of not only RIL, but also of ONGC and Oil India. It will also increase the earnings per share of these companies,” said Kalpana Jain, senior director, Deloitte.
The Rangarajan panel also recommended replacing the existing profit-sharing formula based on the level of investment made and revenue earned from a field with a production-based-payment scale for future contracts. Hen production or price goes up, the exchequer stands to earn more. In future auctions, winners of oil and gas blocks will continue to be selected based on the existing weight given for bidders' technical capability, committed exploration work
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