The ministry of petroleum and natural sas on Monday allowed allocation of gas produced from new wells or well interventions from nominated fields of state-owned upstream companies ONGC and Oil India at a 20% premium over the administered price mechanism (APM price) or the domestic natural gas price. The move is expected to make new gas development projects of the firms viable and  help increase domestic production.  

Following the notification, the gas produced from new wells in the nomination fields of ONGC and Oil India will attract premium of a total 12% of Indian crude basket price, as under the current policy, gas pricing is linked to crude price. Currently, the APM gas price is fixed at 10% of the Indian crude basket price, and revised by Petroleum Planning and Analysis (PPAC) on a monthly basis.

“The enhanced price for new gas will make the new gas development projects viable and help ONGC to augment the production of natural gas from nominated fields in challenging areas that require higher amounts of capital and technology,” ONGC said.

The company said that the move will enhance its investment capacity to take up development projects which are otherwise capital intensive and involve higher degree of risks requiring commensurate prices. 

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ONGC’s Board has recently approved the Daman Upside Development project in its nominated field of Mumbai High at a cost of approx Rs 7,800 crore for increasing the domestic gas production. The job has already been awarded for execution and the peak production envisaged from this project is around 5 Million Metric Standard Cubic Meters per Day (MMSCMD), said the company.

The Board has also approved another project – Integrated Development of 4 Contract areas under DSF-II  at a project cost of Rs 6,000 crore. The peak gas production from the project is estimated at around 4 MMSCMD where the government has already allowed pricing and marketing freedom under the Discovered Small Field Policy. “Job has already been awarded for execution of this project also,” ONGC said.

The implementation of the policy comes amidst the government’s target of increasing the share of natural gas to 15% in the energy mix from the current 6% by 2030.

The country’s sedimentary basins currently hold about 651.8 million tonnes of crude oil and 1,138.6 billion cubic meters of natural gas. India imports 85% of its crude oil requirements. 

So far, the country’s upstream sector companies have explored only 10% of the sedimentary basin. The government is now aiming to increase the explored area to 16% by the end of 2024 after the end of upcoming rounds of bids under Open Acreage Licensing Program. 

The government also intends to increase the country’s exploration acreage to 1 million square kilometers by 2030.