The premium price for natural gas produced from geologically difficult areas would be announced soon, petroleum minister Dharmendra Pradhan said...
The premium price for natural gas produced from geologically difficult areas would be announced soon, petroleum minister Dharmendra Pradhan said on Monday, reports fe Bureau in New Delhi. Although the minister, who discussed the issue with the finance minister Arun Jaitley recently, refused to divulge the premium, sources told FE that oil and gas explorers would be allowed to sell 20-50% of natural gas volumes produced from ‘difficult areas’ such as high-pressure and high-temperature zones at market rates. The remaining volumes would have to be sold at prevalent domestic natural gas rates.
The sources added that five categories of ‘difficult areas’ would be defined and each category of field would be eligible to sell a defined portion of the production at market rates. Least difficult fields would be allowed to sell 20% of production at market price while market prices would apply for 50% of the gas produced from the most difficult areas. Explorers, the sources added, could determine the market price for the specified volumes by calling for bids from buyers.
“There is now an in-principle agreement over the issue of gas price premium between the ministry of petroleum and natural gas and the ministry of finance. (The issue has been) resolved and an announcement is likely soon,” Pradhan told mediapersons on Monday.
According to industry watchers, the premium pricing would bring some relief to state-run and private oil and gas explorers such as ONGC, Reliance Industries (RIL), Cairn India, BP, Oil India, and Gujarat State Petroleum Corporation, among others, who have been seeking a market-determined price for natural gas for long.
The price of domestic natural gas, which was hiked in November last year by the NDA government, was reduced by 7.6% to $5.18 per million British thermal units effective April 1, 2015, as the relevant global benchmark prices remained subdued in the second half of 2014. The Cabinet on October 18 last year approved the new gas price formula, after tweaking the Rangarajan formula approved by the UPA government in June 2013. The price is to be revised every six months.
The Cabinet Committee on Economic Affairs decided that for all discoveries after November 2014 in ultra-deep-water areas, deep-water areas and high-pressure, high-temperature areas, a premium would be given on the gas price to be determined as per the prescribed procedure.
RIL and BP, sources said, have urged the petroleum ministry to relax the CCEA decision of October 18 last year to allow the premium pricing methodology for discoveries made prior to November 2014 as well.