Double the price of gas, says Oil Ministry

Jan 23 2013, 19:40 IST
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Double the price of gas, says Oil Ministry Double the price of gas, says Oil Ministry
SummaryOilMin's words came as music to the ears of companies like Reliance, ONGC.

the formula suggested by the Rangarajan committee gives USD 8-8.5 per mmBtu as the price of domestic gas.

RIL, which had been engaged in protracted wrangling with the Oil Ministry on pricing of natural gas from its eastern offshore KG-D6 field, last week said there was "positive traction in domestic exploration and production business environment with the submission of Rangarajan Committee Report".

The panel had addressed key issues on "gas price mechanism" and created "an investment enabling environment", RIL said in investor presentation on its October-December quarter results.

RIL has since been seeking a price of almost USD 13 per mmBtu for gas produced from KG-D6 gas on expiry of current USD 4.2 per mmBtu price in April next year and its comments on Rangarajan Committee recommendation are being seen as its readiness to accept a lower price.

The company, which had previously stated that USD 4.2 was too low for monetising smaller and marginal gas finds in KG-D6 and other blocks, said the Rangarajan panel recommendation "indicates positive sign for monetisation of marginal fields".

The Rangarajan Committee suggested averaging volume-weighted price of gas at US's Henry Hub, UK's NBP and Japan Customs Cleared prices for the trailing 12 months with the the net price that producer got from exporting liquefied natural gas (LNG) to India on a long-term contract.

Previously, RIL had from April 2014 wanted to price KG-D6 gas at the rate India pays for importing gas in its liquid form (called LNG) on a long-term contract from Qatar. India pays 12.67 per cent of the international oil rate plus USD 0.26 per mmBtu to Qatar. At USD 100 per barrel oil rate, this translated into a gas price of USD 12.93.

The panel headed by C Rangarajan -- Chairman, Economic Advisory Council to the Prime Minister -- also suggested gas-on-gas competition after five years and sweeping change in future exploration contracts.

The existing PSC allows a company to recover its cost, before giving the government a share in revenue earned from sale of oil and gas.

Stating that cost recovery is at the root of the problems being experienced currently, the panel proposed to dispense with it in favour of sharing of the overall revenues of the contractor, without setting off any costs.

The committee has also recommended that an extended tax holiday of 10 years, as against 7 years already available for all blocks, be granted for blocks having a substantial portion involving drilling offshore

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