Higher rates will help increase domestic gas output: Moily

Defending the government decision to double natural gas prices from April next year, Oil Minister M Veerappa Moily today said higher rates will help raise domestic production and cut dependence on imports. While the government had in June approved a new formula for pricing of all domestically produced natural gas, the Cabinet yesterday allowed the same principles to also be applied to Reliance Industries' currently producing fields in KG-D6 block subject to certain conditions.

"If you don't raise gas price, no domestic production will come and dependence on imports will increase," Moily said at the AIMA's 3rd PSU Summit here. India, which currently imports half of its gas needs, has the hydrocarbon potential which require lot of money to exploit, he said. "You need to spend a lot of money on technology (to access the hydrocarbon) and research." Higher gas price will help bring to production over 3 Trillion cubic feet of gas reserves that had been declared economically unviable at current rates of USD 4.2.

Several gas discoveries of firms like Oil and Natural Gas Corp (ONGC) as well as of RIL had been declared unviable by the Directorate General of Hydrocarbons (DGH) as current gas price of USD 4.2 per million British thermal unit was inadequate to cover the cost. The Minister said the option before the country was to either keep the finds in the ground and continue importing gas at USD 12-13 or pay much lesser than this price to domestic producers to bring the discoveries to production and cut foreign exchange outgo on imports.

"We may end up importing 100 percent (of our needs) if we don't encourage exploration," Moily said. The reserves in the discoveries not viable at current price equals the remaining resources in the currently producing Dhirubhai-1 and 3 (D1&D3) gas fields in RIL's eastern offshore KG-D6 block. The Cabinet Committee on Economic Affairs on June 27 approved pricing of domestically produced gas at an average of imported LNG and international benchmarks from April 1 2014. Accordingly, the price in April would be about USD 8.4.