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Last Updated : Aug 10, 2015 05:09 PM IST | Source: PTI

Govt to announce gas price formula for 'difficult fields'

While approving a new gas pricing formula based on international hub rates in October last year, the government had decided that new gas discoveries in deep-water, ultra-deep sea or high-temperature and high-pressure fields will be given a premium over and above the approved price.

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Government will "any day" announce a decision to allow market price for part of gas discoveries made in future from difficult fields, Oil Minister Dharmendra Pradhan said on Monday.

While approving a new gas pricing formula based on international hub rates in October last year, the government had decided that new gas discoveries in deep-water, ultra-deep sea or high-temperature and high-pressure fields will be given a premium over and above the approved price.

"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. It's resolved and it will come any day," he told reporters here.

Based on a recommendation from its upstream technical arm, the ministry proposed to allow a fixed percentage of natural gas produced from difficult fields to be sold at market price and the remaining as per the approved price.

The Ministry had sent the gas price premium proposal to the Finance Ministry which had returned it, saying the Petroleum Ministry should decide on the issue on its own keeping in mind the October 2014 decision of Cabinet Committee on Economic Affairs.

The Oil Ministry subsequently resubmitted the proposal to the Finance Ministry, saying CCEA had in October specifically directed that the gas price premium should be jointly decided by the two ministries based on recommendation of the Directorate General of Hydrocarbons (DGH).

Pradhan, who had recently met Finance Minister Arun Jaitley on the issue, said all issues are settled and an announcement of the gas price premium can be made any day. "It can be done any day, even today," he said.

While the domestic gas is priced at USD 4.66 per million British thermal unit, the market price as measured by the rate at which the fuel is imported is USD 7-8.
The percentage of total volumes that can be sold at market price will be different for ultra-deep sea discoveries, deep-sea finds and high-temperature and high-pressure (HTHP) fields.

All gas producers, including state-owned Oil and Natural Gas Corporation (ONGC), have stated that it was uneconomical to produce gas from difficult fields at the current price of USD 4.66 per mmBtu.

As per the mechanism approved in October 2014, price of domestically produced natural gas is to be revised every six months using weighted average or rates prevalent in gas-surplus economies of the US/Mexico, Canada and Russia.

Gas price, according to the formula, was USD 5.05 per mmBtu till March 31 and has subsequently been cut to USD 4.66, in line with international movements.

The current price is among the lowest in the Asia-Pacific. China pays explorers USD 11.9 per mmBtu rate for new projects while Indonesia and the Philippines price the fuel at USD 11 and USD 10.5, respectively.

Gas from offshore fields in Myanmar, where Indian firms ONGC and GAIL have a stake, is sold to China for USD 7.72. Thailand prices gas from new projects at USD 8.2 per mmBtu. Vietnam has a gas price of USD 5.2 and Malaysia USD 5.

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First Published on Aug 10, 2015 05:09 pm
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