Panel proposes 20% premium for gas producedby ONGC, OIL
Thepanelsaidprice of natural gas from old fields should be 10% of imported oil price
NEW DELHI: The Kirit Parikh Committee, which recommended a floor and ceiling price for natural gas produced from legacy fields of state-owned producers to moderate input price for CNG and fertilizer, has favoured paying ONGC and OIL a premium of 20% over such price for any new gas production they add from old fields.
The panel, which submitted its report to the oil ministry last week, has recommended benchmarking price of natural gas produced from ONGC and OIL’s legacy or old fields, called APM gas, at 10% of cost of crude oil imported into India, as per a copy of the report seen by PTI.
This rate would however be subject to a ceiling or cap price of $6.5 per million British thermal unit, until a full deregulation of prices is implemented in 2027. There would also be a floor of $4 with a view to cover for cost of production and at the same time keeping cost for fertilizer, power and CNG, which use gas as input raw material, at manageable levels.
The basket of crude oil India imports averaged about $83 per barrel in December. Going by recommendation of the committee, the price for APM gas, which makes up for 60% of all gas produced in the country, should be $ 8.3 per mmBtu ( 10% of imported oil price). But Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) will be paid only $6.5 in case the recommendation for ceiling and cap price of the committee is accepted by the Cabinet headed by Prime Minister Narendra Modi.
APM gas is currently priced at $8.57 per mmBtu using a formula that uses weighted average rates in gas-surplus nations such as the US, Canada and Russia.
For gas produced from fields in difficult geology such as deep sea or in high-temperature, highpressure (HTHP) zones, the panel was for continuing with existing formula without any floor. Such fields are currently paid a ceiling price of $12.46 per mmBtu using a formula that is different from APM.
Reliance Industries Ltd and its partner bp plc of UK are the biggest producer of gas from difficult fields.
The committee recommended fully de-regulating APM gas price by January 1, 2027, “if the gas price volatility on the international market has moderated”. For difficult fields, the full pricing and marketing freedom should be given by January 1, 2026.
“To incentivise additional production from a new well or well intervention in the nomination blocks, the committee recommends a premium of 20% over and above the APM prices for ONGC/OIL,” the report said. “The government may consider giving marketing freedom for this additional production from new wells or well intervention in the APM fields.”The modalities for this may be finalised by upstream regulator Directorate General of Hydrocarbons (DGH) and approved by the Ministry of Petroleum and Natural Gas within a period of three months, it said.
APM gas is the one produced from fields given to ONGC and OIL on nomination basis without any provision of sharing profit. This gas totalled 49.26 million standard cubic metres per day in 2021-22. A third of this gas was used for generating electricity, 22 per cent for converting into CNG to run automobiles and piping natural gas (PNG) to household kitchens for cooking purposes and 17% for producing fertilizer.
The price of APM gas remained less than $3 till March this year but spiked in the following month as global energy rates rose in the aftermath of Russia’s invasion of Ukraine.