Oil ministry to go to Cabinet on gas pricing: Moily

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Oil ministry will take a proposal for nearly doubling the price of domestically produced natural gas to $8-8.5 per mmBtu to the Cabinet after getting comments on its draft note.

In the draft note to the Cabinet, the ministry has proposed raising price of gas produced by state-owned ONGC and OIL during current year itself and that for Reliance Industries in 2014.

“That (draft note) is under circulations before all the ministries. And after consultations when the proposals come back to us from various ministries, we are going to move the cabinet,” oil minister M. Veerappa Moily said.

The ministry in a draft Cabinet note proposed accepting the Rangarajan Committee recommendation of pricing natural gas at an average of international hub prices and cost of imported LNG instead of present mechanism of market discovery.

It wants this pricing formula to apply to all forms of natural gas - conventional, shale and coal-bed methane (CBM). Also, the price determined shall be applicable to all consuming sectors uniformly.

Moily said though some timelines have been indicated in the draft note for user ministries like power and fertiliser to send in their comments, “sometime deadlines do not work.”

Sources said the ministry wants new pricing guidelines to apply from 2013 itself on all domestically produced gas barring cases where it is either governed by a definite formula prescribed in the Production Sharing Contract (PSC) or the government had previously fixed a tenure for the same.

This essentially meant that RIL would get the new price only from April 2014 upon expiry of the fixed five-year term of current rate of $4.205 per million British thermal unit.

State-owned Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) can, however, get the new rates this year itself for gas they produce from fields given to them on nomination basis by the government. Gas from nominated fields, called APM gas, is currently priced at $4.2 per mmBtu.

The Rangarajan panel suggested rates may also not apply to BG Group-operated Panna/Mukta and Tapti fields in the western offshore as the current rates of $5.57-5.73 per mmBtu for the fuel produced from these are derived from a pre-defined formula detailed in the PSC.

However, Cairn India’s eastern offshore Ravva gas, which is currently priced at $3.5-4.3 per mmBtu, may be revised as per the committee’s recommendations.

Sources said the Rangarajan panel had suggested taking a weighted average of the US, Europe and Japanese gas hubs or market price and then averaging it with the net imported price of liquid gas (LNG) to give sale price of domestically produced gas.