ONGC goes for market price for gas from two fields

Bidders to quote premium over notified price

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Making use of an opportunity thrown up by an exemption from the notified gas price, the government-controlled Oil and Natural Gas Corporation is tendering out natural gas from its two fields. The price for this gas would be market-linked.

The natural gas would go to customers bidding the highest premium over the reserve price. Tender for gas flowing out of ONGC’s Cauvery find has been floated. A separate tender for stranded gas in Assam would be issued soon, Ved Prakash Mahawar, director (onshore), ONGC told, Business Standard.

The Cauvery block produces about 1.5 million standard cubic metres a day (mscmd). In Assam, the production is much lower at 0.2 mscmd. ONGC managed to get the exemption from the government on grounds of non-materialisation of earlier contracts in the case of the Cauvery block and gas being stranded in the case of Assam.

GETTING HIGHER PRICE

• ONGC floats tender to sell Cauvery gas
   
• Tender for Assam gas on cards
   
• A Dec 2015 rule allows it to sell gas at a premium
   
• Customers of Cauvery gas unwilling to lift volume
   
• Reserve price to be $3.06 per mBTU

Both these blocks produce gas under the administered price mechanism (APM) regime, which existed prior to the opening up of oil and gas production to the private sector. Under the National Democratic Alliance (NDA) government’s gas pricing guideline, natural gas is priced uniformly at a notified rate derived from six monthly trailing average of a basket of gas benchmarks. The rate for April-September 2016 is $3.06 for very million British thermal unit (mBtu). In case of discovered producing field from deep water, ultra deep water and high pressure high temperature a premium is allowed but the price is currently capped at $6.61.

The Union government, however, had in December 2015 granted exemption to the national oil companies under which they can float tender to get a market price for small and isolated fields in the APM blocks given on nomination basis. This is in cases where there were no existing customers.

“In case of new supplies or where the duration of existing contracts have been completed, the price would be determined by NOCs (no-objection certificates) by calling bids through an open competitive bidding process,” said the notification. The reserve price for these bids is equal to the notified price. Private companies are allowed the notified price or a price below the notified cap, though the New Exploration and Licensing Policy (NELP) provided for market pricing. To attract investment, however, a new policy allows market price even to private companies for gas produced from discovered small fields put on the block.

Mahawar said natural gas from the Cauvery block under contracts signed earlier was for sale to Venkatrama Steel, MSS Steel and RK Energy. “The Tamil Nadu government is not buying power from these companies for grid. They are using gas only for captive power requirement,” he said. The government, therefore, allowed ONGC to cancel contracts and sell gas through tender, initially for 90 days.

In the case of Assam, the gas is stranded in the vicinity of field because of lack of proper infrastructure. The government has given the company one year relaxation for sale through the tendering route.