Small units need not buy natural gas through bidding: GIFNGCIA

Natural gas produced by oil firms from small or isolated fields comes with low pressure and was earlier being supplied to small industrial consumers on fall back basis

The Union government's recent decision to revise guidelines for pricing of natural gas produced from small isolated fields across the country has obviated the need for small and medium enterprises (SMEs) to participate in bidding to buy natural gas, said Gujarat Isolated Fields Natural Gas Consumer Industries Association (GIFNGCIA).

Centre's Ministry of Petroleum and Natural Gas (MoP&NG) had set the guidelines for pricing of isolated fields' gas on December 19, 2014. According to the guidelines, gas produced from such fields was to be sold through bidding in case of renewal of existing existing contracts.

The natural gas produced by national oil companies (NOCs) from small or isolated fields, located mostly on or near sea creeks, comes with low pressure and was earlier being supplied to small industrial consumers on fall back basis. "The move was against the interest of MSME consumers and we met Union minister for state for petroleum and natural gas Dharmendra Pradhan, who, after thoughtful consideration, reversed the decision to sell the gas through bidding process. Now we will get gas as we got earlier via contract system," said Hasmukh Thakkar, president, GIFNGCIA. There are over 100 units located near isolated gas fields in India. Out of it, 75 units are in Gujarat, while the remaining are in South India. These units consume about 800,000 cubic metre natural gas per annum while Gujarat alone consumes close to 500,000 cubic metre gas.

ONGC and GAIL provide natural gas on contract for two years over the last two decades. The price is decided by the ministry. Natural gas is currently priced at $5.5 per MMBTU. Ashok Dholakia, vice president of GIFNGCIA said, "The MSME units, dependent on gas produced from the isolated fields, were facing closure following the December revision in the policy. If gas is sold through bidding process, bigwigs in the oil and gas sector would have won the bids easily."

During the meeting with union minister, GIFNGCIA evinced fears that large or big players may not only have sold the gas at higher prices, but also sold it to other big consumers in faraway places, as they can easily set up facility to convert the gas into compressed gas.