Natural gas price set to go up
OIL, ONGC among others to benefit from it
Natural gas pricing is set for a major revamp. An empowered group of ministers is likely to approve new policy guidelines based on the Rangarajan Committee report that would more than double the price of domestic gas being sold by Oil and Natural Gas Corporation (ONGC) and Oil India (OIL).
Though existing contracts for domestic contracts will remain unaffected till the expiry of the contract period, the new policy will bring in uniformity in pricing. The new policy will be applicable to coal bed methane and all other non-conventional gas including shale.
Besides, contracts currently providing for indexation of natural gas to a formula will also be not touched for now. The ministry of petroleum and natural gas has recommended the Rangarajan formula for all natural gas producers including government companies for nominated fields and private companies. The price will be applicable to all consumers uniformly. Currently, gas produced from nominated fields are sold at a rate of $2.52 a million British thermal unit to certain consumers.
The Rangarajan formula is the mean of weighted averages of producer price of liquefied natural gas imports to India and the price prevalent in the US, Europe and Japan. At the current rates, the price works out to around $7.4, said an official. Though domestic gas prices have been aligned to $4.2 price fixed for Reliance Industries Ltd’s KG-D6 gas in 2007, this time round RIL would have to wait till 2014 when its gas price is due for revision.
The Rangarajan committee that recently submitted its report had suggested rates may also not apply to BG Group-operated Panna/Mukta and Tapti fields since the current rates of $5.57-5.73 per mmBtu are derived from a formula in the production sharing contract. However, Cairn India’s Ravva gas, which is currently priced at $3.5-4.3 per mmBtu, would be revised.
Domestic gas output stood at 154 million standard cubic metre a day in 2011-12 but is expected to fall this year with RIL producing less than 25 mmscmd.