60 percent premium for gas from difficult fields: Sources

Following the union budget 2016-17 proposal to incentivise gas exploration in difficult areas, the government is set to raise the price of domestic natural gas by around 60 percent for their undeveloped gas discoveries from such areas, an official source said on Thursday.

Domestically-produced gas price is currently priced at $3.82 per million British thermal unit (mbtu) that will undergo a revision from April.

An official source here told IANS that the government plans to pay a price for gas discoveries in deep-sea, ultra-deep sea and high-temperature, high-pressure areas as per a formula based on the average of landed price of naphtha, fuel oil and liquefied natural gas (LNG).

The union cabinet will decide whether the formula will employ a normal or weighted average of naphtha, fuel oil and LNG, he said.

The price derived with this method will go over $6 per mmBtu that would benefit explorers like state-run ONGC and the Mukesh Ambani-led Reliance Industries Ltd (RIL), the source added.

The Oil and Natural Gas Corp (ONGC) has earlier said that production from discoveries in difficult areas are not viable at current prices.

Several discoveries of ONGC, RIL and the Gujarat State Petroleum Corp (GSPC) in KG Basin on the eastern offshore alone are lying idle owing to the lack of a profitable price.

Presenting the budget in parliament on Monday, Finance Minister Arun Jaitley said: "Government is considering incentivising gas production from deep-water, ultra deep-water and high-pressure high-temperature areas, which are presently not exploited on account of higher cost and higher risks."

"A proposal is under consideration for new discoveries and areas which are yet to commence production, first, to provide calibrated marketing freedom; and second, to do so at a pre-determined ceiling price to be discovered on the principle of landed price of alternative fuels," he added.