Ministry considering premium on non-shallow gas price

The premium to be paid on natural gas for all new discoveries in ultra-deep-water and deep-water areas as well as in high pressure-high-temperature areas is under consideration of the government, the petroleum ministry's top official said on Thursday.

"The issue of premium on gas price for deep-water discoveries is under consideration," Kapil Dev Tripathi, who took charge as petroleum secretary last month, told reporters here in an informal chat, regarding the gas price announced by the NDA government last year.

In October 2014, the government announced an upward revision to $5.61 per unit against the industry's demand for at least doubling it to a little over $8 per unit, as per the Rangarajan Committee recommendations.

However, accepting the Rangarajan panel recommendations would have meant a gas price of $8.4 per unit, instead of $5.6 effective from November 2014 for five months.

As per the mechanism approved in October 2014, the new price of $5.61 per unit applied for normal categories of gas.

But for all new discoveries in ultra-deep-water areas, deep-water areas and the high pressure-high-temperature areas, it said that a premium will be given but did not spell out further details on how it will be calculated.

While shallow-water blocks are at a depth of up to 100-500 metres, deep-water blocks descend to around 1,000 metres. Those at depths beyond 1,500 metres are classified as ultra-deep-water blocks.

These are the areas where the Reliance Industries-led consortium has maximum discoveries.

Reliance Industries will not immediately be able to avail the new price as it remains locked in an arbitration with the government over alleged shortfall in production from its Krishna-Godavari basin fields.

The government has announced a new rate, effective April 1, at $4.66 a unit - lowering it by 8 percent from the earlier $5.61 owing to lower international prices.