Premium for gas production from difficult fields: Jaitley

The government on Monday pronounced on the long pending issue of higher premium for gas production from deep water, ultra-deep water as well as high-temperature and high-pressure fields, saying exploration in these difficult areas will be incentivised by giving producers calibrated marketing freedom to discover a pre-determined rate.

Presenting Budget 2016-17 in parliament, Finance Minister Arun Jaitley said: "Government is considering to incentivise 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."

India Inc. has been calling for a decision on the matter for over a year now.

While approving a new gas pricing formula in October 2014, the government had decided that new gas discoveries in difficult areas will be given a premium over and above the approved price.

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 the maximum discoveries on the eastern offshore.

State-run explorer Oil and Natural Gas Corp (ONGC) said earlier this month that in order to best benefit from low exploration costs resulting from falling international oil prices, the focus should be on exploration in frontier and deep water blocks where the lead period is 7 to 8 years.

"This is a time for reserves-building in areas where the lead time is more than 7-8 years and incentivising exploration activities in frontier and deep water areas," said ONGC's executive director, exploration, Anand Sahu at the India Energy Forum and Observer Research Foundation-organised Petro India Conference here.

"If focus is laid on extensive data acquisition in the unexplored sedimentary basins during the period of global low exploration costs, reserves that will be accreted can be profitably harnessed during the next cycle of boom," he added.