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The Oil Ministry is putting out a reminder to the Finance Ministry for an early decision on allowing market price for part of the natural gas produced by firms like ONGC and RIL from difficult fields.
While approving a new gas pricing formula based on international hub rates in October last year, the government had decided that new gas discoveries in deep-water, ultra-deep sea or high-temperature and high-pressure fields will be given a premium over and above the approved price.
Based on a recommendation from its upstream technical arm, the ministry proposed to allow a fixed percentage of natural gas produced from difficult fields to be sold at market price and the remaining as per the approved price.
"The Ministry had sent the gas price premium proposal to the Finance Ministry which had returned it, saying the Petroleum Ministry should decide on the issue on its own keeping in mind the October 2014 decision of CCEA (Cabinet Committee on Economic Affairs," an official said.
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The Oil Ministry subsequently resubmitted the proposal to the Finance Ministry, saying CCEA had in October specifically directed that the gas price premium should be jointly decided by the two ministries based on recommendation of the Directorate General of Hydrocarbons (DGH).
Oil Minister Dharmendra Pradhan had recently met Finance Minister Arun Jaitley on the issue and now the Ministry is sending a reminder, he said.
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While the domestic gas is priced at $4.66 per million British thermal unit, the market price as measured by the rate at which the fuel is imported is $7-8.
"The percentage of total volumes that can be sold at market price will be different for ultra-deep sea discoveries, deep-sea finds and high-temperature and high-pressure (HTHP) fields," the official said without elaborating.
All gas producers, including state-owned Oil and Natural Gas Corporation (ONGC), have stated that it was uneconomical to produce gas from difficult fields at the current price of $4.66 per mmBtu, he said.
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As per the mechanism approved in October 2014, price of domestically produced natural gas is to be revised every six months using weighted average or rates prevalent in gas-surplus economies of the US/Mexico, Canada and Russia.
Gas price, according to the formula, was $5.05 per mmBtu till March 31 and has subsequently been cut to $4.66, in line with international movements.
The current price is among the lowest in the Asia-Pacific. China pays explorers $11.9 per mmBtu rate for new projects while Indonesia and the Philippines price the fuel at $11 and $10.5, respectively.
Gas from offshore fields in Myanmar, where Indian firms ONGC and GAIL have a stake, is sold to China for $7.72. Thailand prices gas from new projects at $8.2 per mmBtu. Vietnam has a gas price of $5.2 and Malaysia $5.
