Oil ministry signals RIL, BP may need to wait longer for gas price hike
Cost of overseas LNG gas for India has dropped to about $9 per mBtu, curbing the govt’s scope to raise rates for local producers, Dharmendra Pradhan said
India’s oil minister signaled Reliance Industries Ltd (RIL) and BP Plc may need to wait longer for higher domestic natural gas prices as plunging global energy costs make imports cheaper. The cost of overseas liquefied natural gas for India has dropped to about $9 per million British thermal units (mBtu), curbing the government’s scope to increase rates for local producers, Dharmendra Pradhan said. Domestic prices, due for review on 1 April, were boosted by one-third to $5.6 per mBtu on 1 November. “If imported LNG is available at that price, how can we meet the demand from domestic gas producers for higher prices?” Pradhan said in an interview at his office in New Delhi on Tuesday. “That may not be possible now.” While Prime Minister Narendra Modi has made boosting energy supplies a priority to curb blackouts, explorers such as RIL argue higher domestic gas prices are needed to spur investment and raise output. BP last year wrote off $770 million from an undersea Indian gas block, while Canada’s Niko Resources Ltd is seeking to sell its stake in the project because of uncertainty about the long-term pricing outlook in India. The price of LNG is about $7 per million Btu and it costs about $2 per unit more to transport it to India, Pradhan said. The difference between the price of LNG—gas chilled to a liquid for ease of transport by ships—and local prices is too small, he said. RIL owns 60% of the KG-D6 gas field off India’s east coast and Niko has 10%. BP bought 30%, as well as 20 other blocks, for $7.2 billion in 2010. India’s offshore oil and gas industry is “at risk” in the absence of higher prices, BP chief executive officer Robert Dudley said in June. Output from KG-D6 has slid since 2010 as the reserves proved more geologically difficult than anticipated, RIL said in January. Tushar Pania, a spokesman for RIL, didn’t immediately respond to an e-mail seeking comment. Bloomberg
