Gas pricing may hit marginal fields’ auction
The Centre’s attempt to auction marginal fields has hit a road block, with the Ministry for Petroleum & Natural Gas unable to get a fix on the ‘gas price’.
While the Centre is clear that the price of crude oil produced from these fields will be market-linked, it is unable to make up its mind on the gas rates, a senior government official said.
Marginal fields are scattered, so to develop them the fiscal regime has to be different. About 69 marginal fields of ONGC and Oil India combined have been shortlisted for the auction.
“We are still trying to figure out what should be the formula adopted for pricing gas produced from marginal fields, marketing freedom, and what fiscal regime to be offered to the contractors,” the official told BusinessLine.
The Centre has been treading cautiously on the issue of domestically produced gas price.
Despite the Centre coming out with guidelines for domestic natural gas pricing last year, the issue of a suitable rate for gas produced from deepwater remains unresolved. “We need clarity on the pricing before calling for bids,” the official added.
Marginal fields were given to public sector entities – ONGC and Oil India – before the licensing rounds on a nomination basis.
A substantial quantity of hydrocarbons is locked up in these fields, but production on a standalone or conventional basis is not economically viable.
Environmental concerns, political stability, access, remoteness and, of course, the price and price stability of the produced gas/liquids, make the cost of production from these fields expensive.
ONGC holds about 165 marginal fields (79 offshore and 86 onshore). Sixty-nine fields are likely to be put up for auction once the bidding policy for these blocks are ready. Of these, 63 belong to ONGC and six to Oil India.
At present, in the 165 fields that ONGC holds, the total ultimate reserves are estimated to be 340 million tonne.
On whether the steep fall in crude price makes these fields viable, the official said, “these low prices will not remain forever.”
The Centre wants to come out with a policy on marginal fields before the new regime (model revenue-sharing contract) for the New Exploration Licensing Policy is in place.