New premium gas pricing policy for deepwater blocks soon

New premium gas pricing policy for deepwater blocks soon

The government is set to take several key initiatives to address the issue of energy shortages in the country. It will soon announce a new premium gas pricing policy for deepwater blocks to unlock new reserves and also complete the tendering process to invite global shipping giants to make LNG ships in India.

Work on the proposed Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline would also be accelerated so that the project could be started by December.

“We are taking steps to address energy-related issues. Few projects are being undertaken in the mission mode to realise its benefits at the earliest,” oil minister Dharmendra Pradhan said on Monday.

Among the first initiative would be announcement of premium gas pricing. Armed with broad agreement from the finance ministry, the petroleum and natural gas ministry is set to announce a new pricing policy for gas produced from difficult deep-water blocks that will allow market price for part of discoveries made in the future from these fields.

While approving the new gas pricing formula based on average of international hub rates in October last year, the government decided that all new discoveries in deep-water blocks would be treated differently and would command a premium over normal blocks.

“All issues pertaining to our draft policy on gas pricing for difficult blocks have been resolved with the finance ministry. It will come anytime now,” Pradhan told reporters after launching retail sale of diesel blended with bio-diesel in few outlets at Delhi, Vishakhapatnam, Haldia and Vijayawada.

The finance ministry had returned an earlier draft of the policy seeking clarifications on procedures and revenue implications for the government.

On the issue of TAPI pipeline, Pradhan said Turkmenistan’s state-owned TurkmenGaz would be the leader of the consortium and take 51 per cent stake in the project.

During the visit of the minister to Turkmenistan last week, it was agreed that all four countries participating in the project would be part of the consortium through their respective state-owned companies.

From India, GAIL India will hold stake in the four-nation company that would set up and operate the 1,800 km pipeline. Officials from the state companies of the four nations will meet in Dubai on August 18-19 to discuss equity participation as well as technical feasibility, he said.

The TAPI pipeline would provide India access to about 38 mmscmd of gas that could help ease shortage situation in the domestic market where power and fertiliser plants are struggling to get access to the fuel.

GAIL will also invite tender within a month to lease three-four LNG ships from Indian ship builders such as Cochin Shipyard, L&T Shipbuilding and Pipavav Defence & Offshore Engineerings.

These companies have succeeded in getting Korean shipbuilders Samsung, Daewoo and Hyundai as joint venture partners in the project with technology transfer agreements. The initiative will substantially reduce pressure on GAIL that has to import gas from the US.

With regard to the premium gas pricing, the move would help exploration companies like Reliance Industries (RIL) and Oil and Natural Gas Corporation (ONGC) who have made discoveries in offshore difficult blocks but are reluctant to commit investment at current administered price of gas.

As per the draft of deep water gas pricing policy, the oil ministry has proposed that contractors of deepwater blocks can sell up to 50 per cent of production in open market to realise addition cost in extracting gas from difficult regions. This would be lower for blocks that have lesser degree of difficulty with least difficult block be given 20 per cent of gas output for market sale.



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