ONGC pads up for debate on gas price deregulation

ONGC pads up for debate on gas price deregulation

CRUDE LOGIC OF DEREGULATION: With effect from April 1, the government has cut the natural gas price to $2.48 per million British thermal units, which will be effective for six months

Triggering a debate on the need to revise domestic natural gas prices, Oil and Natural Gas Corporation (ONGC) Chairman Dinesh Kumar Sarraf on Thursday said deregulating gas pricing and marketing rights was necessary in India for exploration to develop.

He said cost optimisation was the major challenge in exploration in a low-pricing environment. With effect from April 1, the government has cut the natural gas price to $2.48 per million British thermal units (mBtu), which will be effective for six months. Hence, companies are asking for a minimum price of natural gas in India.

According to the gas-pricing formula approved in October 2014, prices are to be revised every six months.

“One of the major challenges we are facing in a low-pricing regime is cost optimisation, for which new technologies need to be introduced. In India, deregulating the gas market (both gas prices and marketing rights) is needed,” Sarraf said, addressing a Confederation of Indian Industry summit in New Delhi. The state-run company accounts for 60 per cent of the country’s gas output, and that comes to around 90 million standard cubic metres a day.

Earlier in the day, Union Petroleum Minister Dharmendra Pradhan said he understood the travails of the industry because of the lowpricing regime. The central government had given marketing freedom for deepwater blocks and small fields, he said, adding the government would look to clear the mess regarding pricing.

In October 2014, the government came up with new pricing formulae, taking a weighted average of the rates at Henry Hub in the US, the National Balancing Point in the UK, and those in Alberta (Canada) and Russia. However, due to a drop in international prices, the domestic natural gas prices, too, tanked, by more than 50 per cent.

ONGC has been batting for a minimum price at $4.2 per mBtu in order to make most of its fields viable. While the average cost of production for the Krishna-Godavari basin is between $4.99 per mBtu and $7.30 per mBtu, it is between $3.8 a unit and $6.59 per unit for others.

https://www.pressreader.com/india/business-standard/20170407/281590945418195