RIL, ONGC arms can bid for gas under new marketing policy
The norm will end ambiguity in contracts across auction regimes (NELP, HELP, OLAP) and allow transparent discovery of price, oil minister Dharmendra Pradhan said after the Cabinet approved the guideline
NEW DELHI: In a big boost for Reliance Industries Ltd, Cairn India and state-run ONGC, the government on Wednesday approved an electronic auction-based gas marketing regime that allows affiliates of domestic producers to bid for output from new discoveries of the parent company.
The norm will end ambiguity in contracts across auction regimes (NELP, HELP, OLAP) and allow transparent discovery of price, oil minister Dharmendra Pradhan said after the Cabinet approved the guideline.
He said the move would clear the way for an additional 40 mmscmd (million metric standard cubic meters per day) of supplies, roughly 8-9 days of CNG consumption in Delhi-NCR, from new discoveries and increase ease of doing business. The standardised policy and a panel of digital trading platforms, both in the private and public sectors would help discover an Indian benchmark gas price and allow domestic producers to compete with imported LNG (liquefied natural gas).
Existing CNG and PNG services will not be affected as the government will continue to control marketing and pricing of gas from old fields, which feed city gas projects, given to ONGC and OIL without bidding. But
Under the new norm, Reliance’s refinery or petrochem units can bid for output from the Andhra offshore project operated by RIL-BP. Vedanta group industries can bid for supply from Cairn’s Rajasthan project. Similarly, HPCL, MRPL and OPAL can bid for parent for output from parent ONGC’s Andhra offshore, Daman and Kutch projects, or the volume of production coming out as incremental increase from old projects.
The affiliates can set a stable price regime for their supplies or help the parent get better price if a buyer bids higher. The affiliates currently buy imported LNG for use as fuel or feedstock. While new discoveries were given marketing and pricing freedom, affiliates were not allowed to bid due to conflict of interest.
The policy allows producers to choose from a panel of trading platforms. Directorate General of Hydrocarbons, the oil ministry’s quasi-judicial technical arm for exploration, will work out the details.
Currently, IGX from the Indian Energy Exchange stable, the leader in power trading, runs the only physical delivery-based trading platform. As reported by TOI, while launching IGX on June 15, Pradhan had said the government planned to set up a common gas trading hub for discovering an Indian gas price benchmark through a transparent and competitive process.
A market-driven pricing mechanism and non-discriminatory access to transportation infrastructure have become important in view of the government’s drive to attract investments in the upstream and city gas sectors as well as creating LNG import capacity.
Natural gas makes up only 6 per cent of India’s energy basket and the government wants to raise it to 15 per cent by 2023 with a view to reducing the economy’s carbon footprint in line with the Paris climate commitment. As reported by TOI on September 22, for the first time imported LNG volumes shot past domestic supplies this year, accounting for 53 per cent of consumption.