The unpopular issue of domestically produced natural gas pricing is once again expected to come up for consideration before the Cabinet Committee on Economic Affairs (CCEA).

Whether the CCEA, which is expected to meet today evening, will take a decision on the issue remains to be seen.

One of the key offtakers Power Ministry continues to oppose the proposed increase in domestically produced gas price to more than $ 5/mmBtu. The Petroleum & Natural Gas Ministry is proposing a gas price of about $ 6.77/mmBtu.

On, June 21, CCEA had deferred taking any decision on domestically produced natural gas pricing, as the Minister for Petroleum & Natural Gas M Veerappa Moily was out of town.

On June 19, the Petroleum Ministry had circulated the CCEA note for considering fixation of domestically produced natural gas based on the recommendations of the C Rangarajan Committee on Production Sharing Mechanism in the Petroleum Industry.

The Ministry was seeking approval for Domestic Natural Gas Pricing Guidelines 2013.

The pricing was to be applicable to gas produced from all sources conventional as well as unconventional like shale, CBM etc. The guidelines were to be applicable from April 1, 2014, with exception to that gas for which prices have been fixed contractually for a certain period, till the end of such period. An example of such contract is Reliance Industries operated KG-D6 block. The new price for D6 block has to come from April 1, 2014.

These guidelines are also not applicable where the contract provides for specific formula for natural price indexation/fixation. An example for this is price for gas being produced from Panna-Mukta-Tapti fields. But, eventually all will have to follow the price policy, an industry source said.

Besides, the proposed price will be uniformly applicable to all consumers.

The Petroleum Ministry, which has suggested quarterly review of gas pricing, has suggested that the price should be notified in advance on a quarterly basis using the data for four quarters, with a lag of one quarter.

(This article was published on June 27, 2013)
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