The pricing of domestically produced gas is significantly lower than the levels that are necessary, according to FICCI.

In a representation to the Ministry of Petroleum and Natural Gas, the industry association said the current price is not enough to give domestic gas producers a fair return to cover their risk capital involved in the exploration and production business.

It will be, “prudent to align domestic prices on an import parity basis, as in the case of crude oil,” FICCI said. The current gas (notified) price at $2.50/mmbtu works out to about $15 per barrel in oil equivalent terms. This is in the backdrop of a large part of domestic gas production coming from matured gas fields where the average cost of production is upwards from $6/mmbtu, excluding duties, taxes and royalty.

FICCI has argued that the recent surge in spot LNG prices has pushed prices to $9/mmbtu and indicates that the period of ultra-low energy prices are about to be over. Further, it calls for the need to re-look at the rationale for the level at which the price ceiling gets fixed.

The industry body states that the current price for domestically produced natural gas is linked to the Henry Hub, National Balancing Point, Alberta Hub and the Russian domestic market. These are mostly gas-surplus regions and hence they cannot be considered as benchmarks for a consuming country like India.

Further, FICCI said the $5.30/mmbtu price for deepwater, ultra-deepwater and high pressure-high temperature fields is too low and does not commensurate with the cost and risk profile of these fields.

The investment in India’s upstream sector becomes unproductive at present pricing, FICCI said in a press statement.

Related Topics
comment COMMENT NOW