Economy

Domestic industry seeks floor price on gas at $4.5 per mBtu

Our Bureau New Delhi | Updated on September 29, 2020 Published on September 29, 2020

The domestic oil and gas exploration sector wants a floor price for natural gas in the country. According to senior industry executives, the public sector undertaking oil exploration companies have sought a floor price of $4.5 per million British thermal units (mBtu).

The call for a minimum sale price for domestically produced natural gas follows the steep fall from $5.05 per mBtu in November 2014 to $2.39 per mBtu in April 2020. The Ministry of Petroleum and Natural Gas is expected to revise the price of natural gas this week. The new price will be applicable for the coming six months from October 1, 2020 to March 31, 2021. The prices are determined by the Modified Rangarajan Formula that takes into account the weighted average of natural gas price around the world.

The price has been steadily falling in the last three revisions and it is expected to go down further. Industry watchers say that a further downward revision would result in most oil explorers paying out of their pockets and margins becoming strained, if not negligent.

For public sector undertaking, Oil India Ltd, there is a direct impact of the fall in gas price which comes after a blowout and subsequent fire at its Baghjan Gas field in Assam. The fire has been raging over three months now. Commenting on the status of well control operations at a press interaction after OIL’s Annual General Meeting, Chairman and Managing Director, Oil India Ltd, Sushil Chandra Mishra, said, “We are expecting some equipment to come in three to four weeks time and after it reaches the well site, it will take another three to four weeks to have complete control over the well.”

OIL had an annual domestic production of crude oil of 3.133 million tonnes and domestic natural gas production of 2801 million standard cubic meters in fiscal 2019-20. OIL has also become the first operator to commence exploration activities in the recently awarded Open Acreage Licence Policy (OALP) blocks in the country by commencing 2D & 3D survey in Rajasthan OALP Block.

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Published on September 29, 2020
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