The committee on fair price of natural gas to the end-consumer, chaired by former Planning Commission member Kirit Parikh, on Wednesday submitted its report to the government suggesting pricing freedom on gas produced from legacy fields or APM gas.
The committee suggested a floor price of $4/mBtu and a ceiling price of $6.5/mBtu for gas produced under the administered price mechanism (APM). At present, the price is $8.57/mBtu till March 2023.
State-run ONGC and Oil India Ltd (OIL), which produce natural gas from fields allocated to them on a nomination basis, can fix the price based on the average imported price of crude oil and then apply the floor and ceiling on them. At present, the prices are linked to prominent global gas exchanges.
“We have many gas fields with different pricing and policies. We have tried to simplify this. It was done with three objectives. First, to increase gas share in energy mix to 15 per cent by 2030. Second, to provide fair prices to consumers. Third, to make sure prices do not affect government finances,” Parikh told businessline.
It recommended not tinkering with natural gas prices from deepwater, ultra deepwater and high pressure-high temperature (HPHT) fields such as in KGD6 run by Reliance Industries and BP, which at present is $12.46/mBtu.
“Floor and ceiling prices provide healthy gas realisation to upstream producers with graded increases over the next five years moving to full decontrol from January 1, 2027. Additionally, removal of the cap on prices for difficult fields from January 1, 2026, provides impetus for development of challenging fields,” said Prashant Vasisht, Vice President, ICRA Ratings.
If the report is approved by the Union Cabinet, then there will likely be a decline in CNG and PNG prices as well as boost investment opportunities in the exploration and production (E&P) sector.