The Petroleum and Natural Gas Ministry will soon approach the Cabinet for clarifications on some of the contentious issues affecting the implementation of the new price for domestically produced natural gas. The Ministry is required to notify the price for the July quarter within the first fortnight of June.
Ministry sources said clarifications are needed on the method of price calculation and the applicability of the new price to D-1 and D-3 gas fields of the Reliance Industries-operated KG-D6 block.
The new Minister of Petroleum and Natural Gas, Dharmendra Pradhan, has been briefed by Secretary Saurabh Chandra. Since the decision on the pricing and KG-D6 was taken by the Cabinet, any clarification thereon also needs to come from there, the official said.
Asked what the pricing issue was when the Rangarajan Panel has already suggested a formula, a Ministry official said, “Clarity is needed on whether the calculation will be on the basis of gross calorific value (GCV) or net calorific value (NCV). The high-level panel had wanted it based on NCV, but the global practice is to use GCV.”
The heat produced from natural gas is measured in calorific value. The issue cropped up when RIL-BP-Niko proposed a price based on GCV. This was not acceptable to the buyers, as that would automatically push up the price by a dollar. The new gas price is expected to be almost double the current $4.2 a unit (gas is measured in million British thermal units).
“That the Ministry is talking in terms of approaching the Cabinet to sort out some of the pending contentious issues is a clear indication that the issue will be re-opened. If the new Government was to endorse the decision of the previous regime, there was no need to approach the Cabinet; the Ministry itself would have notified the price,” said an official associated with the development.
“Besides, let us not forget it is a tricky issue and the Government may want expert opinion before taking a call,” another official added.
Arbitration Notice Meanwhile, the contractors of the D6 block — RIL, BP, Niko Resources — on May 9 issued an arbitration notice to the Government seeking implantation of the gas pricing guidelines notified in January. They are also in dispute with the Government on reasons for drop in output from the block.