In a step to further free India’s gas market, the Cabinet Committee on Economic Affairs has given its nod for a methodology to determine the fuel price in future discoveries.

Briefing newspersons after the CCEA meeting, Minister for Petroleum and Natural Gas Dharmendra Pradhan said the Cabinet has approved ‘Natural Gas Marketing Reforms’ that aim to prescribe a standard e-bidding procedure to discover the market price of gas through a transparent, competitive process.

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Bringing uniformity

According to Pradhan, this will bring uniformity to the bidding process across various contractual regimes and policies to avoid ambiguity.

Pradhan, however, clarified that the current gas pricing formula will continue to be in force for production from existing discoveries awarded under the nomination regime. The price ceiling under the present gas price formula will also continue. “The new e-bidding process will govern discoveries which came on stream from February 2019 onwards,” he said. Essentially, the new regime will be applicable to producers from the areas offered under the Open Acreage Licensing Policy (OALP) rounds. In this regime, producers have complete marketing and pricing freedom.

For the industry, which was looking for clarity, this lays out the broad framework of the pricing freedom. Pradhan clarified that producers cannot participate in the bidding process, but affiliate companies can. However, a re-bidding will have to be done if only affiliates participate. The platform will be worked out by the Directorate General of Hydrocarbons.

The gas demand is directly proportionate to supply. Today, the demand is 155 mmscmd (million standard cubic metre per day), of which GAIL (India) sells 108 mmscmd.

 

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