Govt under pressure to set higher price for deepsea gas finds

| Updated on: Nov 12, 2014

New uniform price will make investments unviable, feels industry

Less than a fortnight after the Government announced a new price for domestically produced gas, the pressure is mounting on it to consider higher prices for deepwater discoveries which are yet to come into production.

Sources in the know said that a view is emerging within the BJP and sections of the Government to consider the demands of industry, which says that the new uniform price of $5.05 a unit (gas is measured in million British thermal units) makes their deepsea investments unviable.

“An area of focus for the BJP has been to bring in investments in the sector. We know that deepwater requires specialised technology and higher input costs. If the requirement is for having differential pricing, then it should be considered,” said Narendra Taneja, National Convener - Energy Cell, BJP.

If the Government does consider the request, it will benefit not only private sector players like Reliance Industries but also public sector entities such as ONGC and GSPC. An industry official said even in the neighbourhood Myanmar, the well head price for deepwater is $7.5 a unit. Higher price is also required to attract foreign investment when the Government launches tenth edition of oil and gas blocks auctions.

In fact, Association of Oil & Gas Operators, in its submission before the Government had sought free market pricing for gas. It had been maintaining that any move away from free market pricing will be a violation of the production sharing contract and its sanctity.

A fresh debate is also emerging on whether there should be a differential pricing – separate price for deepwater discoveries and shallow/onshore discoveries. A section of industry feels that uniform pricing is the solution but it should be market linked.

In fact, when announcing the new price, to be effective from November 1, 2014 till March 31, 2015, the Government had said that Reliance Industries and its foreign partners in KG-D6 block will not get the benefit of the new price for D1, D3 discoveries till the ongoing arbitration with the Government is resolved.

Besides, the existing deepwater discoveries will also not qualify for premium on gas price. The Government has proposed a premium for deepwater/ultra-deepwater discoveries. But, this will be only for discoveries made after November 1.

Published on November 25, 2017

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