Union Cabinet on Thursday approved the new price formula for undeveloped gas discoveries in difficult areas in the country. Government believes the new price will encourage oil exploring companies to invest in deep-sea discoveries.
Currently in India, gas is priced at USD 3.82 per mmBtu. Come April the price will fall to USD 3.15, which again is not enough to make up for the cost of ‘deep-sea development.’
‘Since this rate is not enough to incentivise exploration, the government approved the new price formula’ said oil Minister Dharmendra Pradhan.
The new price is expected to give relief to two dozen discoveries of the state-owned ONGC, Reliance Industries and the Gujarat State Petroleum Corporation (GSPC) that are waiting for right gas pricing in KG basin.
“The new price will apply to undeveloped gas discoveries and not on currently producing fields,” Pradhan said.
In the Budget 2016-17, Finance Minister Jaitley had announced a two-stage gas pricing freedom.
“India is blessed with rich natural resources, including oil and gas. However, their discovery and exploitation has been below our potential,” he had said in his Budget speech.
With near stagnation in domestic production and consequent rapid increase in imports, “the government is considering incentivising gas production from deep-water, ultra deep-water and high-pressure, high-temperature areas, which are presently not exploited on account of higher cost and higher risks,” he said.
“A proposal is under consideration for new discoveries and areas which are yet to commence production, first, to provide calibrated marketing freedom and second, to do so at a pre-determined ceiling price to be discovered on the principle of landed price of alternative fuels,” he said.
The Economic Survey, too, had rooted for market-determined arm’s length pricing for domestic gas.
(With inputs from PTI)