Welcoming the Government decision on gas pricing, Sudhir Vasudeva, Chairman and Managing Director of ONGC said: “The rise in gas price will not only encourage the upstream companies to invest in exploring more challenging frontiers to augment gas production for the country, but a good amount of this increased price will flow back to the Government in terms of royalty and dividend which could be invested in various development programmes.”
ONGC will be the biggest beneficiary of the Government’s decision.
Vasudeva is also Chairman, CII National Committee on Hydrocarbons.
“It (CCEA decision) is directionally a step towards achieving market-determined pricing as suggested by the Minister, which will encourage the development of a competitive gas market in the country,” says Sashi Mukundan, Co-Chairman, CII National Committee on Hydrocarbons and Regional President and Country Head India, BP Group Companies.
P.M.S. Prasad, Executive Director and Board Member, Reliance Industries Ltd, said: “This decision will bring in the much-needed investments in the hydrocarbon sector that are required to reduce the debilitating effect of increasing energy imports upon the economy.” Prasad is also a member of the CII National Committee on Hydrocarbons.
Association of Oil & Gas Operators (AOGO), said that the new prices are likely to make many of the discoveries made in the last few years commercial and increase domestic production. The announcement, however, falls short of the Rangarajan committee’s recommendations.
“Removal of spot prices from the formula reduces the volume and the correct reflection of imported liquefied natural gas cost thus affecting domestic producer’s price. The Rangarajan Committee had also recommended a transition to free market prices in five years. The notification is silent on this,” AOGO said.
Vijay Kelkar committee is looking at the transition issues, and its report should be with the Government in a few months therefore the Association hoped that the transition to free market shall start within next year and shall be completed within the five-year time span.
AOGO believes that free market price is the only way to go forward for the upstream industry. This is already committed and contracted in production sharing contracts.
Future investors will be willing to take the risk of lower prices, as long as the free market principles and non interference by allocation are observed. The earlier India moves to such a regime, the better it shall be for the country.