India’s new price for domestically produced gas could hover around $6/mmBtu, if the mood within the Government is any indicator.
Officials associated with the issue said though differences still remain among the buyers (power, fertiliser firms etc) and sellers (gas producers), a broad consensus has emerged on the price.
“The sellers have agreed to rates lower than what they were demanding earlier on expectations that 3-4 years down the line the Government will make the price market linked,” an official said.
A senior official level panel comprising secretaries of Power, Fertiliser and Expenditure, with Additional Secretary in Ministry of Petroleum and Natural Gas as Member Secretary looking into the issue will suggest a new price to the Ministry for Petroleum and Natural Gas soon.
The panel report will be then considered by the group of ministers headed by Finance Minister Arun Jaitley before a final call on the price is taken.
The Government wants to honour its commitment of announcing the new price by September 30. But critics point towards the forthcoming State elections, as any increase in price would have immediate implications on the prices of piped cooking gas, compressed natural gas used as auto fuel, and electricity bills.
While officials remained non-committal on the formula being adopted to derive this price, they said factors such as making aging and mature gas producing fields viable as well as concerns of power and fertiliser sectors will be duly addressed. Ministries of Power and Petroleum are jointly working on a proposal of pooling gas prices for the sector.
Seeking clarity The gas producers under the aegis of Association of Oil & Gas Operators want clarity on the Government’s method of price calculation – on whether calculation will be on the basis of gross calorific value (GCV) or net calorific value (NCV), and whether it should be rupee denominated.
The heat produced from natural gas is measured in calorific value. If it is based on GCV it would mean the prices automatically going up by a dollar.
On rupee versus dollar, sellers have argued that business in the in oil and gas sector is conducted in dollar terms irrespective of the country involved, and this is why the dollar was the designated operating currency.
“With exchange rates being volatile, strong growth may see the rupee in fact appreciating, destroying the logic of those who are today demanding rupee denominated formula,” the sellers said.
Currently, the base price of gas sold under administered price regime is $4.2/mmBtu, which is the same rate for Reliance Industries’-operated NELP block in the East Coast.
Domestic gas is also being sold at a base price of $5.7/mmBtu. August average rate of imported gas on long-term is about $15/mmBtu, while spot rates are $16/mmBtu.
Correction
The date of announcing the new price has been corrected to September 30. It was published as September 31.