NEW DELHI, Nov 25: Government move to free natural gas pricing will not resolve the issue of economically developing already discovered 15-17 trillion cubic feet of gas reserves as the policy will only apply to future finds.
Industry officials said the Oil Ministry’s proposal to make natural gas prices market driven for blocks or areas awarded in future exploration licensing rounds/auctions is a forward looking policy framework.
It “promotes key principles of ‘ease of doing business’ and ‘minimum government maximum governance’,” a senior executive at a multinational energy firm said.
Pricing and marketing freedom will help develop and manage a vibrant oil and gas market, said another executive at a leading private explorer. “Its a very big step forward.”
However, it does not resolve the issue of economically developing the already discovered 15-17 Tcf of natural gas, which can yield an additional 100 million standard cubic meters per day by 2022 to help reduce import dependency, the executive said.
The existing capped natural gas price of USD 4.24 per million British thermal unit is not enough to support multi-billion dollar investment for developing the gas finds, most of which are in deepsea and difficult areas.
Market rates are nearly double of the current price.
“Allowing a pricing policy that support developing these finds. It will also brings much needed revenue (USD 30-40 billion), investment (USD 50-60 billion), skills and employment (100,000 during construction),” the executive said.
Several discoveries of Reliance Industries-BP combine, state-owned Oil and Natural Gas Corp (ONGC) and Gujarat State Petroleum Corp (GSPC) in Bay of Bengal are economically unviable to produce at current gas price.
Finding current rates too low to support exploration and production cost, the Oil Ministry on November 6 proposed to free natural gas pricing, bring in open acreage licensing and replace the controversial Production Sharing Contract (PSC) with simpler revenue-sharing regime for all future field auctions.
In September, the government had allowed pricing freedom for the gas produced from 69 small and marginal fields it plans to auction shortly.
“In the recently announced marginal field policy, the government has provided pricing and marketing freedom for the natural gas. On similar lines, it is proposed to provide pricing and marketing freedom for the natural gas to be produced from the areas to be awarded under the new contractual and fiscal regime in order to incentivise production from these areas,” the Ministry said inviting comments on a new policy. (PTI)
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