The government has approved a 20 per cent premium over the regulated price or APM for any natural gas ONGC produces from new wells, the company said on Monday.
Currently, two pricing regimes govern most of the country’s natural gas production, which is used to generate electricity, produce fertilizer, be transformed into CNG to run cars, and be transported to homes for cooking.
Gas produced from fields inherited or transferred to state-owned Oil and Natural Gas Corporation (ONGC) and Oil India Ltd on a nominative basis is priced at 10 per cent of the prevailing price of crude oil imported into India.
This price, subject to a price cap of $6.5 per million British thermal units, is called the regulated price or APM. Therefore, at the current Indian basket price of $77 per barrel, the APM price for gas produced from ONGC’s Mumbai High and Bassein fields on the west coast should be $7.7 per mmBtu, but it is being paid the $6.5 cap price.
Gas produced from difficult fields, such as deepwater fields, is governed by a different formula and is paid for at a higher price due to the higher cost of producing it. That price for six months starting April 1 is $9.87 per mmBtu.
When these formulas were adopted last year, it was decided that gas produced from new wells, even from old fields, would receive a 20 percent premium over the APM price. This has now been notified.
“As per the domestic gas pricing guidelines, the domestic natural gas price (APM price) has been fixed at 10 per cent of the Indian crude oil basket price as announced by the Petroleum Planning and Analysis Authority (PPAC) on a monthly basis. The guidelines stipulated that for gas produced from new wells or well interventions in ONGC/Oil India Limited’s nomination fields, there would be a premium of 20 per cent over the APM prices, a total of 12 per cent of the Indian crude oil basket price for new gas.
“The modalities of the same had to be drawn up by the General Directorate of Hydrocarbons (DGH) for the approval of the Ministry of Petroleum and Natural Gas (MOPNG),” ONGC said in a statement.
The Ministry, he said, has now notified allocation of gas produced from new wells or well interventions of nominated fields of ONGC/OIL at a premium of 20 per cent over the APM price.
“The increase in the price of new gas will make new gas development projects viable and help ONGC increase natural gas production from designated fields in challenging areas that require higher amounts of capital and technology.
“This will increase the company’s investment capacity to undertake development projects, which otherwise require a lot of capital and involve a higher degree of risks that require commensurate pricing,” he said.
The ONGC Board recently approved the Daman Upside development project at its designated Mumbai High field for Rs 7,800 crore to augment domestic gas production, and the work has already been awarded for execution. The expected peak production from this project is around 5 million standard cubic metres per day.
The board also approved another integrated development project of four contract areas under DSF-II, with a project cost of Rs 6,000 crore and peak production of around 4 million cubic metres per day of gas, where the government has already allowed freedom of pricing and marketing under the DSF Policy. The work has already been awarded for the execution of this project.
“The implementation of the policy decision is in line with the national vision of achieving the target of natural gas share in India’s energy mix from 6 per cent to 15 per cent by 2030,” ONGC added.
First published: August 12, 2024 | 11:09 PM IS
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