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India plans gas pricing reforms

POLICY THE Indian government has unveiled plans to State-run Oil and Natural Gas Corp. (ONGC)
allow developers of new natural gas fields to sell will welcome the move, given the company’s
their production on e-bidding platforms, in a bid multi-billion-dollar development commitments
to move towards market-determined pricing. in the deep waters of the Krishna-Godavari (KG)
Minister of Petroleum and Natural Gas Dhar- Basin. The company has said that developing
mendra Pradhan said on October 7 that the new new gas discoveries requires a price of $5-9 per
price discovery mechanism should help boost mmBtu ($138.3-248.94 per 1,000 cubic metres)
the country’s gas production by 40mn cubic to break even.
metres per day. However, the major will undoubtedly be
“Pricing obtained through the e-bidding dismayed by the lack of traction over pricing
platforms will be applicable to the gas discov- for gas produced from existing state-operated
eries whose field development plan [FDP] was blocks. Pradhan said the government’s fixed-
approved after February 2019,” Pradhan told price formula for such production would
reporters. He added that the Directorate Gen- remain in place.
eral of Hydrocarbons would set up platform New Delhi sets domestic prices every six
guidelines, without saying when the e-bidding months using the weighted average gas price
mechanism would launch. in hubs in the US, Canada, the UK and Russia.
Gas producers will be excluded from the These tariffs are also set at a three-month lag
platforms, though their subsidiaries will be able to prevailing market rates in those hubs and
to participate, Pradhan said. If a bid round only come with a built-in $0.50 per mmBtu ($13.83
attracts these units, however, then the process per 1,000 cubic metres) discount to the inter-
will have to be repeated. national average.
The government said: “The policy aims to The government last week cut tariffs for the
provide standard procedure for sale of natural six months from October 1 to $1.79 per mmBtu
gas in a transparent and competitive manner to ($49.51 per 1,000 cubic metres) from $2.39 per
discover market price by issuing guidelines for mmBtu ($66.11 per 1,000 cubic metres) in the
sale by contractor through e-bidding. This will previous six-month period. The price for gas
bring uniformity in the bidding process across produced from challenging fields, which receives
the various contractual regimes and policies to a premium, was slashed from $5.61 per mmBtu
avoid ambiguity and contribute towards ease of ($155.17 per 1,000 cubic metres) to $4.06 per
doing business.” mmBtu ($112.30 per 1,000 cubic metres).™

P10 www. NEWSBASE .com Week 40 08•October•2020