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India slashes prices for

domestic gas production

POLICY THE Indian government has slashed the price
of natural gas produced by state-run developers,
putting their finances under greater pressure.
New Delhi has cut prices for the six months
from October 1 to $1.79 per mmBtu ($49.51
per 1,000 cubic metres) from $2.39 per mmBtu
($66.11 per 1,000 cubic metres) in the previous
six-month period, the Petroleum Planning &
Analysis Cell has said.
The government cut prices for gas pro-
duced from challenging fields, which receives
a premium, from $5.61 per mmBtu ($155.17
per 1,000 cubic metres) to $4.06 per mmBtu
($112.30 per 1,000 cubic metres).
The cut for conventional fields was steeper
than the $1.90-1.94 per mmBtu ($52.55-53.66
per 1,000 cubic metres) that reports in August
had suggested the government was considering. ONGC chairman Shashi Shanker has
Moreover, the price of gas extracted from fields described the mechanism as illogical, arguing
has not only fallen to a 10-year low but is even that it uses an average price set in gas-rich hubs
further below the average cost of production. to set rates in a gas-poor market. The developer
The country’s largest gas producer, Oil and has told the government that developing new gas
Natural Gas Corp. (ONGC), said on June 30 that discoveries requires a price of $5-9 per mmBtu
its average gas production costs were about $3.70 ($138.3-248.94 per 1,000 cubic metres) just to
per mmBtu ($102.34 per 1,000 cubic metres). break even.
ONGC has been pushing the government The situation saw Indian Minister of Petro-
for months to deregulate gas prices, forecast- leum and Natural Gas Dharmendra Pradhan
ing heavy losses from its gas business if policy pledge in June to phase out price controls, paving
changes were not implemented. the way for market-led pricing.
New Delhi sets domestic gas prices every The price cuts come just days after reports
six months using the weighted average price emerged suggesting that the government was
of gas in hubs in the US, Canada, the UK and mulling the creation of a gas price floor pegged
Russia. These tariffs are also set at a three- to the benchmark Japan-Korea Marker.
month lag to prevailing market rates in those The Ministry of Petroleum and Natural Gas
hubs and come with a built-in $0.50 per has formed a panel to study the plan and other
mmBtu ($13.83 per 1,000 cubic metres) dis- pricing options, Bloomberg reported on Sep-
count to the international average. tember 26 quoting unnamed sources.™

India seeks greater oil security

POLICY THE Indian government has revealed that it its portfolio of oil suppliers. He noted that long-
is still exploring the idea of storing strategic term supply contracts had been signed for US,
reserves of oil overseas, after first touting this in Russian and Angolan crude and that the coun-
July, when it signed a co-operation agreement try’s oil imports now came from more than 30
with the US. countries. The goal here is to reduce India’s expo-
Indian Minister of Petroleum and Natural sure to suppliers in the political volatile Middle
Gas Dharmendra Pradhan said on September 29 East.
that the country was considering strategic “crude “To further improve energy security in the
storage facilities in the US and other commer- hydrocarbons sector, we are gradually improving
cially viable locations”. crude and petroleum product storage capacity
Pradhan, who was speaking at an industry from [the] existing 74 days of national consump-
event, added that other efforts to ensure energy tion to 90 days,” he said.
security involved diversifying and expanding The country is currently looking into more

P6 www. NEWSBASE .com Week 39 01•October•2020