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Rediff.com  » Business » India should get used to global natural gas prices

India should get used to global natural gas prices

January 11, 2011 17:37 IST
Indian flagPlanning Commission member and former Cabinet secretary B K Chaturvedi said on Tuesday India should get used to natural gas price of $8 mmBtu, nearly double the price at which domestic gas is currently available.

Inaugurating the ninth Petro India conference, he said the country had got 'accustomed' to the gas price of $3 per million British thermal unit and power prices of about Rs 1.5 2.5 per unit.

"(Those) prices cannot remain at that level for long," he said.

"Energy policy of our country should evolve to absorb gas at prices of about $8-10 per mmBtu which is the estimated price level for Shale gas and LNG both of which would meet India's gas demand in the long term."

With domestic production of just over 140 million standard cubic meters per day meeting barely half the demand, India is importing 10 million tons of liquefied natural gas per annum and is looking at unconventional sources like shale gas.

Chaturvedi said that there was no need to wait for gas under administered price mechanism or for gas allocated by the government to setup gas-based power generating plants, as sufficient LNG was available in the Asian market.

There was adequate demand in the power sector to absorb $8 per mmBtu gas, he said.

He was critical of the discriminatory pricing and fiscal policy adopted for oil and gas saying unless 'this discrimination' is not removed investment in exploration will not increase to the desired level.

Currently, oil produced from domestic field is priced at international rates while the government caps natural gas price at artificially low levels.

Also, polluting crude oil is given a seven-year income tax break while environment friend natural gas is not bestowed the same fiscal incentive.

An exploration firm doesn't know if oil or gas or both will be found when a well is drilled, he said adding both oil and gas share the same geological origins and require the same extent of financial and technical risk capital.

He commented that the necessary investment would not materialise if investors felt that they would 'sink' if they find gas rather than oil.

Chaturvedi expressed confidence that capacity will be added in the hydro power sector with the entry of the private sector as long as India's policies find the right balance between competing environmental, social and economic needs.

He said that underground coal mining which was more environmentally sound had suffered because of policy had not adapted to higher prices for coal.

He also commented that India was pursuing the policy of setting up fertiliser plants in countries such as Qatar so that cheap fertilisers are imported to India rather than natural gas.

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