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Rediff.com  » Business » ONGC seeks gas price of $4.75 per mBtu

ONGC seeks gas price of $4.75 per mBtu

August 08, 2007 18:32 IST

Spicing up the ongoing debate on natural gas pricing, state-run Oil and Natural Gas Corporation has warned its over $6-billion investment could become infructious if it did not get a minimum market price of $4.75 per million British thermal unit (mBtu).

ONGC Chairman and Managing Director R S Sharma on July 30 wrote to Petroleum Secretary M S Srinivasan seeking immediate hike in price of gas it sells under regulated regime as it was incurring Rs 700 crore (Rs 7 billion) loss on the business.

Sharma also sought market determined prices, as promised by the Cabinet Committee on Economic Affairs in June 2005, for gas from new fields to compensate for the rise in cost.

The demands come at a time when Prime Minister Manmohan Singh has referred the issue of pricing of gas to an Empowered Group of Ministers after power and fertilizer sectors in general and Anil Ambani Group in particular wanted the government to renege on its promise of giving market determined prices to companies investing in gas exploration.

"The price has to be remunerative to take care of increased cost of oil services and to take exploration risk. This is more relevant in respect of gas produced from deep water/east coast in view of the advanced technology, high development cost and delivery cost," Sharma wrote.

He asked the government to raise the rates of gas sold under administered pricing mechanism to Rs 3.6 per cubic meter from current Rs 3.2 as has been recommended by the Tariff Commission.

He also sought an annual escalation of 20 per cent to gradually align the price to market rates. For non-APM gas, "the market price should at least be at parity with prices finalised in recent past for gas (from private fields) with minimum benchmark of $4.75 per mBtu," he wrote.

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