The Union Cabinet on Thursday approved a revision in the formula for pricing of natural gas and imposed cap or ceiling price to help cut CNG and piped cooking gas prices by up to 10 per cent. Natural gas produced from legacy or old fields, known as APM gas, will now be indexed to the price of imported crude oil instead of benchmarking it to gas prices in four surplus nations such as the US, Canada and Russia, Union I&B Miniser Anurag Thakur told reporters after a meeting of the Cabinet. APM gas will be priced at 10 per cent of the price of basket of crude oil that India imports (Indian basket of crude oil).
The new government on June 25 decided to defer the implementation till September-end to hold wider consultations.
The bank guarantee, which will be equivalent to the incremental revenue that RIL will get from the new gas price, will be encashed if it is proved that the company hoarded gas or deliberately suppressed production at the main D1&D3 fields in the eastern offshore KG-D6 block since 2010-11.
The finance ministry has rejected the formula and, instead, suggested an alternative that takes into account well-head prices of suppliers in Qatar, Oman, Abu Dhabi and Malaysia.
Committee of secretaries is working on the formula and it is understood that EAC is also being asked to go through the formula.
The Empowered Group of Ministers, which had its third meeting on Wednesday morning was near unanimous on the need to honour the government's commitment allowing marketing and price freedom to investors investing in oil and gas hunt.
The previous United Progressive Alliance government had last year approved pricing of all forms of domestically produced gas at according to a formula suggested by a panel headed by C Rangarajan.
The Standing Committee on Petroleum and Natural Gas in a report tabled in Parliament said the proposed formula is a simple average of two methodologies -- price of imports of LNG into India by different suppliers, and weighted average of prices of natural gas prevailing at Henry Hub in USA, National Balancing Point in London and netback import price at the well head of suppliers into Japan.
Gail India subsidiary Mahanagar Gas (MGL) on Friday announced a steep reduction in the retail price of compressed natural gas (CNG) by Rs 8/kg and domestic PNG (piped natural gas) by Rs 5/SCM across its licenced area. The move comes on the heels of the Centre revising the pricing methodology of domestically-produced natural gas on Thursday as proposed by the Kirit Parikh committee and following it with the new price announcement earlier in the day. In February, the city gas distributor reduced its CNG price by Rs 2.5/kg but prices are still around 80 per cent more than those in April last.
State-owned Indian Oil Corporation (IOC), Adani-Total Gas Ltd and Shell were among the 29 companies that bid and bought natural gas to be produced from the deepest field in the KG-D6 block of Reliance Industries Ltd and bp, sources said. IOC walked away with almost half of the 6 million standard cubic meters per day of gas sold in an e-auction on Wednesday while state-owned gas utility GAIL bought 0.7 mmscmd, Adani-Total Gas Ltd 0.4 mmscmd, Shell 0.5 mmscmd, GSPC 0.25 mmscmd and IGS another 0.5 mmscmd, two sources with knowledge of the matter said. Reliance-bp on Wednesday held an e-auction for sale of gas from the MJ field in their eastern offshore KG-D6 block after incorporating the government's new marketing rules to give CNG-selling city gas companies first priority over supplies.
The gas pricing formula no weight to cost of gas production. It takes into account prices in global hubs and the price of gas being imported.
Locally produced gas in India will now cost at least 8 per cent less.
The government on Thursday more than doubled the price of natural gas that is used to produce electricity, make fertilisers, turned into CNG and piped to household kitchens for cooking, on the back of a spike in global energy prices. The price of gas produced from old regulated fields, such as the nation's largest gas field of Bassein of ONGC, will rise to a record high of $6.10 per million British thermal unit (mmBtu) from the current $2.90 per mmBtu, according to the oil ministry's Petroleum Planning and Analysis Cell (PPAC). The new price, which is likely to result in a hike in CNG and piped cooking gas rates, will be for six months beginning April 1.
The Communist Party of India Marxists said that Reliance gas pricing was 'artificially inflated.'
At $4.64 per mBtu, KG gas is alleged to be over-priced.
Reliance Industries Ltd, whose gas pricing formula has been questioned by Anil Dhirubhai Ambani Group company Reliance Natural Resources Ltd, has said that the company has not breached a Bombay high court order.
The government on Thursday hiked by 62 per cent the price of natural gas that is used to produce electricity, make fertilisers and turned into CNG to use as fuel in automobiles and cooking gas for household kitchens. This is the first increase in rates since April 2019 and comes on back of firming benchmark international prices but does not reflect the spurt in spot or current price of liquefied natural gas (LNG) witnessed during the last couple of weeks. The oil ministry's Petroleum Planning and Analysis Cell (PPAC) said the rates paid for gas produced from fields given to state-owned Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) will be $2.90 per million British thermal unit for the six-month period beginning April 1.
The Union Cabinet in June decided to price all domestically produced natural gas at an average of the price prevailing at international gas trading hubs and the actual cost of importing liquid gas.
The agreement on pricing last month marks a significant step towards promoting energy security in the region, say Nisha Taneja & Samridhi Bimal.
The reduction in natural gas prices would mean lower raw material cost for compressed natural gas (CNG) and natural gas piped to households (PNG).
Oil Min rejects RIL arbitration notice.
The current price is among the lowest in Asia Pacific.
The government has formed a four-member panel of secretaries to suggest a new gas pricing mechanism.
The Election Commission asked the government to defer announcement of the new price till completion of the polls and so RIL was asked to continue selling the gas at old rates.
Last week, RIL and urea companies failed to settle the key terms of gas supply from April 1 upon expiry of the five-year contracts that priced gas from the eastern offshore KG-D6 fields at $4.205 per million British thermal units.
RIL-BP currently produce gas from Dhirubhai-1 and 3 field and oil and gas from MA field, three of the over one-and-half dozen discoveries made in KG-D6 block
The list includes CAG's request dated July 2, 2012 for information on award of contract for laying of a 1,395-km pipeline by Mukesh Ambani-owned Reliance Gas Transportation Infrastructure Ltd for shipping KG-D6 gas from east coast to the west.
The government on Thursday decided to join the arbitration initiated by Reliance Industries and its partners over delay in revision of natural gas prices, and named former Supreme Court judge G S Singhvi as its arbitrator.
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Following adverse media reaction to the June 27 decision of the Cabinet Committee on Economic Affairs, the finance ministry had issued an office memorandum asking the petroleum ministry to see if there was a way to make RIL clear its gas supply backlog at the existing price.
Since we are at the start of the month and the quarter, we shall look at the broader picture for the markets.
The Cabinet on Thursday decided to allow Reliance Industries to almost double the price of natural gas from April provided the firm gave a bank guarantee to cover its liability if gas-hoarding charges are proved.
RIL has more than half a dozen undeveloped discoveries.
In the 38-page report, across 10 chapters, RIL explained how it entered the exploration and production business; the history of the New Exploration and Licensing Policy and the introduction of production-sharing contracts.
Technically speaking, US equities have seen net losses since January. India is strongly influenced by US trends.
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The Management Committee headed by Director General of Hydrocarbons R N Choubey refused to take a view on appointment of renowned reservoir consultants Ryder Scott, DeGolyer and MacNaughton, Gaffney, Cline & Associates or Netherland, Sewell & Associates to ascertain if RIL's claims of fall in reserves are actually true or the firm was hoarding gas by producing less, official sources said.
Link between oil exploration and markets can be used by India to great advantage.
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The toxic brew of fiscal populism, crony capitalism and bad economic management has ensured the collapse of economic growth, industrial stagnation, stubbornly high consumer inflation, declining savings and investment, shrinking employment opportunities, and a dangerously vulnerable external financing situation.
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