Premium price on non-shallow gas in New Year: Government

By Sarkaritel October 24, 2014 11:46

Premium price on non-shallow gas in New Year: Government

New Delhi Oct 22  Oil exploration companies engaged in deep-water and ultra-deep water discoveries, like Reliance Industries, will have to wait till the New Year for the government to spell out the new formula for their gas prices.

“Pricing for these categories needs work to be done. It will be determined by way of a transparent process. Apprehensions of discretion and the like (by the government) would be minimised,” Petroleum Secretary Saurabh Chandra told reporters here.

“We’re in the process of starting consultations with stakeholders. The final product should be available in the New Year,” Chandra added, four days after the government announced the gas price formula for other categories of discoveries.

For these normal categories, the government had announced a price of $5.61 per unit.

But for all new discoveries in ultra-deep-water areas, deep-water areas and the high pressure-high-temperature areas, it said that a premium will be given but did not spell out further details on how it will be calculated.

While shallow-water blocks are at a depth of up to 100-500 metres, deep-water blocks descend to around 1,000 metres. Those at depths beyond 1,500 metres are classified as ultra-deep-water blocks.

Reliance Industries will not immediately be able to avail the new price as it remains locked in an arbitration with the government over alleged shortfall in production from its Krishna-Godavari basin fields.

When the matter is resolved, the company is expected to benefit the most as most of its ongoing explorations are in the deep-water areas of the Bay of Bengal.

“The matter relating to cost recovery on account of shortfall in envisaged production from D1, D3 discoveries of Block KG-DWN-98-3 is under arbitration,” the official notification had said Saturday.

“Hence the operator (Reliance) would be paid the earlier price of $4.2 per unit till the shortfall quantity of gas is made good,” it said, adding the difference between the revised and the present price will be kept in an escrow acount, pending settlement.

Reacting to the new gas price Saturday, the state-run Oil and Natural Gas Corp. said the company stood to increase its profits annually by Rs.2,000 crore.

“Every $1 rise in gas price increases our revenues by Rs.4,000crore and net profit by Rs.2,350 crore,” chairman D.K. Sarraf had told reporters here. For the five months of current fiscal, the oil major stands to benefit around Rs.1,950 crore,.

Sarraf was also hopeful of further hikes to gas rates that will be revised every six months, with the next revision slated from April 1.

In its presentation to the Committee of Secretaries tasked to revise the gas price, ONGC had said it needed $6-$7.15 per unit to break even from its Krishna-Godavari blocks and $5.25-$17.80 per unit from seven small fields in the western offshore.

By Sarkaritel October 24, 2014 11:46