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Updated: January 24, 2014 17:39 IST

Cabinet note on capping subsidy share of upstream oil companies soon

PTI
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A file picture upstream activities of Reliance Industries project at KG D6. Photo: Special Arrangement.
The Hindu
A file picture upstream activities of Reliance Industries project at KG D6. Photo: Special Arrangement.

Ministry of Petroleum and Natural Gas will go to the Cabinet soon seeking a minimum $ 65 per barrel price for state oil and gas explorers like ONGC.

The move is expected to help in bringing 70 million tonnes of oil to production.

“We will soon approach Cabinet on the issue of capping the subsidy share of upstream companies,” Oil Minister M Veerappa Moily told reporters in New Delhi on Friday.

Upstream companies (like ONGC and Oil India) bear disproportionately high subsidy burden. $ 65 is the minimum price that is needed to help bring marginal and deeper fields into production.

Upstream firms pay for a portion of fuel subsidies by giving discounts on crude oil sales to refiners selling diesel and cooking fuel at rates lower than cost of production.

Discoveries in Mumbai High and KG basin on the east coast can produce nearly 70 million tonnes over a period of time if the price is right.

The Kirit Parikh Committee, last year, advocated reducing upstream subsidy burden on Oil Ministry.

The ministry will also circulate a Cabinet note on allowing Reliance Industries extra time to conduct various tests to prove five natural gas discoveries.

“We are going to the Cabinet Committee on Economic Affairs to allow the contractor to conduct DST (drill stem test) after the time period has expired,” Mr. Moily said.

The tests should be done to confirm three gas discoveries in the Krishna Godavari basin KG-D6 block and two finds in the NEC-25 block off the West Bengal coast.

Directorate General of Hydrocarbons (DGH) has made DST mandatory and in its absence does not recognise the five finds.

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