The Petroleum and Natural Gas Ministry on Friday notified a new natural gas pricing guidelines under the Rangarajan formula that will lead to almost doubling of prices for all domestically produced gas including conventional, shale, coal bed methane (CBM) from the present price of $ 4.2 mbtu starting April 1 this year.
In a statement issued here this evening, the Ministry said it had notified the `Domestic Natural Gas Pricing Guidelines, 2014’ that will apply to all natural gas produced domestically, irrespective of the source, whether conventional, shale or coal-bed methane (CBM) from April 1, 2014 produced in the public sector or by the private sector firms.
The notification said gas from April will be priced at an average price of liquefied natural gas (LNG) imports into India and benchmark global gas rates. This formula will be applicable till March 31, 2019. The new rates, which will change every quarter, based on the 12-month average of global rates and LNG import price with a lag of one quarter. ``The guidelines shall also be applicable for natural gas produced by ONGC/OIL from their nominated fields,’’ the notification added.
Mukesh Ambani-owned Reliance Industries Limited (RIL) will get the benefit of the new gas price from its existing fields like MA in the KG D6 block and new/upcoming ones like R-Series and satellite in the KG Basin block and the ones in North East Coast block NEC-25. However, for the D1&D3 gas fields in KG-D6 block it will have to submit a bank guarantee to cover its liability if the charges of hoarding gas by deliberately producing less during last three years, are proved by independent observers or an arbitrator. ``In respect of D1 and D3 gas discoveries of Block KG-DWN-98/3, these guidelines shall be applicable subject to submission of bank guarantees in the manner to be notified separately,’’ the notification said.
The bank guarantee 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. Experts estimate that price of gas from April will be around $8 to 8.4 mbtu during 2014-15 as against the current rate of $4.2.
A Committee comprising of official of the Ministry and the Directorate General of Hydrocarbons (DGH) has been constituted for drafting the bank guarantee and supplementary agreement in respect of natural gas pricing guidelines for the D1&D3.