Petroleum and Natural Gas Minister, Veerappa Moily on Friday said the decision to almost double the natural gas prices from April 2014 will encourage investments in exploration and production and in turn reduce country’s dependence on imports.
“If you don't raise gas price, no domestic production will come and dependence on imports will increase. You need to spend a lot of money on technology and research to access the hydrocarbon,” Mr. Moily said at the AIMA's 3rd PSU Summit in New Delhi.
Mr. Moily was of view that giving higher gas price will help bring to production over 3 Trillion cubic feet of gas reserves that had been declared economically unviable at current price of $4.2.
Several gas discoveries of firms like state-owned Oil and Natural Gas Corporation (ONGC) as well as of RIL had been declared unviable by the Directorate General of Hydrocarbons (DGH) as the current gas price of $4.2 per mbtu was inadequate to cover the cost of production. “The option before the country was to either keep the gas finds under wraps and continue importing gas at $12-13 or pay much lesser than this price to domestic producers to bring the discoveries to production and cut foreign exchange outgo on imports. We may end up importing 100 per cent if we don't encourage exploration,” he added.
The Cabinet Committee on Economic Affairs (CCEA) on June 27 had approved pricing of domestically produced gas at an average of imported LNG and international benchmarks from April 1, 2014. The new price in April would apply to all public and private producers of conventional gas and non-conventional fuel like coal-bed methane and shale gas. On Thursday, the CCEA allowed RIL the new rates provided it furnished a bank guarantee to cover its liability if gas-hoarding charges are proved. 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 Dhirubhai-1 and 3 (D1&D3) fields in KG-D6 block since 2010-11.
The finds whose commerciality has not approved by DGH are spread over RIL's KG-D6 block and Cauvery basin block CY-DWN-2001/2 off the Tamil Nadu coast. In KG-D6, commerciality of D-5 and 18 had not been submitted due to low gas price, while Declaration of Commerciality (DoC) of D-29, 30 and 31, which hold around 350 billion cubic feet of reserves which can produce 5-7 million standard cubic meters per day has not been approved by DGH.