Union Petroleum and Natural Gas Minister, Veerappa Moily on Wednesday said the move to raise the gas prices from April 2014 was an important step towards monetising the nearly 3 trillion cubic feet (tcf) potential capacity which could otherwise not be exploited due to the economically unviable price of $4.2 mbtu.
"There is approximately 3 tcf of gas reserves waiting to be exploited including those by state-run Oil and Natural Gas Corporation (ONGC) and the private players. But these could not be monetised at the current level price of $4.2 mbtut. Several discoveries by ONGC and RIL have been declared unviable by the Directorate General of Hydrocarbons (DGH) as the current gas price was not viable to cover the costs," he said addressing a seminar organised by Assocham in New Delhi.
He said the new pricing regime would help revive the almost dead investment in the oil and gas sector. "There has been consistent decline in the investment in this sector which was around $6 billion in 2007-08 and declined to a meagre $1.8 billion in 2011-12. Interestingly, the India firms invested $27 billion abroad and another $10 billion was in pipeline. It is evident that we have no choice but to take immediate measures to make the domestic gas production sector viable," he remarked.
He said due to lack of investments in the oil and gas sector, gas production in India declined from a peak of 143 mmscmd per day in 2010-11 to 111 mmscmd in 2012-13. Production of state-owned ONGC and OIL also remained stagnant at about 70 mmscmd while output of private firms dipped from 72.9 mmscmd in 2010-11 to 40 mmscmd in 2012-13 leading to larger import of LNG. The LNG imports accounted for 20 per cent of total gas consumption in 2010-11, 25 per cent in 2011-12 and 30 per cent in 2012-13. "The deficit between supply and demand is projected to increase from 143 mmsmd in 2012-13 to 234 mmsmd in 2016-17, which if met from import means not only huge outflow of foreign exchange but import of gas at a much higher price of more than $11," Mr. Moily said.
"Broadly speaking, every $1 per mBtu increase in the gas price would result in an additional burden of about $1 billion. Out of which, approximately $400-500 million will come back to the Government in the form of royalty, increased profit petroleum, taxes and dividends," he added.
Speaking on the occasion Petroleum Secretary, Vivek Rae called for faster decision making stating that the biggest challenge is greater exploration of Indian sedimentary basins. To address the need for quality data, which he said is key to investment decisions, the Government was working on National Data Repository. He also indicated that an Open Acreage Licensing Policy will also be in place to facilitate faster exploration.
Keywords: gas price hike, Veerappa Moily, gas reserves, Cabinet Committee on Economic Affairs, Trillion cubic feet of gas reserves, ONGC, OIL, Directorate General of Hydrocarbons, Assocham meeting, Reliance Industries, KG-D6 basin