Though the price of natural gas is not due for revision for another two years, Reliance Industries Ltd. says the current “sub-market” price is constraining the development of indigenous gas resources and needs urgent upward revision.
In its January 6 letter to the Petroleum and Natural Gas Ministry, RIL states: “As such, we wish to exercise our contractual right to market natural gas on the basis of arms length competitive sales to the benefit of all parties to the PSC [production sharing contract], including the Union government. Since we understand from public and private statements that there are some who believe the current sub-market price should be maintained, we therefore propose discussing with you a revised price formula consistent with Article 21.8 of the PSC and principles established by the New Exploration and Licensing Policy (NELP) and the Petroleum Ministry with a view to reaching an amicable settlement within 90 days of the date of this letter.”
A similar demand by RIL for revising the gas price formula was turned down by the government in 2010 itself. Only last week did a top official of the Petroleum Ministry say that there was no proposal to revise the gas pricing formula, and it would be done when it was due in 2014. “We have gone through a number of representations and petitions on the pricing of gas at international rate. However, we have still not been able to figure out what is the benchmark international gas price unlike the case in crude oil,” the official had said.
RIL's letter states that it will be no exaggeration that the nation's energy security is directly threatened by this price anomaly as domestic gas production potential is being depressed by sending the wrong price signal to potential producers. “The refusal to entertain discussions regarding a revised formula only exacerbates these consequences and further constrains the development of indigenous gas resources. The current gas formula is contrary to the public interest, as it is jeopardising the potential energy security of the country.”
