Fresh fields in nominated blocks fall under the new policy

In what could be indicative of the introduction of the free pricing regime, the Petroleum and Natural Gas Ministry has given freedom to the state-run Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) to price the natural gas produced by them at market rates.

The latest move is seen as a step towards putting in place a uniform gas pricing policy as indicated by Petroleum Secretary S. Sundareshan on a number of occasions.

According to the notification issued on May 31, the government has made it clear that any additional natural gas produced from blocks given to ONGC and OIL on nomination basis would fall under the free pricing policy.

So far all the gas produced from blocks given to OIL and ONGC was priced at government-controlled rates, called Administered Price Mechanism. The Petroleum Ministry notification now makes a distinction between existing producing fields and new ones in the nomination blocks. “The ONGC and OIL would have the freedom to sell any production from new fields in their nominated blocks at non-APM rates,'' it said.

The price of APM gas from June 1 has been more than doubled to $ 4.2 per mmBtu, at par with the rate at which Reliance Industries Limited (RIL) sells gas from its KG-D6 fields.

“It has been decided that the price of APM natural gas produced by national oil companies (NOCs) be fixed at $ 4.2 per mmBtu less royalty. Hence, the APM price inclusive of royalty [to customers] would be $ 4.2 per mmBtu,'' the order said.

The notification also stated that the company marketing the APM gas, Gas Authority of India Limited (GAIL) has been allowed to charge a marketing margin of Rs. 200 per mscm.

“The sale of APM and non-APM gas produced from nominated blocks would be in accordance with the government's decisions regarding commercial utilisation of gas,'' the order said.

In case of reduction in availability of APM gas, supplies to customers would be reduced on a pro-rata basis. To meet the deficit in supply of APM gas, GAIL and other oil marketing companies marketing non-APM natural gas would supply non-APM gas, subject to availability and connectivity, to connected APM customers on priority, provided they are willing to pay the higher non-APM price, it added.

The Empowered Group of Ministers headed by Finance Minister, Pranab Mukherjee is scheduled to take up the issue of free pricing of petrol and diesel on June 7.

Correction

In the above report, the expansion of “mscm” in the seventh paragraph is “million standard cubic metres”. It is quite a popular term which was in usage when gas rates were calculated in rupee terms and which are now done in dollar terms.

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