The new Indian government has decided that the whole issue of gas pricing will need comprehensive re-examination.(Reuters) The new Government has decided that the whole issue of gas pricing will need comprehensive re-examination.(Reuters)
SummaryThe new Government has decided that the whole issue of gas pricing will need comprehensive re-examination.
In the run up to the general election, Aam Aadmi Party (AAP) had alleged that RIL’s partner Niko Resources was selling KG-D6 gas in Bangladesh for half the USD 4.2 per million British thermal unit rate that India pays them.
“The gas produced from KG-DWN-98/3 (KG-D6) block in eastern offshore is being sold domestically in India as per the allocation made by the Government and no gas is being supplied to Bangladesh from this block,” Oil Minister Dharmendra Pradhan told Rajya Sabha today.
In a written reply to a question, he said Article 21.1 of the Production Sharing Contract for KG-D6 signed between the government and RIL, states that “the Indian domestic market shall have the first call on the utilisation of natural gas discovered and produced from the contract area (field).”
He said the current sale price of KG-D6 is USD 4.205 per mmBtu.
This price formula which led to a rate of USD 4.205, was valid for first five years of production. RIL began production gas from KG-D6 in April 2009 and the price was valid till March 31, 2014.
“Accordingly the formula was due for revision. The new Government has decided that the whole issue of gas pricing will need comprehensive re-examination. The Domestic Natural Gas Pricing Guidelines, 2014 have been kept in abeyance up to September 30, 2014 and till that time, the domestically produced gas would continue to be priced at the rate prevailing on March 31, 2014,” he said.
The pricing guidelines, notified on January 10, would have doubled the gas price to about USD 8.4.
To a separate question, Pradhan said cost of production of gas varied between USD 1.86 per mmBtu to USD 4.31 excluding levies and USD 2.47 to USD 4.80 per mmBtu including levies.
“The average cost of crude oil and natural gas production varies from company to company and field to field depending upon size/type of the reservoir, location of reservoir, operating cost, financing cost, depreciation, depletion and amortization applicable and accounting policy followed by various E&P companies as well as taxes and duties levied by the Government,” he said.
Cost of production includes operating cost, recouped cost (depreciation, depletion, survey and dry wells) and statutory levies, and excludes return on capital employed, he added.