Government approves 20% premium price hike for gas from new ONGC wells

13 Aug 2024 CW Team

The government has sanctioned a 20% premium over the regulated price for natural gas produced from new wells by Oil and Natural Gas Corporation (ONGC). This decision aims to enhance the viability of new gas development projects. Currently, domestic gas pricing operates under two main regimes. Gas from legacy fields, managed by ONGC and Oil India Ltd, is priced at 10% of the imported crude oil price, capped at $6.50 per million British thermal units (mmBtu). For instance, with the Indian crude oil basket price at $77 per barrel, the APM price for ONGC's gas from Mumbai High and Bassein fields would be $7.70 per mmBtu, but the cap price is applied. Gas from challenging fields, such as deep-sea locations, is priced higher due to increased production costs. For the six months starting April 1, this rate is set at $9.87 per mmBtu. Under last year's guidelines, a 20% premium over the APM price was established for gas from new wells, even within legacy fields. The Ministry of Petroleum and Natural Gas has now officially implemented this premium. ONGC stated, ?The domestic gas price (APM price) is fixed at 10% of the Indian crude basket price as announced by the Petroleum Planning and Analysis Cell (PPAC) monthly. The guidelines included a 20% premium for gas from new wells or interventions in ONGC/Oil India Ltd?s nominated fields, totalling 12% of the Indian crude basket price for new gas.? This policy adjustment is expected to improve the viability of new gas projects, helping ONGC increase production in challenging areas that require significant investment and technology. ONGC's board recently approved the Rs 78 billion Daman Upside Development project in the Mumbai High field, aiming for peak production of about 5 million standard cubic meters per day. Another project, involving the integrated development of four contract areas under DSF-II, was approved with a cost of Rs 60 billion and a peak production target of around 4 mmscmd. This project benefits from pricing and marketing freedom under the DSF Policy. ?The implementation of this policy supports the national goal of raising the share of natural gas in India?s energy mix from 6% to 15% by 2030,? ONGC added. (ET)

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