Govt, pvt explorers demand hike in natural gas prices

Producers want contracts to be honoured

State-owned energy behemoth ONGC on Monday joined private sector explorers Reliance Industries, BP and Cairn India in demanding an immediate hike in natural gas prices, saying the current rate of $4.2 per unit was hindering development of over a dozen discoveries.

Sources attending the stakeholder-government meeting said that gas producers were of the opinion that as many as 10 trillion cubic feet of gas cannot be developed at the current rate of $4.2 per million British thermal units.

The meeting was chaired by Power Secretary P K Sinha who asked the producers to present their views in writing by August 28 to oil secretary Saurabh Chandra.

Sources said that producers reiterated that the sanctity of Production Sharing Contracts (PSC), which the government has entered into with them, should be maintained. The PSC provides for a market discovered gas price.

They also stated that the best option was the implementation of the 2006-07 recommendation of the Committee headed by P K Sinha, who was then Additional Secretary in the oil Ministry, where it was stated that gas price should be discovered by asking consumers to bid.

The Association of Oil and Gas Operators (AOGO) told the panel that the future of exploration and production industry will depend a lot on the gas price decision. It insisted that the issue has be addressed urgently to restore investor confidence.

The NDA government had on June 25 deferred by three months the implementation of the Rangarajan formula that would have doubled gas price to $8.4 per million British thermal unit pending review.
Earlier this month, Oil Minister Dharmendra Pradhan had told Parliament that the NDA government decided to review the pricing formula keeping in mind public interest and recommendations of the Parliamentary Standing Committee.

He had said a decision will be taken keeping in mind the interests of investors and public and a new formula will be announced by September 30. Till then, the $4.2 per mmBtu price will continue.