Under the current policy, gas price is linked to crude oil price, with APM gas price currently fixed at 10 percent of the Indian crude oil basket price.
The Ministry of Petroleum and Natural Gas on Monday approved the allocation of gas from new wells or well interventions in the nominated fields of state-owned companies ONGC and Oil India Ltd. This gas will be priced at a premium of 20 per cent over the current Managed Price Mechanism (APM) or the domestic natural gas price.
The initiative aims to make new gas development projects more profitable and boost domestic production.
According to the latest notification, gas produced from new wells in the nominated fields of ONGC and Oil India will benefit from a premium equal to 12 per cent of the Indian crude oil price. Under the existing policy, the gas price is linked to the crude oil price, with the APM gas price currently fixed at 10 per cent of the Indian crude oil price. This rate is adjusted monthly by the Petroleum Planning and Analysis Cell (PPAC).
In a statement, ONGC said: “The higher price of new gas will make the new gas development projects viable and help ONGC scale up production of natural gas from nominated fields in challenging areas that require higher amounts of capital and technology.”
The company announced that this initiative would increase investment capacity in development projects, particularly those that require significant capital and carry significant risks, necessitating appropriate pricing.
The ONGC Board recently approved the Daman Upside Development project in the designated Mumbai High field. With an estimated cost of around Rs 7,800 crore, this project is aimed at boosting domestic gas production. The contract has already been awarded and the company is forecasting a peak output of around 5 million metric standard cubic metres per day (MMSCMD).
The Board has given the green signal to another venture – Integrated Development of four contract areas under DSF-II, with an expected outlay of Rs 6,000 crore. The project aims to achieve peak gas production of about 4 MMSCMD, using the pricing and marketing flexibility provided under the Discovered Small Field Policy. According to ONGC, the contract for the execution of the project has already been awarded.
The introduction of this policy is in line with the government’s ambition to increase the share of natural gas in the energy mix from the current 6 percent to 15 percent in 2030.
India’s sedimentary basins are estimated to contain about 651.8 million tonnes of crude oil and 1,138.6 billion cubic metres of natural gas. Currently, the country relies on imports for 85 percent of its crude oil needs.
Upstream companies have so far explored just 10 percent of the sedimentary basin. The government is now working to increase this figure to 16 percent by the end of 2024, following the conclusion of upcoming bidding rounds under the Open Acreage Licensing Programme.
In addition, the government wants to expand the country’s exploration area to one million square kilometers by 2030.
Meanwhile, Oil India touched a 52-week high on Tuesday after being included in the MSCI India domestic index. ONGC stock price also rose to a fresh 52-week high on Tuesday on the back of positive market sentiment.
(With input from the agency)
First publication: Aug 13, 2024 | 10:36 AM IST