Panel agrees on need to charge domestic natural gas users more

Panel agrees on need to charge domestic natural gas users more

New Delhi: An inter-ministerial panel on Wednesday agreed on the need to charge more from users of domestic natural gas so that imported LNG can be made affordable.

The inter-ministerial committee, headed by Planning Commission advisor (energy) Sunanda Sharma, on Wednesday held the first meeting on subsidizing costlier imported LNG (liquefied natural gas) by making consumers of cheaper domestic natural gas pay more.

“The meet discussed the need for such a move and all except the representative of power ministry agreed on the need," a source privy to the deliberation said.

The power ministry wanted more discussion on the rational to average out or pool price of costlier imported LNG with cheaper domestic gas, the source said.

More deliberations will follow and various sub-groups on working out modalities, tax implications, etc, will be formed.

The panel was constituted after Petronet LNG, India’s largest liquefied natural gas importer, contracted LNG from Australia at a price that is four times the rate at which most of the natural gas produced from domestic field is sold.

Australian LNG, which is to be imported at Petronet’s under construction Kochi terminal in Kerala from 2014, is indexed at 14.5% of crude oil price -- the loading price at Australian port will be $14.5 per million British thermal unit at $100 a barrel oil price.

After adding $1-1.2 per mmBtu towards cost of shipping, the gas in its liquid form in cryogenic ships to Kochi, 5% customs duty ($0.77 per mmBtu) and cost of converting the LNG into its gaseous state, the gas ex-Kochi will cost about $17 per mmBtu.

This compares to $4.2 per mmBtu price of majority of gas, the source said, adding the panel will suggest how these two prices can be pooled or averaged out to make the gas affordable to power and fetilizer units in Kerala.

However, the constitution of the committee has come in for questioning by some quarters, who say inclusion of officials of Petronet, a private company, and state-owned gas utility GAIL are a conflict of interest.

Petronet and GAIL, which is a promoter of Petronet and principal marketer of the Australian LNG, are naturally inclined towards price pooling.

Instead, upstream regulator DGH (Directorate General of Hydrocarbons), they say, should have been co-opted as member of the committee so as to detail the implication and complication of such proposal on contracts of the fields awarded under new exploration licensing policy (Nelp).

The panel includes representatives of power, fertilizer, finance and oil ministries, GAIL India chairman, Petronet CEO, Petroleum and Natural Gas Regulatory Board secretary and Oil and Natural Gas Corp (ONGC) director finance.