Parikh panel backs lifting cap on price of gas produced in ‘difficult fields’
1 min read . Updated: 29 Nov 2022, 11:54 PM IST
PremiumThe Kirit Parikh panel on gas pricing is set to recommend the gradual lifting of the price ceiling on gas produced from difficult fields when it submits its report on Wednesday
NEW DELHI : The Kirit Parikh panel on gas pricing is set to recommend the gradual lifting of the price ceiling on gas produced from difficult fields when it submits its report on Wednesday.
The price of gas from difficult fields, including deepwater, ultra-deepwater, and high pressure-high temperature areas such as Reliance Industries Ltd and its partner BP Plc-operated deep sea D6 block in KG basin, currently has a cap.
Speaking to reporters after a meeting of the committee, Kirit Parikh, the chairman of the government-formed panel, said that the report would be submitted to the union ministry for petroleum and natural gas on Wednesday. The panel discussed the draft report on Tuesday.
He said that the committee expects domestic gas prices to be linked to international prices going ahead.
On Monday, Mint reported that the panel is likely to recommend liberalization of natural gas prices by 1 January 2026.
The former bureaucrat said the panel would recommend a floor price and a cap for the legacy or old fields operated by state-run ONGC and Oil India Ltd (OIL).
“We were supposed to submit our report by the end of November, and tomorrow we will submit it," he said, adding that gas under Administered Pricing Mechanism (APM) has to be treated separately.
“There is a lot of legacy in terms of APM. So many decisions have been taken in the past, and so many different fields are there. So, it is a huge labyrinth of pricing. We have tried to simplify and straighten," Parikh noted.
Talking of the rationale behind the ceiling and floor prices suggested for APM gas or the gas produced from legacy fields, he said that the gas primarily goes into city gas distribution, fertilizer production and power plant and the objective of the panel was to get a fair price for consumers.
“APM gas, which ONGC and OIL produce, in their allocated field. This is fixed by the government. We have said that lower (floor) price should be implemented as ONGC and other companies should be able to cover their cost of production, and we have recommended an upper price as we don’t want to disturb the market," the chairman of the panel said.
According to people in the know, the panel has set a floor price of $4 per million British thermal unit and a ceiling price of $6.5 per mBtu.
Queries sent to the ministry of petroleum, ONGC, OIL and Reliance Industries remained unanswered till press time.
Under the current mechanism, prices are reviewed every six months —1 April and 1 October —based on prices in gas surplus nations such as the US, Canada and Russia in a year with a lag of one quarter.
From 1 October, the price of gas produced from old fields, which contribute nearly two-thirds of India’s natural gas production, was increased to $8.57 per million British thermal unit (mmBtu) from $6.1/mmBtu.
Deepak Mahurkar, leader, oil and gas sector, PwC said the price cap currently on gas from difficult fields impacts investor interest and that the proposed cap on gas from legacy fields may impact the profit margins of national oil companies.
