New Gas Pricing Policy Aims to Boost Domestic Production
The Ministry of Petroleum and Natural Gas has approved a new policy for gas pricing that aims to encourage increased domestic production. Under this policy, gas from new wells or well interventions in nominated fields of state-owned upstream companies, ONGC and Oil India Ltd., will be priced at a 20% premium over the current administered price mechanism (APM) or domestic natural gas price.
This initiative is expected to make new gas development projects more viable, leading to increased domestic production. The premium for new gas will be equivalent to 12% of the Indian crude basket price. Previously, gas pricing was tied to the crude price, with the APM gas price set at 10% of the Indian crude basket price. This rate was adjusted monthly by the Petroleum Planning and Analysis Cell (PPAC).
ONGC welcomed the new policy, stating that the enhanced price for new gas will make new gas development projects viable and help the company to augment the production of natural gas from nominated fields in challenging areas that require higher amounts of capital and technology.
The company also announced that this initiative would bolster its ability to invest in development projects, particularly those that demand significant capital and involve substantial risks, necessitating appropriate pricing.
the Daman Upside Development project in its designated Mumbai High field and the Integrated Development of four contract areas under DSF-II. These projects aim to boost domestic gas production and leverage the pricing and marketing flexibility granted under the Discovered Small Field Policy.
This new policy aligns with the government's ambition to boost the share of natural gas in the energy mix from the current 6% to 15% by 2030. India's sedimentary basins are estimated to contain vast reserves of crude oil and natural gas, and the government is working towards increasing exploration and production to reduce reliance on imports.