Moily defends natural gas price hike

Says domestic gas production unviable at prevailing rates New Delhi (PTI): Stoutly defending the doubling of gas prices from 2014, Oil Minister M Veerappa Moily on Wednesday said the move will help bring to production over 3 trillion cubic feet of gas reserves that had been declared economically unviable at current rates of $4.2. "Approximately 3 Tcf gas reserves is lying to be exploited which cannot be monetised if the gas price remain at the present level of $4.2 per million British thermal unit," he said addressing a seminar organised by Assocham. Several gas discoveries of firms like Oil and Natural Gas Corp (ONGC) and Reliance Industries have been declared unviable by the Directorate General of Hydrocarbons (DGH) as current gas price of $4.2 was inadequate to cover the cost. "The ministry is rejecting the monetisation of new discoveries as their production will not be viable at the present price of $4.2," he said. Besides making deepsea gas finds viable, the new pricing regime which kicks in from April 1, 2014 would help revive the almost dead investment in the oil and gas hunt."There has been consistent decline in the investment in this sector which was around $6 billion in 2007-08 and dropped down to a meagre $1.8 billion in 2011-12," he said adding at the same time Indian firms invested $27 billion abroad and another $10 billion was in pipeline."Therefore, it is evident that we have no choice left but to take immediate measures to make the domestic gas production sector viable," he said. With unremunerative price, gas production in India has declined from a peak of 143 million standard cubic metres per day in 2010-11 to 111 mmscmd in 2012-13.Production by the public sector companies ONGCBSE and OIL has remained stagnant at about 70 mmscmd while output of private firms has dipped from 72.9 mmscmd in 2010-11 to 40 mmscmd in 2012-13, he said. The output dip meant larger import of gas in its liquid form. The LNG imports accounted for 20 per cent of total gas consumption in 2010-11, 25 per cent in 2011-12 and 30 per cent in 2012-13. "The deficit between supply and demand is projected to increase from 143 mmsmd in 2012-13 to 234 mmsmd in 2016-17, which if met from import means not only huge outflow of foreign exchange but import of gas at a much higher price of more than $11," Moily said. The 3 Tcf reserves not viable at $4.2 price equals the remaining resource base in the currently producing Dhirubhai-1 and 3 (D1&D3) gas fields in RIL's KG-D6 block. The Cabinet Committee on Economic Affairs on June 27 approved pricing of domestically produced gas at an average of imported LNG and international benchmarks from April 1 next year. Accordingly, the price in April would be $8.4. Moily said the option before the country was to either keep the finds in the ground and continue importing gas at $11-12 or pay much lesser price to domestic producers to bring the discoveries to production and cut foreign exchange outgo on imports. "Government is also fully aware of the impact of price rise on the consuming sector like power and fertiliser and at this point of time it will be relevant to say the revise price being fixed with effect from from April, 2014 will be the output price for the domestically produced gas" he said.