Rangarajan's gas pricing disputed
It should be as proposed in 'Production Sharing Contract' New Delhi: Earlier, C Rangarajan committee has found the domestic gas prices were out of...
It should be as proposed in 'Production Sharing Contract'
New Delhi: Earlier, C Rangarajan committee has found the domestic gas prices were out of sync with global rates. It has recommended an interim model, "hybrid producer price" which derived by averaging international hub prices with cost of imported liquid gas (LNG) for next five years.
Accordingly, the price would be $8-8.5 per mmBtu as against present price of $4.2 per mmBtu. However, this was disputed by the Reliance saying that the price cannot be sufficient to bring out the gas locked in deep water and high risk exploration well etc.
A month back, BP India head Sashi Mukundan in a communication to government said, "The price determined through the Committee's recommended formula is at a 40-50 per cent discount to the existing free market price of imported LNG into India."
He said the Rangarajan formula price may be enough only for "new production only from existing producing fields" but "technically challenged resources and projects in deep water and high risk exploration will be uneconomical to develop and produce."
"Most of the discovered deep water/high pressure-high temperature resources (about 10 Trillion cubic feet including 4-5 Tcf with RIL-BP) will not be economically feasible to develop at the resultant price and their lack of development will only exacerbate India's natural gas deficit," Mukundan added.
Incidentally, the output from D6 block has fallen to an all-time low of 16.5 million standard cubic meters per day. A And production can be raised to minimum of 30 mmscmd level, if satellite and smaller fields brought in tune with the presently producing main fields. A The price should be as provided in the Production Sharing Contract (PSC) like the one signed for KG-D6, Mukundan said.
PSC provides for discovering a market price through open tender and does not provide government dictating a rate. "It was on the basis of this PSC that BP made its large investment (of $7.2 billion) in India," he argues.