Government looking to FREE up price of natural gas to increase Domestic Production

There have been several reforms in every sector as the government is not only fighting a pandemic but is also setting itself up for a post COVID world. The latest reform comes in the natural gas sector with the government now trying to free up the price of all domestically produced natural gas to create a gas market with a uniform price. This move will help to increase production from the gas fields of ONGC, Vedanta, Reliance and Oil India Limited.

The development comes after India launched its first online delivery of the gas-based trading platform called India Gas Exchange (IGX) was launched in June. The IGX is a digital trading platform where buyers and sellers of natural gas meet and can trade in the spot market and the forward market. The three hubs are Dahej and Hazira in Gujarat and Kakinada in Andhra Pradesh.

Earlier a panel of experts led by the Vice Chairman of the NITI Aayog had suggested a free market pricing for all the natural gas produced in all the oil field of the country to boost production.

Even the Kelkar Committee in its report” Roadmap for Reduction in Import Dependency in Hydrocarbon Sector by 2030” had talked about the Open Acreage Licensing Policy to encourage domestic production. The report stated” As seen elsewhere, with Colombia being a prominent example, a well-administered OALP can be the key to attracting investor interest in basins that have historically enjoyed limited success. Given the successive drop in investor interest across the later New Exploration Licensing Policies (NELPs), it is therefore imperative for India to pursue urgently the launch of the OALP in a planned manner.”

Currently, the gas prices under pre-NELP and NELP exploration blocks are still regulated by a gas pricing formula which is revised twice by the government once in April and once in October and it is hoped that once the new regulations kick in the regulation on pre-NELP and NELP block will also be lifted. The government is also looking to raise the ceiling prices of the natural gas which is currently at $5.61 mmBtu(British thermal Unit).

The government has been for years trying to bring in changes in policy to attract private investment in the hydrocarbons field and hopes to increase the gas production by two and a half times by 2030.