Govt approves 20% premium for gas from new wells for ONGC

New Delhi: The government has approved a 20 per cent premium over the regulated or APM price for any natural gas that ONGC will produce from new wells, the company said on Monday.

Currently, two pricing regimes govern the majority of the domestic production of natural gas, which is used to generate electricity, produce fertiliser, turn into CNG for running automobiles and piped to households for cooking.

Gas produced from legacy or fields given to state-owned Oil and Natural Gas Corporation (ONGC) and Oil India Ltd, on nomination basis, is priced at 10 per cent of the prevailing price of crude oil that India imports.

This price, subject to a cap price of $6.5 per million British thermal units, is called regulated or APM price. So, at the current Indian basket price of $77 per barrel, the APM price for gas produced from ONGC’s Mumbai High and Bassein fields in the western offshore should come to $7.7 per mmBtu, but it is paid the cap price of $6.5.

Gas produced from difficult fields, such as those in the deep sea, is governed by a different formula and paid a higher rate because of the higher cost involved in its production. That price for six months starting April 1 is $9.87 per mmBtu.

When these formulas were adopted last year, it was decided that gas produced from new wells, even in legacy fields, would be paid a premium of 20 per cent over the APM price. Now, that has been notified.