Millennium Post

Oil Ministry has a premium idea for tough gas fields

“We will very soon decide” on the premium to be paid for gas discoveries in deepwater, ultra-deep sea or high- temperature and high-pressure fields, Oil Secretary Saurabh Chandra said on Wednesday.

A formula, based on recommendation of the Directorate General of Hydrocarbons, has been approved by Oil Minister Dharmendra Pradhan and it has now been forwarded to the Finance Ministry for vetting. The government, while approving a new gas pricing formula based on international hub rates in October last year, had decided that new gas discoveries in deepwater, ultra-deep sea or high-temperature and high-pressure fields will be given a premium over and above the approved price.

Gas price, according to the formula, was $5.05 per million British thermal unit till March 31 and has subsequently been cut to $4.66 in line with international movements. The premium to gas from difficult fields will be over and above this rate. An official said that a graded formula for the premium based on difficulty of the field is on the anvil.

DGH had in January submitted a formula for calculating the premium on such projects. The Cabinet headed by Prime Minister Narendra Modi had in October approved a revised natural gas price and stated that discoveries made after this announcement in difficult regions would be given a premium as exploration and drilling is costly and challenging.

The official said DGH had suggest different rates of premium based on a formula for deepwater, ultra-deep sea and high-pressure and high-temperature (HPHT) fields. Speaking at the JODI (Joint Oil Data Initiative) Conference, Chandra said energy security remains a concern as about 77 per cent of oil needs and one-third of gas requirement is imported. While India’s experiments with a production sharing contract (PSC) regime under New Exploration Licensing Policy (NELP) have not been so successful, the government is now exploring the right regime that can bring in private capital.

“The challenge is to find a bidding model to get private capital into it. The current model hasn’t yielded the kind of gas and oil that was expected. If we continue to do things the same way, perhaps we would get same results. So you have to do things differently. That is what the biggest policy challenge is. We hope to have an answer soon to that policy challenge,” he said.
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