MillenniumPost
Business

Rangarajan gets Reliance pat for gas price proposal

Reliance Industries Ltd (RIL) has said that the Rangarajan Committee mandating doubling the price of domestically produced natural gas to $8 per per million British thermal unit  (mmBtu) would create an 'investment-enabling environment'.

 RIL, which had been engaged in protracted wrangling with the Ministry of Petroleum and Natural Gas on the pricing of natural gas from its eastern offshore KG-D6 field, said that there is 'positive traction in the domestic exploration and production business environment with the submission of the Rangarajan Committee report'.

 The panel had addressed key issues on 'gas price mechanism' and created 'an investment enabling environment', Reliance Industries Ltd said at an investor presentation on its October-December quarter results.

 RIL has been seeking a price of almost $13 per million British thermal unit for gas produced from the KG-D6 block on expiry of the current $4.2 per mmBtu price in April next year. The company, which had previously stated that $4.2 was too low for monetising smaller and marginal gas finds in KG-D6 and other blocks, said that the Rangarajan panel recommendation 'indicates positive signs for monetisation of marginal fields'.

 The Rangarajan Committee had last month suggested pricing of domestically produced natural gas at an average of international hub prices and cost of imported LNG instead of the present mechanism of a bid-based market discovery of the rate.  The panel suggested averaging volume-weighted price of gas at the USA's Henry Hub, the UK's NBP and Japan Customs Cleared prices for the trailing 12 months with the the net price that producer got from exporting liquefied natural gas (LNG) to India on a long-term contract.

 Taking last year's publicly available consumption numbers and the prevailing price of gas in the three markets, the formula suggested by the Rangarajan committee gives just over $ 8 per mmBtu as the price of domestic gas.

 This is more than the $4.2-5.73 per mmBtu price currently prevalent in the country.

RIL gets $4.2 per mmBtu for the gas it produces from the eastern offshore KG-D6. This price was mandated for the first five years of production and is due to expire on 31 March, 2014.

 From April 2014, the company wanted to price KG-D6 gas at the rate India pays for importing gas in its liquid form (LNG) on a long-term contract from Qatar. India pays 12.67 per cent of the international oil rate plus $0.26 per mmBtu to Qatar. At a $100 per barrel oil rate, this translates into a gas price of $12.93.

 The panel headed by C Rangarajan, chairman of the Prime Minister's Economic Advisory Council  (PMEAC), suggested gas-on-gas competition after five years.

'The government is moving towards aligning Indian gas prices with international markets which will act as a bridge for gas on gas competition in the future,' said Reliance Industries Ltd.
Next Story
Share it