Review Rangarajan’s anti-people gas price formula: House panel
19 Dec 2013 5:53 AM IST
The Standing Committee on Petroleum and Natural Gas in a report tabled in Parliament said the proposed formula is a simple average of two methodologies — price of imports of LNG into India by different suppliers and weighted average of prices of natural gas prevailing at Henry Hub in USA, National Balancing Point (NBP) in London and netback import price at the well head of suppliers into Japan. 'It is to be observed that the benefit of lower gas price at Henry Hub has been largely diluted by the inclusion of Japan's liquefied natural gas (LNG) prices which includes 60 per cent royalty component linkage to JCC (Japanese Crude Cocktail) and host of other factors,' it said. The panel, headed by Andhra Pradesh MP Aruna Kumar Vundavalli, felt Russia which exports 40 to 50 per cent of its gas to Europe at a price of about $8.77 per million British thermal unit, could be a better indicator of gas price.
Russia is the world's second largest gas producer and consuming country in the world and its prices could be incorporated as one of the reference price in the pricing formula, it said.
The committee also pointed at omission of domestic cost of production of natural gas which ranges from $2.48 to $3.63 for private and public sector firms, in the formula.
'The Rangarajan Committee formula for arriving at natural gas price should be throughly reviewed and reconsidered. The committee has recommended factoring domestic cost of production of gas for arriving at the price, and fixation of price of gas in rupee terms,' the report said.
The Rangarjan pricing formula will be effective 1 April, 2014, for a period of five years, with the price being revised quarterly.
Prices for each quarter will be calculated based on the 12-month trailing average price with a lag of one quarter (i.e. price for April to June 2014 will be calculated based on the average for 12 months ended 31 December, 2013).
Using the approved formula, gas price in April-June is estimated at $8.2-8.4, nearly double the current selling price of $4.20 per mmBtu.
The panel said a note prepared by Ministry of Finance argues that there is no logic in inclusion of the consumption by Japan which is having very high import LNG price and that nowhere in the world, well head prices of natural gas has been linked to spot LNG contract basis. 'The committee found merit in this view of the Ministry of Finance,' the report added.
GAIL doubles marketing margin on gas
New Delhi: GAIL India Ltd, the nation's biggest natural gas distributor, has doubled the marketing margin it charges from customers on sale of a small volume of gas sourced from state-owned ONGC.
GAIL used to charge Rs 200 per thousand cubic metres (Rs 5 per million British thermal unit) as effort money or marketing margin from consumers like fertiliser plants and power stations, for selling natural gas sourced from fields that Oil and Natural Gas Corp (ONGC) had got from the government on nomination basis (called APM gas). However, a distinction has now been made in the gas produced from fields given to ONGC on nomination basis. Any gas that came into production after 2010 is being treated differently than APM gas for which the government decides the price as well as marketing margin.
Gas from the fields of ONGC that came into production after 2010 are being termed as non-APM gas and GAIL has been since November billing higher marketing margin of Rs 10.21 per mmBtu on such fuel sold to consumers, sources said.
Non-APM gas coming from the nomination fields of ONGC is distributed to consumers by GAIL although a small volume is directly sold to consumers by ONGC itself.
While ONGC has not changed the marketing margin on the volumes it trades directly to consumers, GAIL has been since November billing consumers a higher marketing margin. GAIL, sources said, has reasoned that the higher marketing margin is at par with the rate it charges for its effort on sale of gas from western offshore fields of Panna/Mukta and Tapti.
At the time of revising APM gas price to $4.2 per mmBtu in May 2010 (effective from 1 June, 2010), the Oil Ministry had directed that marketing margin of Rs 200 per thousand cubic metres would be charged from customers by the company marketing the gas produced by national oil companies (ONGC and Oil India Ltd).
Subsequently, in June 2010, the Ministry again clarified that marketing margin shall be charged by ONGC and OIL in cases where they are directly selling gas to end customers and in other cases, the marketing margin would be charged by the companies marketing the gas ie GAIL.
The Ministry had last month ordered that allows marketers freedom to fix marketing margin on sale of gas to consumers other than urea manufacturing units and LPG plants. Oil regulator PNGRB will decide marketing margin for urea and LPG plants.
Reliance Industries shuts Jamnagar refinery crude unit
New Delhi: Mukesh Ambani-led Reliance Industries Limited has shut one of its two crude units because of power failure at its 660,000 barrels-per-day (bpd) refinery in Jamnagar in western Gujarat, according to a news agency report.The unit has been shut since the weekend, the news agency noted.
Reliance has two crude units of similar capacity at the plant. It also operates a 580,000 bpd export-focused plant next to its old refinery. The issue should be resolved soon, it reported.
‘Reliance’s crude unit tripped on Saturday night... will take at least a week to be fully operational,’ news agency report added.
Russia is the world's second largest gas producer and consuming country in the world and its prices could be incorporated as one of the reference price in the pricing formula, it said.
The committee also pointed at omission of domestic cost of production of natural gas which ranges from $2.48 to $3.63 for private and public sector firms, in the formula.
'The Rangarajan Committee formula for arriving at natural gas price should be throughly reviewed and reconsidered. The committee has recommended factoring domestic cost of production of gas for arriving at the price, and fixation of price of gas in rupee terms,' the report said.
The Rangarjan pricing formula will be effective 1 April, 2014, for a period of five years, with the price being revised quarterly.
Prices for each quarter will be calculated based on the 12-month trailing average price with a lag of one quarter (i.e. price for April to June 2014 will be calculated based on the average for 12 months ended 31 December, 2013).
Using the approved formula, gas price in April-June is estimated at $8.2-8.4, nearly double the current selling price of $4.20 per mmBtu.
The panel said a note prepared by Ministry of Finance argues that there is no logic in inclusion of the consumption by Japan which is having very high import LNG price and that nowhere in the world, well head prices of natural gas has been linked to spot LNG contract basis. 'The committee found merit in this view of the Ministry of Finance,' the report added.
GAIL doubles marketing margin on gas
New Delhi: GAIL India Ltd, the nation's biggest natural gas distributor, has doubled the marketing margin it charges from customers on sale of a small volume of gas sourced from state-owned ONGC.
GAIL used to charge Rs 200 per thousand cubic metres (Rs 5 per million British thermal unit) as effort money or marketing margin from consumers like fertiliser plants and power stations, for selling natural gas sourced from fields that Oil and Natural Gas Corp (ONGC) had got from the government on nomination basis (called APM gas). However, a distinction has now been made in the gas produced from fields given to ONGC on nomination basis. Any gas that came into production after 2010 is being treated differently than APM gas for which the government decides the price as well as marketing margin.
Gas from the fields of ONGC that came into production after 2010 are being termed as non-APM gas and GAIL has been since November billing higher marketing margin of Rs 10.21 per mmBtu on such fuel sold to consumers, sources said.
Non-APM gas coming from the nomination fields of ONGC is distributed to consumers by GAIL although a small volume is directly sold to consumers by ONGC itself.
While ONGC has not changed the marketing margin on the volumes it trades directly to consumers, GAIL has been since November billing consumers a higher marketing margin. GAIL, sources said, has reasoned that the higher marketing margin is at par with the rate it charges for its effort on sale of gas from western offshore fields of Panna/Mukta and Tapti.
At the time of revising APM gas price to $4.2 per mmBtu in May 2010 (effective from 1 June, 2010), the Oil Ministry had directed that marketing margin of Rs 200 per thousand cubic metres would be charged from customers by the company marketing the gas produced by national oil companies (ONGC and Oil India Ltd).
Subsequently, in June 2010, the Ministry again clarified that marketing margin shall be charged by ONGC and OIL in cases where they are directly selling gas to end customers and in other cases, the marketing margin would be charged by the companies marketing the gas ie GAIL.
The Ministry had last month ordered that allows marketers freedom to fix marketing margin on sale of gas to consumers other than urea manufacturing units and LPG plants. Oil regulator PNGRB will decide marketing margin for urea and LPG plants.
Reliance Industries shuts Jamnagar refinery crude unit
New Delhi: Mukesh Ambani-led Reliance Industries Limited has shut one of its two crude units because of power failure at its 660,000 barrels-per-day (bpd) refinery in Jamnagar in western Gujarat, according to a news agency report.The unit has been shut since the weekend, the news agency noted.
Reliance has two crude units of similar capacity at the plant. It also operates a 580,000 bpd export-focused plant next to its old refinery. The issue should be resolved soon, it reported.
‘Reliance’s crude unit tripped on Saturday night... will take at least a week to be fully operational,’ news agency report added.
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