New Delhi: In a major boost to firms such as Reliance Industries, the government Wednesday allowed affiliate companies to buy gas produced from non-regulated fields as part of giving complete marketing freedom.
The government between 2016 and 2019 gave pricing freedom for all fields except those given to state-owned Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) on a nomination basis. But, there were restrictions on marketing including a ban on affiliates of producers buying the fuel and in some cases, a state nominee being mandated to offtake the gas. This restricted competition kept prices artificially low.
The Cabinet Committee on Economic Affairs (CCEA), headed by Prime Minister Narendra Modi, approved natural gas marketing reforms, Oil Minister Dharmendra Pradhan told reporters here.
There will be no change in the price of gas sold by ONGC and OIL from fields given to them on a nomination basis. The rate at USD 1.79 per million British thermal unit is half of the production cost. Pradhan said the CCEA approved a standard procedure for discovering the price of gas through a transparent and competitive e-bidding as also ‘permitting affiliates to participate in the bidding process for the sale of gas’.
Complete marketing freedom has been provided where production sharing contracts (PSCs) already provide for pricing freedom. This would benefit firms such as Vedanta-owned ‘Cairn’ and ‘Focus Energy’ who can now sell fuel to anyone and not necessarily to state-owned GAIL.
“This will add 40 million standard cubic metres per day of production from Krishna-Godavari basin and other areas to the current output of 84 mmscmd,” informed Pradhan. He said the ban on producers buying their own gas will continue to prevent manipulations. But, their affiliates can participate in the auction for the discovery of price and buying the gas, he said.
Last year, Reliance and its partner BP had bid out 5 mmscmd of new gas from their KG-D6 block to firms such as ‘Essar’ and ‘GSPC’.
Reliance and BP were keen to buy the gas but rules did not allow. Now, India Gas Solutions Pvt Ltd, an equal joint venture of Reliance and BP, will be allowed to bid and buy the gas.
“The objective of the policy is to prescribe a standard procedure to discover the market price of gas to be sold in the market by gas producers, through a transparent and competitive process,” the oil minister stated.