India intent on price reform

The Indian government is intent on introducing gas pricing policy reforms to incentivize natural gas production, its prime minister Manmohan Singh said March 23.

“We are conscious that remunerative energy prices are needed to ensure expanded energy supply,” Singh told the Asia Gas Partnership Summit in New Delhi.

However, the pricing of naturalresources like oil and gas should be conducted within a framework of governmental and regulatory oversight, he said. Moreover, the economic exploitation of these resources should benefit both investors and the people of India, he said. So there is little prospect of naked gas-on-gas competition yet.

Gas produced by state-owned upstream oil companies and from the Krishna Godavari basin block owned by Reliance Industries is priced at $4.20 MMbtu; gas produced from some of the blocks have been allowed a price of over $5.5/MMbtu.

While gas produced from the blocks offered under the New Exploration and Licensing Policy are allowed free pricing based on market determined rates, the prices must be approved by the oil ministry.

“Our government is committed to taking all possible steps to find viable solutions to meet the concerns of the gas industry,” Singh said.

Privately owned gas producers have been lobbying for domestic gas prices to be linked to the price of imported LNG. But energy minister S. Jaipal Reddy ruled out any immediate plans for an increase in domestic natural gas prices, in comments to the press.

However, the ministry has revived a dormant debate on a gas pool pricing mechanism, which would narrow the gap between the low price of domestic natural gas and higher priced imported LNG.

India’s LNG imports are expected to increase. Capacity is due to reach 50 million mt/year by 2017 from around 14 million mt/year at present, Reddy said.

State utility GAIL’s 2,200-km pipeline from Dahej in Gujarat on the country’s west coast, where its largest LNG terminal is located, to Bhatinda in Punjab in northern India, was March 25. The pipeline’s capacity is 66 million cu m/d. GAIL has plans to buy US-produced LNG from Cheniere (IGR 688/3) and it has also made a bid for LNG assets in Mozambique via Cove Energy (IGR 624/29).

Muhammad Ejaz Chaudhry, secretary of Pakistan’s petroleum and natural resources ministry, said Pakistan was interesting in importing gas from India. Bhatinda is close to the border with Pakistan, opening up the possibility of a pipeline to ferry gas further from Bhatinda to Lahore.

India is also now mapping its shale gas resources and expects to put in place a regulatory regime for licensing rounds by the end of 2013, Singh said. — MC VaijayanthThe Indian government is intent on introducing gas pricing policy reforms to incentivize natural gas production, its prime minister Manmohan Singh said March 23.

“We are conscious that remunerative energy prices are needed to ensure expanded energy supply,” Singh told the Asia Gas Partnership Summit in New Delhi.

However, the pricing of naturalresources like oil and gas should be conducted within a framework of governmental and regulatory oversight, he said. Moreover, the economic exploitation of these resources should benefit both investors and the people of India, he said. So there is little prospect of naked gas-on-gas competition yet.

Gas produced by state-owned upstream oil companies and from the Krishna Godavari basin block owned by Reliance Industries is priced at $4.20 MMbtu; gas produced from some of the blocks have been allowed a price of over $5.5/MMbtu.

While gas produced from the blocks offered under the New Exploration and Licensing Policy are allowed free pricing based on market determined rates, the prices must be approved by the oil ministry.

“Our government is committed to taking all possible steps to find viable solutions to meet the concerns of the gas industry,” Singh said.

Privately owned gas producers have been lobbying for domestic gas prices to be linked to the price of imported LNG. But energy minister S. Jaipal Reddy ruled out any immediate plans for an increase in domestic natural gas prices, in comments to the press.

However, the ministry has revived a dormant debate on a gas pool pricing mechanism, which would narrow the gap between the low price of domestic natural gas and higher priced imported LNG.

India’s LNG imports are expected to increase. Capacity is due to reach 50 million mt/year by 2017 from around 14 million mt/year at present, Reddy said.

State utility GAIL’s 2,200-km pipeline from Dahej in Gujarat on the country’s west coast, where its largest LNG terminal is located, to Bhatinda in Punjab in northern India, was March 25. The pipeline’s capacity is 66 million cu m/d. GAIL has plans to buy US-produced LNG from Cheniere (IGR 688/3) and it has also made a bid for LNG assets in Mozambique via Cove Energy (IGR 624/29).

Muhammad Ejaz Chaudhry, secretary of Pakistan’s petroleum and natural resources ministry, said Pakistan was interesting in importing gas from India. Bhatinda is close to the border with Pakistan, opening up the possibility of a pipeline to ferry gas further from Bhatinda to Lahore.

India is also now mapping its shale gas resources and expects to put in place a regulatory regime for licensing rounds by the end of 2013, Singh said.  

 Platts, a leading global provider of energy, metals and petrochemicals information.