ONGC may approach govt seeking premium pricing on gas from KG basin

State-run Oil and Natural Gas Corporation may approach the government to seek premium pricing on natural gas produced from its KG basin.

Oil minister Dharmendra Pradhan had last week Friday said that premium pricing will only be available to developers of new blocks.

“As on today, the premium will only be given on blocks which are yet to be discovered. A decision in this regard will be made shortly,” Pradhan had said. 

"The oil ministry is currently working on the extent of premium to be offered to the exploration and production companies and will make an announcement in the next few weeks, Pradhan said.

ONGC is planning to invest up to $10 billion in its D5 block in the KG basin, the field development plan for which will be submitted shortly. 

"We have not approached the ministry yet seeking premium pricing but we may do that. Government should take a considerate view of players producing oil and gas in their own nation than spending dollars on importing," said a senior official from ONGC.

The oil ministry had, last October announced a new gas pricing formula for country's existing gas producing blocks. The ministry had also said that blocks operating in deep waters and at high temperatures and high pressures (HT/HP) will be offered a premium.

"Ultimately we are Indian companies and the government should incentivise us if we are investing billions of dollars, helping the nation's economy," said a senior official from a private company. 

On the basis of gross calorific value, the rate effective from October 1 on natural gas will be about $3.8 per million metric British thermal unit against the current $4.66. 

"Low prices will make production from deep water and ultra deep water unviable. Government should consider that," the official added. 

ONGC official said that India has a good hydrocarbon reserves and the government should encourage national players to invest in these fields.

"This is the right time for players to make investments when costs have come down. After a few years, when oil prices will go up again, investments will be difficult. But if we invest now, we can reap the benefits a few years down the line," said the MD of a national exploration and production companay.