In a big boost to Oil and Natural Gas Corporation (ONGC), the government has approved up to 25 per higher price for natural gas the state-owned firm may produce from new fields.
The oil ministry on June 28 issued guidelines for the price national oil companies like ONGC can charge for natural gas they produce from new fields in the blocks given to them on nomination basis, official sources said.
ONGC will get $5.25 per million British thermal unit (mmBtU) for the gas it produces for new fields in nominated blocks in the western offshore and $5 per mmBtu for fields in Cauvery basin. It will get $4.75 per mmBtu for fields in Krishna Godavari basin off the Andhra Pradesh coast.
The price approved is more than $3.818 per mmBtu that the government had set for the gas ONGC produces from its operational fields in the blocks given to it on nomination basis.
The price for consumers of this gas, known as APM or government administered gas, after including royalty is $4.2 per mmBtu, sources said.
"National oil companies would charge non-APM price for gas produced from new fields in nominated blocks," the oil ministry order of June 28 said.
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The ministry based the price on the rates at which dominant players in the region like Panna/Mukta and Tapti field in western offshore and Reliance Industries' KG-D6 fields in eastern offshore sell the fuel.
It said ONGC can charge $5 per mmBtu for fields in western and northern zone, $4.5 per mmBtu for southern zone KG basin and $4.75 per mmBtu for Cauvery basin.
"Further, a premium of $0.25 per mmBtu would be allowed for production of natural gas from new fields which are offshore," the order said.
The price ONGC will get is higher than $4.205 per mmBtu rate set for Reliance's eastern offshore KG-D6 fields.
Sources said the government has for the first time implemented a distinct pricing for current and future fields in the same block that was given on nomination basis.
So far, all gas -- current and future -- produced from blocks given to ONGC and Oil India was priced at government-controlled rates, called administered price mechanism (APM).
The petroleum ministry has now made a distinction between existing producing fields and new ones in nomination blocks.