 "Pricing freedom to help monetise discoveries: D K Sarraf")
The Union government's gas pricing formula, notified in 2014, had put not only Reliance Industries in a spot but had also a poser on the viability of some of gas fields of state-owned Oil and Natural Gas Corporation. In an interview with Jyoti Mukul, ONGC Chairman and Managing Director D K Sarraf discusses implications of the pricing freedom announced on Thursday. Edited excerpts:
What kind of impact will the government decision on pricing freedom for difficult fields have on the ONGC?
The decision to give pricing and marketing freedom for natural gas produced from high-pressure and high-temperature areas is a positive for the ONGC because we were not able to monetise some of our discoveries. These discoveries included KG-DWN-98/2 and some onshore fields. Now, we will be able to develop these.
Since price can be anything below the ceiling, what price will be suitable for the ONGC?
We are working on the details of what price these discoveries will be viable and good for investment. In some weeks, we will take the investment decision. We are in the process of finalising our field development plan. Once the FDP is finalised, we will be able to figure out the price at which production will become economical.
Do you think that the ceiling has been rightly set?
The price of alternative fuels at the time of production will be applicable as cap, not the ones right now. The ceiling price will be the least of the three prices. Depending on the gas demand and supply, we will be able to achieve the ceiling price. This would also be possible since there is marketing freedom as well.
Can there be a situation where the price under the current formula for other fields is higher than the ceiling price since the lower of three will be the cap?
Theoretically, it may be possible but I don't see that happening.
Shouldn't pricing freedom be given to all difficult fields, instead of only those which are discovered and yet to start production?
I would not like to comment since it is a government decision.
With this, there will be differential pricing of gas. How good is it for the gas market?
It is not a question of gas market but it is good for gas production. Even today, we have one price for domestic gas and another one for imported gas. There will be three prices once production from difficult fields begin.
What kind of impact will the government decision on pricing freedom for difficult fields have on the ONGC?
The decision to give pricing and marketing freedom for natural gas produced from high-pressure and high-temperature areas is a positive for the ONGC because we were not able to monetise some of our discoveries. These discoveries included KG-DWN-98/2 and some onshore fields. Now, we will be able to develop these.
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We are working on the details of what price these discoveries will be viable and good for investment. In some weeks, we will take the investment decision. We are in the process of finalising our field development plan. Once the FDP is finalised, we will be able to figure out the price at which production will become economical.
Do you think that the ceiling has been rightly set?
The price of alternative fuels at the time of production will be applicable as cap, not the ones right now. The ceiling price will be the least of the three prices. Depending on the gas demand and supply, we will be able to achieve the ceiling price. This would also be possible since there is marketing freedom as well.
Can there be a situation where the price under the current formula for other fields is higher than the ceiling price since the lower of three will be the cap?
Theoretically, it may be possible but I don't see that happening.
Shouldn't pricing freedom be given to all difficult fields, instead of only those which are discovered and yet to start production?
I would not like to comment since it is a government decision.
With this, there will be differential pricing of gas. How good is it for the gas market?
It is not a question of gas market but it is good for gas production. Even today, we have one price for domestic gas and another one for imported gas. There will be three prices once production from difficult fields begin.