Govt should relook new gas pricing formula: Ficci

With natural gas prices being cut by 18 per cent using the new pricing formula, industry body Ficci today advocated a mechanism that adequately remunerates country's exploration and production activity and helps ramp up domestic supplies.
"Not only is this imperative for the development of domestic hydrocarbon industry, but is vital towards ensuring India's energy security. A pricing regime should be reflective of the enormous geological risks and production uncertainties which are inherent in geography such as India," Ficci said.
In a letter to Oil Secretary, Ficci said the current gas formula of pricing gas based on rate prevalent in surplus economies like US and Canada should be relooked.

The formula "is unfairly biased towards the pricing in gas surplus economies such as the US, Canada and Russia and is not consistent with realities of the Indian Market," it said.
This view has also been corroborated by rating agencies Standard & Poor and Moody's, which have recommended that the pricing formula incorporate prices in similar geographies such as Indonesia and Thailand which average around USD 8-10 per million British thermal unit, it said.
Gas price in India fell by 18 per cent to USD 3.82 per mmBtu for six months beginning October 1.

Didar Singh, Secretary General, Ficci, emphasised that India's vast untapped reserves in deepwater, ultra-deepwater as well as North East and frontier basins can only be brought online by creating a favorable pricing regime which incentivises both domestic and foreign oil and gas majors to commit significant amounts of risk capital and advanced engineering solutions in these areas.

Furthermore, he added that the higher premium for deepwater, ultra-deepwater along with high pressure and high temperature fields, as previously announced by the government needs to be implemented expeditiously, a Ficci press release said.
"This incentive also needs to be extended to all existing discoveries," it said.
Ficci said "continuing with the current gas pricing regime will severely affect India's larger goal of reducing oil import dependency and building the domestic hydrocarbon capacity as envisaged in Prime Minister's 'Make in India' initiative.