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In first signs of dissent over the new gas pricing, Gujarat government firm GSPC has demanded market price for its output from KG basin fields saying it cannot be forced to sell fuel at a rate which is less than the cost of production.
Days after the October 18 government decision to raise natural gas prices to USD 5.61 per unit from USD 4.2, Gujarat State Petroleum Corp (GSPC) shot off a letter to the Oil Ministry, demanding "market determined price" for its ready-to-produce Deen Dayal West (DDW) fields in Bay of Bengal.
"GSPC cannot be put to irreparable harm by directing it to sell at a gas price which is less than the cost of gas production (which includes exploration, development and production cost) from DDW field," the company wrote.
The firm owned and run by the Gujarat government had last year discovered a market formula that gives a price of about $ 10.5 per million British thermal unit at current oil rate of USD 80 per barrel.
India is not endowed with rich natural resources and most of the reserves are in ultra-deep water, deepsea, and High Pressure-High Temperature (HPHT) areas which requires investment of substantial capital to develop the gas fields irrespective of time of discoveries.
Company, it said, "invested substantial capital in these areas with the assumption of having freedom for marketing the natural gas at market determined price which was the essential and most important feature of NELP contracts". GSPC had won the Block KG-OSN-2001/3 in the third round of auctions under New Exploration Licensing Policy (NELP), which was launched by the BJP-led NDA government, in 2003. DDW field in the block was discovered in 2005-06.
