• ONGC seeks complete autonomy on pricing of natural gas to boost output

    State-run Oil and Natural Gas Corporation (ONGC) is seeking total pricing freedom for natural gas produced in the country, arguing it would help boost local output and develop India into a vibrant gas market. “We are making the case before the government that the gas prices could be deregulated,” Chairman Dinesh Sarraf said. “Some regulatory mechanism can be put in place to protect the interest of the consumers. But let the prices be deregulated. Let it be determined by the buyers and sellers collectively through the market forces.”

    With this ONGC has given a new thrust to the demand from Reliance Industries, BP Plc, and other private sector gas producers in the country to free up pricing. The government has kept a lid on prices through a formula worked out two years ago that aligns local with international rates, and a gas allocation policy that prioritises sectors for receiving local supply. The government has allowed pricing freedom to gas blocks that will be auctioned under new exploration and production policies. Sarraf said “the point has been made in brief ” to the government and a detailed note would soon be sent.

    He said he was optimistic the government would consider the company’s plea of pricing freedom because the company’s aim behind this was to help raise domestic gas output, the same as that of the government. A few months back, ONGC had also written to the government that a floor price be fixed for the domestic prices.

    “The markets are what they are and prices are coming down. And price which we get today is $2.5 only. So we believe that government needs to reconsider this because new exploration and development can get encouraged if prices are better. So we have taken up the matter with the government,” said Sarraf. Domestic gas prices have halved to $2.5/unit in two years, tracking global decline, dropping lower than ONGC’s average gas production cost of $3.5/unit. ONGC loses Rs 4200 crore in revenue and Rs 2400 crore in profit annually for each dollar’s drop in local gas price.

    “Ultimately we want higher dollars. If it is a formula or a price, that they (government) will decide,” Sarraf said. He added that “If gas prices are increased in general, many of the gas discoveries which are not otherwise viable would become viable.” Josh Bailey Jersey

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