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Govt reviews pricing system for natural gas

Govt reviews pricing system for natural gas
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In order to encourage exploration and development activities by players in the oil and gas sector, the government is reviewing the system of pricing natural gas under the production sharing contract (PSC), Economic Survey 2012-13 said.

The pricing system would be reviewed in order to clarify the extent to which producers will get the freedom to market the gas, the survey noted.

Oil and gas exploration firms like ONGC, Reliance Industries, Cairn India and Gujarat State Petroleum Corporation would stand to benefit from the move.

The government’s move gains significance at a time when the country is facing scarcity of domestic energy resources.

Currently, the government provides the operator freedom to sell the gas produced from the New Exploration Licensing Policy (NELP) blocks at a market-determined price, subject to the approval of pricing formula. Natural gas pricing under the NELP is lower than the prices in the international market.

The survey said India’s energy prices were much lower than global prices for many products, which discourages investment as well as efficient use of a scarce resource.

The survey said production of crude oil and natural gas grew by the compound annual growth rate of 4.3 percent and 9.1 percent respectively between 1970-71 and 2010-11.

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