An internal note circulated by the petroleum & natural gas ministry has justified the recent decision of the union cabinet to almost double the domestic natural gas price to $8.4 per unit.
The note argued that the current price of $4.2 was not viable for “sustenance of the domestic production of gas and all the operators are demanding an increase in price”.
The present deficit of 142.78 million standard cubic metres a day (mscmd) is expected to increase to 234.26 mscmd in 2016-17, the note expects. Therefore, there will be huge dependence on the import of gas at a much higher price of around $14 and above, which will simply become unaffordable for the consuming sector, the note warns.
There are two factors that would push up the price in future. One, India would start importing more expensive Australian LNG and the other is the lifting of the price cap on Qatar LNG.
The current price level of domestically produced gas is unviable and hence oil and gas firms are hesitant to exploit around three trillion cubic feet of gas reserve.
Oil and gas firms reduced the investment in exploration and development from $6 billion in 2007-08 to $1.8 billion in 2011-12 because of unviable price level. At the same time, Indian companies have invested $27 billion in the E&P sector abroad, with another $10 billion in the pipeline, reports suggest.
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