Lok Sabha Question No. 4120 (UNSTARRED), answered on 2017-03-27
Subject: Price of Natural Gas
Ministry: PETROLEUM AND NATURAL GAS
Asked by: BHARTRUHARI MAHTAB, YERRAM VENKATA SUBBAREDDY, RAM CHARITRA

## GOVERNMENT OF INDIA MINISTRY OF PETROLEUM & NATURAL GAS

LOK SABHA UNSTARRED QUESTION No. 4120 TO BE ANSWERED ON 27 th  MARCH, 2017

## PRICE OF NATURAL GAS

## 4120:   SHRI BHARTRUHARI MAHTAB:

SHRI Y.V. SUBBAREDDY:

SHRI RAM CHARITRA NISHAD:

पेट्रोलियम एवं प्राक ृ लिक गैस मंत्री

## Will the Minister of PETROLEUM AND NATURAL GAS be pleased to state:

- (a) the  salient  features  of  the  existing  formula  to  determine  the  price  of  natural  gas produced by public/private sector companies in the country;
- (b) whether the cases of disputes between the natural gas producing companies and the Government  on  determining  the  prices  of  gas  have  come  to  the  notice  of  the Government after  implementation  of  the  said  revised  formula  and  if  so,  the  details thereof, company-wise along with the present status of such disputes;
- (c) whether  the  Government  has  maintained  a  balance  between  the  profitability  of  the companies  producing  natural  gas  and  insulate  common  man  from  undue  burden  of rise  in  prices  of  natural  gas  after  revision  of  the  said  formula  and  if  so,  the  details thereof and the steps taken in this regard;
- (d) whether the selling prices of natural gas is less than the production cost and Oil India Limited and Oil and Natural Gas Corporation Limited are incurring losses and if so, the details thereof along with the corrective steps taken/being taken by the Government in this regard;
- (e) whether the Government has found some anomaly in pricing of gas produced from Coal Bed Methane block and if so, the details thereof; and
- (f) whether  the  17  CBM  blocks  have  been  relinquished  out  of  33  offered  by  the Government and if so, the reasons therefor along with the pre approved price of gas produced from such blocks?

## ANSWER

पेट्रोलियम एवं प्राक ृ लिक गैस मंत्रािय में राज्य मंत्री ( स्विंत्र प्रभार )

## ( धमेन्द्र प्रधान )

MINISTER OF STATE (INDEPENDENT CHARGE) IN THE  MINISTRY OF PETROLEUM & NATURAL GAS (SHRI DHARMENDRA PRADHAN):

(a) The formula to determine the price of domestic natural gas notified under the New Domestic Natural Gas Pricing Guidelines, 2014 include the following:

- (i) Prices prevailing in HH (USA), NBP (UK), Alberta (Canada) and Russia are used as inputs to determine the price of domestic natural gas, as per the following formula:

<!-- image -->

P = Wellhead gas price

- VHH = Total Annual volume of Natural Gas consumed in United States and Mexico
- VAC = Total Annual volume of natural gas consumed in Canada
- VNBP = Total Annual volume of natural gas consumed in EU and FSU excluding Russia
- VR = Total Annual volume of natural gas consumed in Russia
- PHH = Annual average of daily Henry Hub prices
- PAC = Annual average of monthly Alberta Market Price
- PNBP =  Annual average of daily NBP UK prices
- PR = Annual average of monthly prices of Russia

PHH ,  PAC,  PNBP  and  PR  shall  be  calculated  after  deducting  the  US$  0.50/MMBTU  towards transportation and treatment charges.

- (ii) Domestic price of natural gas is linked to the prices at major international hubs and tries to balance the interests of producers as well as consumers;
- (iii) Review of domestic natural gas pricing on six monthly basis;

(iv)  the  gas  price  is  applicable  to  all  the  sectors  uniformly,  except  those  specified  in  the Guidelines; etc.

The details of these Guidelines are available on this Ministry's website.

- (b) & (c) Through the New Gas Pricing Guidelines 2014, Government has tried to maintain a fine  balance  between  the  interest  of  gas  producing  and  consuming  sectors.  However,  to incentivize  domestic  production  of  natural  gas,  Government  while  approving  the  gas  pricing formula, approved a provision for grant of premium for new discoveries made in Deep water, Ultra Deep water and High Pressure High Temperature reservoir for which Government notified a policy on 21.3.2016 to grant marketing including pricing freedom with a cap on the price to the discoveries.
- (d) The  selling  price  of  domestically  produced  natural  gas  is  determined  as  per  the  New Domestic Gas Price Guidelines 2014 issued in October, 2014. The gas prices presently are USD 2.50 /MMBTU on Gross Calorific Value (GCV) basis for the period 01.10.2016 to 31.03.2017. The production costs of companies vary from field to field depending upon the area, logistics, complexity, onland or offshore etc.  ONGC and OIL have posted profits in their accounts for last several  years. Profit after Tax of OIL and ONGC are Rs.2330.11 Crore and Rs.16003.6 Crore respectively for 2015-16.
- (e) CBM blocks were awarded on the model wherein CBM contractors share a portion of their revenue generated in the form of Production Level Payment (PLP) with the Govt.  The Govt. has decided to provide marketing and pricing freedom to the contractors to sell CBM in the domestic market.
- (f) Out of 33 CBM blocks awarded, 4 CBM blocks have been relinquished and 14 CBM blocks are  under  relinquishment.  No  CBM  was  produced  either  from  the  14  CBM  blocks  under relinquishment  or  4  relinquished  CBM  blocks  as  these  CBM  blocks  were  either  low  in prospectivity or due to non-grant of clearances to the contractor.

*********