Indian cabinet committee approves natural gas pricing policy

In a long-awaited move, India’s Cabinet Committee of Economic Affairs (CCEA) has approved a natural gas pricing policy that modifies the Rangarajan formula.

In a long-awaited move, India’s Cabinet Committee of Economic Affairs (CCEA) has approved a natural gas pricing policy that modifies the Rangarajan formula (OGJ Online, Apr. 23, 2013).

India’s Press Information Bureau said the government will get an additional 3,800 crore rupees/year in revenue from higher royalties, profit petroleum, and taxes. About 80% of the additional revenue will go to government companies.

Modifications to the Rangarajan formula include removal of Japanese and Indian LNG import components. CCEA also recommended:

• Alberta gas reference prices instead of Henry Hub prices.

• Russian actual prices.

• Appropriate deductions for transportation and treatment charges at different hubs

• Options of biannual and annual price revisions instead of quarterly revisions.

The revisions apply to all gas produced from nomination fields given to Oil & Natural Gas Corp. and Oil India Ltd., New Exploration Licensing Policy (NELP) blocks, pre-NELP blocks where production-sharing contracts provide for government approval of gas prices, and coalbed methane blocks.

Exceptions include small and isolated fields in nomination blocks as 2013 guidelines for gas pricing there will continue; where prices have been fixed contractually for a certain time period, until the end of the period; where the PSC provides a specific formula for natural gas price indexation-fixation; and pre-NELP blocks where government approval has not been provided under the PSC.

A premium will be given on gas prices for all discoveries in deepwater, ultradeepwater, and high pressure-high temperature areas.

The CCEA is chaired by Indian Prime Minister Narendra Modi.

Niko Resources Ltd. said it “will be evaluating the impact” of the policy on its assets in India (OGJ Online, July 1, 2013).

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