The Indian Government has revised natural gas pricing, enabling the Oil & Natural Gas Corporation (ONGC) and Oil India to charge a 20% premium over the administrative price mechanism (APM).
This move is designed to make new gas development projects economically feasible, particularly in areas that require significant capital and advanced technology.
In the Indian oil and gas sector, the APM is a government-controlled system that sets the prices of petroleum products.
According to the domestic gas pricing guidelines, the APM Price for natural gas was pegged at 10% of the Indian Crude basket price, as determined monthly by the Petroleum Planning and Analysis Cell (PPAC).
In a statement, the ONGC said: “The enhanced price for new gas will make the new gas development projects viable and help the ONGC to augment the production of natural gas from nominated fields in challenging areas that require [a] higher amount of capital and technology.
“This will enhance the investment capacity in the company to take up development projects, which are otherwise capital intensive and involve higher degree of risks requiring commensurate prices.”
Concurrently, the ONGC announced its decision to invest approximately Rs138bn in two projects.
It plans to invest Rs78bn in the Daman Upside Development project in the Mumbai High field.
The project, which is already under way, is expected to reach peak production of around five million standard cubic metres per day (mscm/d).
Additionally, the ONGC Board has approved the integrated development of four contract areas under the discovered small fields (DSF-II) policy, with an estimated cost of Rs60bn.
This project, which has pricing and marketing freedom under the DSF Policy, aims to achieve a peak production of roughly 4mscm/d.
The commencement of this project's execution has been announced.
This policy revision is in line with India's goal to increase the natural gas share in its energy mix from the current 6% to 15% by 2030.
This target supports India's broader energy and environmental objectives.
Last week, the ONGC received government approval for an additional investment of Rs183.65bn into ONGC Petro additions Limited (OPaL).
This infusion of funds is expected to enhance the ONGC's stake in the petrochemical company, thereby improving OPaL's financial resilience and operational efficiency.
