"Government Approves 20% Premium for ONGC Natural Gas from New Wells"

The government has approved a 20% premium on the regulated or APM price for natural gas produced from new wells by Oil and Natural Gas Corporation (ONGC), according to a statement released by the company.

Currently, domestic natural gas pricing is regulated under two main regimes. Gas from legacy fields operated by state-owned ONGC and Oil India Ltd is priced at 10% of the prevailing crude oil price, capped at USD 6.5 per million British thermal units (mmBtu). For instance, with the current Indian crude oil basket price at USD 77 per barrel, the APM price for gas from ONGC's Mumbai High and Bassein fields should be USD 7.7 per mmBtu, but it is capped at USD 6.5.

In contrast, gas from challenging fields, such as deep-sea reserves, follows a different pricing formula due to higher production costs. For the six-month period starting April 1, this gas is priced at USD 9.87 per mmBtu.

Last year, it was decided that gas from new wells, even within legacy fields, would receive a 20% premium over the APM price, raising the total to 12% of the Indian crude oil basket price. This policy has now been officially implemented.

According to ONGC, the premium pricing will make new gas development projects more viable and support the company's efforts to increase natural gas production in challenging areas that require significant capital and advanced technology. This move is expected to enhance ONGC’s investment capacity for high-risk, capital-intensive projects.

The ONGC Board has recently approved two major projects: the Daman Upside Development project in Mumbai High with a budget of ₹7,800 crore and a projected peak production of 5 million standard cubic meters per day, and the integrated development of four contract areas under DSF-II with a cost of ₹6,000 crore and a peak production of 4 million standard cubic meters per day. Both projects have commenced execution.

ONGC highlighted that the new pricing policy aligns with the national goal of increasing the share of natural gas in India’s energy mix from 6% to 15% by 2030.

BS