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Domestic Natural Gas Pricing Guidelines, 2014 notified
Jan 11, 2014

On the recommendations of the committee headed by Dr. Rangarajan, Chairman, Economic Advisory Council to the Prime Minister in May, 2012, to look into “the Production Sharing Contract (PSC) mechanism in petroleum industry”, the Government has notified Domestic Natural Gas Pricing Guidelines, 2014.

Salient features of the Domestic Natural Gas Pricing Guidelines, 2014 are:

I. These guidelines will be applicable to all natural gas produced domestically, irrespective of the source, whether conventional, shale, CBM etc. These guidelines shall apply from 1st April 2014.

II. The notification states that gas from April will be priced at an average price of liquefied natural gas (LNG) imports into India and benchmark global gas rates. This formula will be applicable till March 31, 2019.

III. The new rates, which will change every quarter, based on the 12-month average of global rates and LNG import price with a lag of one quarter. 

IV. The guidelines shall also be applicable for natural gas produced by ONGC/OIL from their nominated fields.

V. The prices determined under these guidelines shall be applicable to all consuming sectors uniformly.

Mukesh Ambani-owned Reliance Industries Limited (RIL) will get the benefit of the new gas price from its existing fields like MA in the KG D6 block and new/upcoming ones like R-Series and satellite in the KG Basin block and the ones in North East Coast block NEC-25. However, for the D1&D3 gas fields in KG-D6 block it will have to submit a bank guarantee to cover its liability if the charges of hoarding gas by deliberately producing less during last three years, are proved by independent observers or an arbitrator. ``In respect of D1 and D3 gas discoveries of Block KG-DWN-98/3, these guidelines shall be applicable subject to submission of bank guarantees in the manner to be notified separately.

The bank guarantee will be encashed if it is proved that the company hoarded gas or deliberately suppressed production at the main D1&D3 fields in the Eastern offshore KG-D6 block since 2010-11. Experts estimate that price of gas from April will be around $8 to 8.4 mbtu during 2014-15 as against the current rate of $4.2.


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