Parekh panel suggests 20% premium for new gas production by ONGC

The Kirit Parikh Committee, which recommended a floor and ceiling price for natural gas produced from legacy fields of state-owned producers to moderate input price for CNG and fertilizer, has favoured paying ONGC and OIL a premium of 20 per cent over such price for any new gas production they add from old fields.The panel, which submitted its report to the oil ministry last week, has recommended benchmarking price of natural gas produced from ONGC and OIL’s legacy or old fields, called APM gas, at 10 per cent of cost of crude oil imported into India, according to a copy of the report seen by PTI.This rate would however be subject to a ceiling or cap price of USD 6.5 per million British thermal unit, until a full deregulation of prices is implemented in 2027. There would also be a floor of USD 4 with a view to cover for cost of production and at the same time keeping cost for fertilizer, power and CNG, which use gas as input raw material, at manageable levels.The basket of crude oil India imports averaged about USD 83 per barrel in December. Going by recommendation of the committee, the price for APM gas, which makes up for 60 per cent of all gas produced in the country, should be USD 8.3 per mmBtu (10 per cent of imported oil price). But Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) will be paid only USD 6.5 in case the recommendation for ceiling and cap price of the committee is accepted by the Cabinet headed by Prime Minister Narendra Modi.APM gas is currently priced at USD 8.57 per mmBtu using a formula that uses weighted average rates in gas-surplus nations such as the US, Canada and Russia.