Current gas price ‘too low’ for exploration

The Centre is learnt to be seriously considering a proposal to allow cost of gas to be determined by market forces. The petroleum ministry had in November 2015 distributed a consultation paper seeking the views of the oil and gas industry on the freeing of natural gas prices.

Industry leaders supported the government’s move, and this led to the insertion of the clause in a Cabinet note that has now been circulated afresh to various ministries, seeking their views on the matter. Sources told this newspaper that once these views are received from the ministries and departments, the note could be sent for Cabinet approval as soon as possible. The thinking in the government is that as the current price of gas is too low to support exploration and production costs, freeing its price and allowing it to be determined by market forces may incentivise production of the natural resource in future.

Several exploration firms have for long been seeking freeing of natural gas prices, as they claim the current prices don’t incentivise the high cost of exploration. In its consultation paper, which the petroleum ministry had floated in November last year, it said it had provided pricing and marketing freedom for natural gas for auction of marginal fields.