In a setback to the oil ministry and oil majors, the Finance Ministry has returned an Oil Ministry proposal to allow market price for part of the natural gas produced by firms like ONGC and Reliance Industries from difficult fields. In October last year, while approving a new gas pricing formula based on international hub rates, the government had decided that new gas discoveries in deep-water, ultra-deep sea or high-temperature and high-pressure fields will be given a premium over and above the approved price.
The Oil Ministry was asked to determine the premium to be paid to discoveries made post October 2014. Based on a recommendation from its upstream technical arm, the ministry proposed to allow a fixed percentage of natural gas produced from difficult fields to be sold at market price and the remaining as per the approved price.
The Finance Ministry earlier stated that the premium should be consistent with the October 2014 Cabinet decision, following which the Oil Ministry resubmitted the proposal explaining that the premium proposed was consistent with the October 2014 decision of the Cabinet Committee on Economic Affairs (CCEA).
Now it has been reported that Finance Ministry has made certain observations on the proposal and returned it without approval. As per mechanism approved in October 2014, price of domestically produced natural gas is to be revised every six months using weighted average or rates prevalent in gas-surplus economies of US/Mexico, Canada and Russia.
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