India chem firms to pay market rates for PSC gas

08 June 2007 14:18  [Source: ICIS news]

NEW DELHI (ICIS news)--India's petrochemicals and fertilizer companies will have to pay competitive prices for natural gas from domestic gas producers, it emerged on Friday. 


An official release on Friday from the Petroleum and Natural Gas Ministry said it had accepted the report of its committee on the pricing of gas sold by producers operating under production sharing contracts (PSCs) with the government.


The Petroleum Ministry had constituted the committee in August 2006 following reports that the government would lose out on revenue if Mukesh Ambani-controlled Reliance Industries Ltd (RIL), which is set to produce and market gas from the country’s largest gas reserve, was allowed to sell gas at very low prices to Anil Ambani-controlled Reliance Energy Ltd (REL).


RIL's reserve is located at the Krishna Godavari basin off the coast of Andhra Pradesh state and it has other gas assets across India


The Ambani brothers had settled for a negotiated price of gas between RIL and REL as part of family settlement to divide Reliance group in 2005.


The government controls the price of gas produced by Oil and Natural Gas Corporation (ONGC) and Oil India Limited from oil and gas fields that were assigned to them on a nomination basis before the launch of its new exploration licensing policy in the 1990s.


Under this price mechanism, public sector oil and gas companies sell gas to fertiliser and power companies at lower prices. Petrochemical and other gas-consuming industries are required to pay higher prices, which are still lower than the free market price for PSC gas.

By: Naresh Minocha
+65 6780 4359

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