 "Gas price hike: RIL to get $8.4 for natural gas from next year")
New Delhi: Reliance Industries will get $8.4 price for the natural gas from its eastern offshore KG-D6 fields from 1 April, 2014 and potentially higher rates in following quarters, its minority partner Niko Resources said.
“Niko Resources confirms that the Cabinet Committee of Economic Affairs (CCEA) of the Government of India has (on June 27) approved a new pricing formula for domestic gas sales in India.
“The pricing formula is based on the average of the prices of imported liquefied natural gas (LNG) into India and the weighted average of gas prices in North America, Europe and Japan,” the Canadian firm said in a press statement.
[caption id=“attachment_932741” align=“alignright” width=“380”]  Reuters[/caption]
The pricing formula will be effective on April 1, 2014 for a period of five years, with the price to be revised quarterly using the approved formula.
The price for each quarter will be calculated based on the 12-month trailing average price with a lag of one quarter (i.e. price for April to June 2014 will be calculated based on the averages for the 12 months ended December 31, 2013).
“Using the approved price formula, the price effective for April 1, 2014 is estimated at around $8.40 per million British thermal unit, double the price of $4.20 for current gas sales from the D6 Block,” Niko said.
This price was also indicated in the Annexure that the Oil Ministry attached to the main Cabinet note on pricing of domestic gas as per a formula suggested by the Rangarajan panel.
Impact Shorts
More ShortsOn page 88 of the Annexure-1, the Ministry stated that the gas price based on the Petronet LNG Ltd’s long-term contracts with RasGas of Qatar would come to $8.42 per mmBtu.
CCEA has approved inclusion of only price of only long- term LNG imports into India and has left out spot rates.
Petronet has also contracted long-term LNG from Gorgon project in Australia at higher price than RasGas and its inclusion in the formula from 2015-16 would further push up domestic rates.
“The pricing terms of the Petronet contracts are expected to result in further increases in the gas prices in future quarters, assuming current pricing levels of Japanese Crude Cocktail, US Henry Hub, UK National Balancing Point and Japan LNG imports,” Niko said.
RIL is the operator of the KG-D6 block with 60 per cent stake while Niko holds 10 per cent interest. UK’s BP plc has the remaining 30 per cent.
KG-D6 currently produces about 14 million standard cubic meters per day of gas.
PTI
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