Gujarat State Petroleum Corporation (GSPC) has agreed to sell natural gas produced from its Deen Dayal West (DDW) field in the Krishna-Godavari basin at a government-approved price of $5.61/mBtu.
This clears the uncertainty that the Gujarat-based explorer wants a much higher gas price of $8.5/mBtu against revised government approved price of $5.61 from November 1.
“GSPC will sell gas at government approved price. There are no issues. We have no problem with the gas pricing regime of the central government. GSPC would commence supply as soon as the development work is completed,” energy minister of Gujarat Saurabh Patel told FE on Tuesday.
Earlier this month, the Union petroleum ministry had pulled up the state-owned GSPC for not commencing gas supplies to Nagarjuna Fertilizers from its DDW gas field in the Krishna-Godavari basin.
The Union petroleum ministry wrote to GSPC asking the reasons for not starting gas supplies. The explorer had intimated the government that they are ready to start gas supply. So the government allocated 0.8 mmscmd to Nagarjuna Fertilizers.
The bone of contention was on gas pricing. The explorer wants a gas price of about $8.5/mBtu while the price as per the latest revised policy is $5.61/mBtu from November 1.
The presence of recoverable gas at the DDW fields was announced in 2005.
GSPC has reportedly spend more than $2-3 billion to develop the acreage and also came across several hurdles to drill the area in the Bay of Bengal. Intitial estimated of production were pegged at 5-6 mscmd, which could go upto 15 mscmd upon development of additional wells.
The prolific find — KG-8 — later renamed as Deen Dayal is pegged to hold 1.8 trillion cubic feet (tcf) of reserves, which was also certified by upstream regulator Directorate General of Hydrocarbons (DGH).
The block was bagged in 2003. GSPC is the operator with 80% stake while UK’s Jubilant and Canada’s GeoGlobal Resources each have 10% share.
From November 1, the price of domestically-produced natural gas has been be revised to $5.61/mBtu from the current $4.2/mBtu. The government decided to drop the Rangarajan panel-recommended gas pricing formula approved by the previous UPA government and put in place a new regime based on weighted average of global prices of the US, Mexico, Canada, EU, Russia and deducting the transportation and treatment charges at Henry Hub Alberta and National Balancing Point.
The government had said that discoveries in tough areas (high-pressure and high-temperature) would be given a ‘premium’ over the prevailing gas price. However, the caveat is that this would be applicable for hydrocarbon.
