Govt Notifies Gas Prices For New Wells At 20% Premium Vs 10% Earlier; ONGC Stock Up 2.5%

The Ministry of Petroleum and Natural Gas on Monday notified the allocation of gas produced from new wells or well interventions from nominated fields of ONGC/ Oil India Ltd at a 20 per cent premium over the APM price (domestic natural gas price). Following this, ONGC’s shares jumped 2.53 per cent to Rs 341 piece on the BSE.

Till now, as per the guidelines for domestic gas pricing, the APM (administered price mechanism) price was fixed at 10 per cent of the Indian crude basket price as announced by Petroleum Planning and Analysis (PPAC) on monthly basis.

“It was provided in the guidelines that for the gas produced from new wells or well intervention in the nomination fields of ONGC/Oil India Limited, there would be a premium of 20 per cent over APM prices (i.e. total 12 per cent of Indian crude basket price for new gas). The modalities for the same had to be worked out by Directorate General of Hydrocarbon (DGH) for approval of Ministry of Petroleum and Natural Gas (MOP&NG),” ONGC said in a BSE filing on Monday.

In pursuance of the guidelines, the ministry has now notified the allocation of gas produced from new wells or well interventions from nominated fields of ONGC/OIL at 20 per cent premium over the APM price, it said.

“The enhanced price for new gas will make the new gas development projects viable and help the ONGC to augment the production of Natural Gas from nominated fields in challenging areas that require higher amount of capital and technology. This will enhance the investment capacity in the Company to take up development projects which are otherwise capital intensive and involve higher degree of risks requiring commensurate prices,” ONGC said.

ONGC’s board recently approved Daman Upside Development project in its nominated field of Mumbai High at a cost of Rs 7,800 crore for increasing the domestic gas production and job has already been awarded for execution. The peak production envisaged from this project is around 5 MMSCMD (million metric standard cubic meters per day).

ONGC Board has also approved another project Integrated Development of 4 Contract areas under DSF-II at a Project cost of nearly Rs 6,000 crore with a peak production of around 4 MMSCMD of gas where GoI has already allowed pricing and marketing freedom under DSF Policy. Job has already been awarded for execution of this project also.

The implementation of policy decision aligns with the National vision of achieving target of share of Natural gas in Indian energy basket from 6% to 15% by 2030, ONGC stated in the filing.

Shares of Indian Oil Corporation (IOC) on Monday closed marginally higher by Rs 0.05 or 0.03 per cent at Rs 169.15 apiece on the BSE.