India to incentivise gas exploration

The Indian government on Thursday approved a new pricing formula for undeveloped, difficult-to-reach gas resources, including deepwater discoveries and gas found in high-pressure zones, in an effort incentivise exploration there.

The Cabinet Committee on Economic Affairs agreed to abandon the pricing model that uses an average of rates in the US, Canada, Russia and other gas-rich countries in favour of a price indexed to other fuels and resources, including coal, naphtha, fuel oil and imported LNG.

“[The] Gas price in India is currently at USD 3.82 per million Btu, which will fall to USD 3.15 in April, a rate not enough to make up for the cost of deep-sea development,” Minister of State for Petroleum and Natural Gas Dharmendra Pradhan said in a first reaction, stressing that the new formula only applies to undeveloped discoveries.

According to Indian media, more than 20 recent discoveries in the KG basin alone, made by ONGC and Gujarat State Petroleum Corporation, are in the doldrums as a result of insufficient pricing incentives for exploration. First estimates put the new price of gas in India at USD 7 per million Btu.

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