India needs to do away with artificial gas pricing: GEECL
India needs to do away with artificial gas pricing in order to attract investment in the sector, Prashant Modi, CEO of gas producer GEECL, told NGW.
“We feel that any sort of artificial pricing must be done away with. Further, a freer gas pricing, coupled with all approvals on self-certification bases will be ideal for the sector and can spur investments,” Modi said.
There have been some price reforms though in recent years. Fields whose development the government approved after February 2019 enjoy pricing and marketing freedoms. Gas produced from deepwater, ultra-deepwater and high-pressure, high-temperature (HPHT) fields that entered production after January 1, 2016 also fetch higher prices. However, most other locally produced gas, which forms the bulk of the supplies, are sold at government-administered prices.
“The free market policy is a big plus, yet some gas is still under controlled pricing and when that is phased out, it will bring in a lot of investments,” Modi said. “Currently the share of gas in the energy mix is at 6 odd percent and the government aims to make it 15%. The government has implemented correct policies which they have filtered on the ground mostly. There are still some tweaks that need to be made. Once that is done, investments in natural gas will go up.”
The Indian government recently hiked the regulated wholesale prices of locally produced natural gas. For the October 1, 2021-March 31, 2022 period, the price paid to most domestic natural gas producers will be $2.9/mn Btu, up from $1.79/mn Btu during April 1-September 30 period. The price of locally-produced gas is set every six months using a formula linked to global rates.
The government has also raised the ceiling price for gas from difficult-to-exploit fields such as deepwater, ultra-deepwater and HPHT by 69% to $6.13/mn Btu.
“The government-determined price for natural gas, which is revised every six months, is acting as a big deterrent for fresh investments in the sector. This increase provides limited relief to Indian upstream producers because even at these prices, gas production is a loss-making proposition for most fields,” Modi said.
Investment in shale gas
London-listed GEECL operates the Ranijganj (South) coalbed methane block in the eastern Indian state of West Bengal. It plans to invest about 150bn rupees ($2bn) in shale gas exploration at the block.
In order to encourage greater development, the Indian government changed the rules in 2018 to permit exploration and production of all types of hydrocarbons including shale gas under existing CBM contracts.
“The company is awaiting the nod from the state government on an amendment to the mineral lease,” Modi said.
GEECL has obtained the environment clearance for starting its shale exploration programme. Modi said that the company was engaging with various vendors to kick off the exploration programme.
“Subject to the results obtained and analysed from the core wells, the company intends to drill an optimum number of pilot production wells,” he added.
According to GEECL, the Ranijganj (South) block holds an estimated 3.51 trillion ft3 in best-estimate shale gas resources.