Marketing, Pricing Freedom Must To Accelerate Investments In Gas Fields
Pricing and marketing freedom is needed to secure billions of dollars in investment to find and extract natural gas from fields hundreds of meters below the ocean floor, producers have told a government-appointed committee that monitors gas prices, which depend on exploration costs. and natural gas production. gas market.
Speaking to investors after the company's second-quarter report on Oct. 21, Sanjay Roy, senior vice president of exploration and production at Reliance Industries Ltd, said the product is represented by the Association of Oil and Gas Operators (AOGO). ), which is expected to issue a report in the next few weeks.
"Maybe manufacturers are saying there should be freedom in marketing and pricing based on policy and contracts," he said. “The opposite of price increases is production increases, as we've seen with KG-D6, and those investments have to be made in the frontier areas, and there seems to be more opportunity for those investments. "
In the UK, Reliance and its partner BP plc are investing about US$5 billion in new and deeper fields at the KG-D6 complex in the Bay of Bengal, which currently produces more than 19 million standard cubic meters of gas, or about 20 percent of India's. gas production
“This will require a huge investment of billions of dollars, so marketing and price freedom will be very important, especially since it is the market that controls costs. Therefore, the prices should be the same," he said.
But gas consumers are looking for a "one-of-a-kind cap", especially for state-controlled APM Gas, which sells LPG for cars on the city's gas network and major suppliers of natural gas for domestic kitchens for cooking.
"...We're also seeing statements from consumers that they hope there should be some kind of cap on gas in particular," he said.
Private gas producers such as Reliance Kerat are not represented in the Barrick-led panel, which has been asked by the oil ministry to determine "fair prices for consumers".
They are represented by their own association AOGO. AOGO told the commission that any change to the price cap would not only contravene market and price freedom agreements and public policy commitments to businesses, but would also add uncertainty to the tax system that encourages investment.
The government sets gas prices every two years based on prevailing rates in countries with a positive balance. Prices according to this formula were lower than the break-even level in the amount of 3-3.5 dollars. US for MBTE for six years since October 2015, but has grown 5 times over the past year to $8.57. US in old fields (APM gas) and $12.46. USA on harder deposits.
The hike sparked complaints from users, after which the ministry set up a committee to propose lower prices for users.
AOGO has directed the commission to achieve a target of doubling India's production from current levels to curb sharp import growth and increase the share of natural gas in the primary energy basket to 15 percent from the current 6.7 percent by 2030. At least 2 percent of Rs. An investment of 3 crores can only be viable if a stable financial and contractual relationship with market rates is ensured.
Only such arrangements can attract investors to invest long-term funds in the exploration and development of these fields.
No major hydrocarbon deposits have been discovered in the country over the past decade, leading to a steady decline in domestic oil and gas production and a rise in imports to meet the huge energy demand of the world's fifth-largest economy.
Natural gas is used to generate electricity, produce fertilizer for crops, drive vehicles converted to run on compressed natural gas, and supply gas to home furnaces. Lacking sufficient domestic production, India increased its fuel imports, paying foreign suppliers four times more than local producers.
Over the past two years, the Krishna Godavari deepwater gas field has increased domestic production thanks to pricing and marketing freedom introduced in 2016, making the field profitable.
Sustained growth in India's reserves is essential to ensure future oil and gas production. Roy said the six-month price review, starting from October 1, 2022, means "better execution (for Reliance) in the next quarter".
The price hike led to a 16% increase in Reliance segment EBITDA in the July-September quarter, resulting in an 82.3% increase in margins.
Reliance executives said the global LNG market remains tight despite record supplies. "There is still a shortage of supplies due to the (Russian-Ukrainian) conflict," he said. "As a result, we are seeing prices rise to around $98 per MMBtu, although they have now more or less stabilized at $45 per MMBtu and below."
Domestic gas production supplies about half of India's needs, while the rest is imported as ship-borne LNG. Roy said the gas market in India is relatively stable. "We saw consumption of about 163 million cubic meters per day in the quarter, which is a slight decrease, but again, this could be due to higher consumption and prices, especially for LNG."
"Now the demand for LNG has decreased significantly, especially due to the production of KG-D6 gas," he added.
India wants to transition to a more gas-based economy, increasing the share of natural gas to 15 percent of its total energy mix by 2030 from the current level of 6.7 percent. But the share of gas in India's energy mess has declined rather than increased.
According to industry estimates, gas will account for only 10 percent of energy consumption, even if current natural gas production doubles to 90 million cubic meters per day.
In order to limit imports at the current level of 50 percent of the total demand, it is necessary to increase domestic gas production by 3 times to 290 million cubic meters per day.
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