Gas from deepwater or high-pressure, high-temperature fields can be sold at market price subject to a ceiling set by the government every six months. Oil and Natural Gas Corp and the consortium or Reliance Industries and BP operate such fields these days.
In the past year, domestic consumers and traders have been very keen to buy gas from difficult fields as the ceiling price made it far less expensive than international prices, which have spiked due to geopolitical developments. Producers received too many bids higher than the ceiling price and distributed gas in proportion to the volumes bidders had sought.
The government’s order now draws the priority ladder for the sectors for gas distribution. “In any situation, which may require proportionate distribution of the gas offered under the bidding process, the contractor shall offer gas to bidders belonging to CNG(Transport)/ PNG(Domestic) sector, fertilizer, LPG and power sector in that order. Any leftover gas shall be offered to other bidders as per the procedure in Request For Proposal (RFP),” the order said.
This would mean city gas companies, which supply compressed natural gas (CNG) to vehicles and piped gas to homes will enjoy priority over others.
The government had also been receiving complaints that many traders, including affiliates of producers, were buying the gas from difficult fields in auction at the ceiling price but reselling it at a much higher rate, defeating the very purpose of keeping gas affordable for end-consumers. This has prompted the government to now cap the margins the traders can make. Bidders will now have to specify if the gas purchased will be self-consumed or resold.
The overall trading margin on the resale of difficult gas to urea and LPG producers has been capped at Rs 200 per thousand standard cubic meters at present, the order said. For resale to other end consumers or traders, the overall trading margin on resale would be linked to the long-term regasified liquefied natural gas (RLNG) contract with Qatar, which is Rs 16.62/mmbtu for 2023.The specified trading margin includes the margin charged by all the traders involved in the chain of transactions between the contractor and the ultimate buyer. Traders have to report details of completed transactions to the producers, who shall maintain the records and submit these to the directorate general of hydrocarbons.
