The Domestic Natural Gas Pricing Guidelines, 2014 notified by the Ministry of Petroleum and Natural Gas will apply to all natural gas produced domestically, irrespective of the source, whether conventional, shale or coal-bed methane (CBM).
The ministry in a statement said gas from April will be priced at an average price of liquid gas (liquefied natural gas or LNG) imports into India and benchmark global gas rates. This formula will be applicable for five years till March 31, 2019.
The new rates, which will vary every quarter, based on the 12-month average of global rates and LNG import price with a lag of one quarter, will apply to all gas produced by both public sector firms like ONGC and private companies like Reliance Industries Ltd.
The statement added that RIL may sell natural gas at the revised doubled price from April provided the firm gave a bank guarantee.
The bank guarantee, which will be around $9 billion, will be encashed if it is proved that the company hoarded gas or deliberately suppressed production at the main Dhirubhai-1 and 3 (D1 and D3) fields in the eastern offshore KG-D6 block.
The issue had held up notification of the new gas pricing formula that will be applicable to all producers and all forms of gas including CBM and shale gas.
“These guidelines shall not be applicable where prices have been fixed contractually for a certain period of time, till the end of such period,” the ministry said.
“These guidelines shall also not be applicable where the production sharing contract provides a specific formula for natural gas price indexation/fixation,” the statement added.