Bloomberg News

India Says Gas Price Policy Reforms Planned to Help Boost Output

March 23, 2012

India’s government said it’s revising the country’s natural gas pricing policy to help explorers, including Reliance Industries Ltd. (RIL) and partner BP Plc (BP/), boost production of the fuel.

“The government has initiated gas pricing policy reforms to incentivize production of natural gas,” Prime Minister Manmohan Singh said at a conference in New Delhi today. “We are conscious that remunerative energy prices are needed to ensure expanded energy supply.”

India controls prices of the cleaner-burning fuel used by some power and fertilizer producers in Asia’s second-fastest growing major economy, where Singh said consumption of gas has increased at a compounded annual rate of 14 percent in the past five years. Output at the nation’s largest gas deposit, operated by Reliance, has been declining since 2010, and BP is seeking market prices for gas produced in India, including output from newer discoveries.

Reliance, India’s biggest company by market value, sells gas from the KG-D6 area at $4.2 per million British thermal units, a price decided by the government in 2007 and scheduled to be revised in April 2014. Japan, the world’s biggest user of liquefied natural gas, paid an average $16.76 a million Btu for the fuel in January, LNG Japan Corp. data show.

India needs to move toward ending controls on gas prices to encourage investments in offshore energy exploration, BP Chief Executive Officer Robert Dudley said in September, after Europe’s second-biggest oil company completed a $7.2 billion acquisition of a 30 percent stake in 21 fields operated by Reliance, including KG-D6. Gas production may rise by 2014, after the partners develop new fields, he said.

While Singh didn’t provide further information about changes in the gas pricing policy, he indicated that state control of energy assets would continue.

“Oil and gas are national resources and, therefore, should be within the framework of government and regulatory oversight,” the prime minister said. The goal is to find “win- win solutions” for both investors and the people of India, he said.

To contact the reporters on this story: Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net; Dinakar Sethuraman in New Delhi at dinakar@bloomberg.net

To contact the editors responsible for this story: Hari Govind at hgovind@bloomberg.net; Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net


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