Petroleum ministry to seek cap on subsidy share of upstream oil cos

The ministry of petroleum and natural gas will soon move the union cabinet seeking an increase in the price of crude oil paid to state-run explorers like Oil and Natural Gas Commission (ONGC) and Oil India Ltd.

The petroleum ministry is seeking a minimum price of $65 per barrel for crude produced by the public sector explorers.

The move is expected to help bring in 70 million tonnes of oil to production.

"We will soon approach cabinet on the issue of capping the subsidy share of upstream companies," oil minister M Veerappa Moily told reporters on Friday.

Upstream companies like ONGC and Oil and India bear disproportionately high subsidy burden.

Against the international price of around $100 per barrel, the oil ministry is seeking a minimum price of $65 per barrel for bringing marginal and deeper oilfields in the country into production, releasing about 70 million tonnes of crude.

These include discoveries in Mumbai High and KG basin on the east coast.

"We are going to the Cabinet Committee on Economic Affairs to allow the contractor to conduct DST (drill stem test) after the time period has expired," Moily said here.

The Kirit Parikh Committee had, last year, recommended a reduction in the subsidy burden of upstream oil companies.

Upstream oil companies share a portion of fuel subsidy burden by giving discounts on crude oil sales to refiners selling diesel and cooking fuel. These are partially offset by government compensating for part of the losses they suffer.

The ministry will also circulate a cabinet note on allowing Reliance Industries extra time to conduct various tests to prove five natural gas discoveries.

These, according to the ministry, are being done to confirm three gas discoveries in the Krishna Godavari basin KG-D6 block and two finds in the NEC-25 block off the West Bengal coast.