CCEA approves procedures for market price realisation of natural gas
07 October 2020
The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved standard operating procedures for arriving at market price of natural gas being marketed in the country by gas producers, taking another step in the country’s move towards a gas-based economy.
A meeting of the CCEA, chaired by Prime Minister Narendra Modi approved ‘Natural Gas Marketing Reforms’, a policy prescribing the mechanism to discover market price of gas to be sold in the market, through a transparent and competitive process.
The new standard operating procedures, permit affiliates to participate in bidding process for sale of gas and allow marketing freedom to certain field development plans (FDPs) where production sharing contracts already provide pricing freedom.
The policy aims to provide standard procedure for sale of natural gas in a transparent and competitive manner to discover market price by issuing guidelines for sale by contractor through e-bidding. This will bring uniformity in the bidding process across the various contractual regimes and policies to avoid ambiguity and contribute towards ease of doing business.
The policy also permits affiliate companies to participate in the bidding process in view of the open, transparent and electronic bidding. This will facilitate and promote more competition in marketing of gas. However, rebidding will have to be done in case only affiliates participate, and there are no other bidders.
The policy will also grant marketing freedom to the field development plans (FDPs) of those blocks in which production sharing contracts already provide pricing freedom.
These reforms will build on a series of transformative reforms rolled out by the government in last several years. These reforms in gas sector will further deepen and spur economic activities in the areas of production, infrastructure and marketing of natural gas by making these more transparent with a focus on ease of doing business.
These reforms will encourage investments in the domestic production of natural gas and reducing import dependence and thereby help in moving towards a gas based economy.
Besides, the increased gas production consumption will help in improvement of environment, while also creating employment opportunities in the gas consuming sectors including MSMEs.
Domestic gas production will further help in increasing investment in the downstream industries such as City Gas Distribution and related industries.
The new policy is supportive of the new exploration licensing policy. The Open Acreage Licensing Policy (OALP) which is investor driven acreage auction process, has increased substantial acreages in the country. No blocks were allocated between 2010 and 2017 which has impacted the long term viability of the domestic production. Since 2017 more than 1.6 lakh sq.km area under 105 exploration blocks have been allocated. This will ensure sustainability of the domestic production in long run.
Government has brought about a series of reforms in the gas sector, which has resulted in investment of more than Rs70,000 crore in the East coast. Gas production from East coast will contribute to Atmanirbhar Bharat by meeting increasing energy needs of the country.
In February 2019, the government implemented major reforms in upstream sector and brought paradigm shift by focusing on production maximization. Acreages under OALP rounds are being allocated based on work programme only in Cat II and Cat III basins.
The domestic gas production has complete marketing and pricing freedom. All discoveries and field development plans approved after 28 February 2019 have complete market and pricing freedom.