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FEB 19 2015

Stable policy regime must for investments in gas sector: Expert

  • Economic Times, ET Bureau / Hyderabad
  • Created: Thu 19th FEB 2015

Slamming the new natural gas formula as making "no sense", world renowned energy expert Fereidun Fesharaki has said only guaranteed market prices along with stable policy regime would bring in investments from global majors.

Fesharaki, who advises many countries including OPEC kingpin Saudi Arabia on energy policy, said arriving at a price for gas produced in India using average of rates in US, Canada and Russia was like "wanting to buy an house in San Francisco but I want to index it to price in Delhi."

"US is gas surplus country, exporting LNG (liquefied natural gas (LNG). Canada is a gas surplus country, Russia is a gas surplus country. Why do I get their numbers and average it for India. Makes no sense," he told PTI in an interview.

The $ 3-4 per million British thermal unit price in United States was reflective of the surplus gas scenario in US and rates will rise the moment exports are allowed, he said.

Similarly, Russia flares gas equivalent to India's annual production and rates prevalent there are not reflective of market scenario.

He said US gas in form of LNG will be $ 7 higher than the current Henry Hub price of under $ 3 per mmBtu on account of liquefication, transport, pipeline and regassification cost.

The rate will compare to the $ 5.61 per mmBtu price approved by the government for period upto March end.

Similarly, bringing gas through a transnational pipeline like Turkmenistan-Afghanistan-Pakistan-India (TAPI) will cost no less than $ 10-11 at the Indian border, he said, adding this was without accounting for the hardships in moving the gas through hostile territories without the pipeline being blown up.

Global energy giants, he said, want "market prices together with stable regulatory regime and no company will invest in India without these, no matter how many NELP round India does."

The new price was 33 per cent higher than $ 4.2 per mmBtu old rate but lower than $ 8.4 per mmBtu approved by the previous UPA government. The new price is also lower than $ 5.71 rate charged for western offshore gas field and $ 8 that Cairn charges for gas from its Rajasthan block.

"You come up with this formula, and wonder why no one is investing," he said, adding the "government do not want to act on anything that is considered remotely benefiting Reliance Industries".

"The question here is not of Reliance. It is of ONGC and GPSC, two state companies which are sitting up on gas resources but not developing because they don't find the prices remunerative enough," he said.

India, he said, has to allow a free float of gas price and put a cap at say $ 10. Fesharaki, Chairman of FACTS Global Energy, said while India took the "brave initiative" on the oil side by using the slide in international oil prices to decontrol diesel rates, "where there is a big gap is on gas price, gas policy."


Delhi Rajasthan Gas Natural Gas New Exploration Licensing Policy Oil Diesel ONGC Pakistan Energy Gas Field United States New Exploration Licensing Policy Saudi Arabia Russia Organization of Petroleum Exporting Countries Liquefied natural gas Diesel rates Canada India

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