The Union government allowed Oil & Natural Gas Corp. and Oil India Ltd. on Monday to price domestically produced natural gas at 20% premium over the administrative price mechanism in a bid to make new gas development projects viable.
In the context of India's oil and gas sector, the APM refers to a government-controlled pricing system that is used to determine the price of petroleum products.
The Ministry of Petroleum and Natural Gas notified the allocation of gas produced from new wells or well interventions from nominated fields of ONGC and Oil India at 20% premium over the APM price.
The enhanced price for new gas will make the new gas development projects viable and help ONGC to augment the production of natural gas from nominated fields in challenging areas that require higher amount of capital and technology, the company said in a statement.
Under the domestic gas pricing guidelines, the APM price is set at 10% of the Indian crude basket price, as announced monthly by the Petroleum Planning and Analysis Cell.
The guidelines specify that gas produced from new wells or well interventions in ONGC and Oil India’s nomination fields will be priced at a 20% premium over the APM prices, making it a total of 12% of the Indian crude basket price for new gas. The APM gas price as of June is $8.44 per million British thermal unit.
The ONGC board recently approved the Daman Upside Development project in its nominated field of Mumbai High at a cost of around Rs 7,800 crore for increasing the domestic gas production. The peak production envisaged from this project is around 5 million metric standard cubic metres per day.
It has also approved another project integrated development of four contract areas under DSF-II at a project cost of Rs 6,000 crore with a peak production of around 4 mmscmd of gas where the government has already allowed pricing and marketing freedom.
Shares of ONGC and Oil India were trading 2.65% and 4.47% higher respectively on the BSE, compared to a flat benchmark Sensex as of 3:25 p.m. The announcement came during market hours.
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