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Union Cabinet approves New price formula for Undeveloped Gas Discoveries

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The Union Cabinet on Thursday approved a new price formula for their undeveloped gas discoveries in difficult areas, which will lead to a near-doubling of rates.

Union Cabinet approves New price formula for Undeveloped Gas Discoveries

Flash points

  • Domestically produced gas costs at average of rates in US, Russia and Canada
  • Deep sea discoveries which are unexplored will be given the cost of alternative fuels
  • The price will be the lowest of weighted average of fuel oil and imported LNG or weighted average of fuel oil, naphtha and imported coal
  • The price of gas will come to USD 7 per million British thermal unit (mmBtu)
  • Gas price in India is currently at USD 3.82 per mmBtu, which will fall to USD 3.15 in April
  • The new price will apply to undeveloped gas discoveries and not on currently producing fields
  • The new pricing would help in production of 35 million standard cubic metres a day of natural gas production for the next 15 years translating to around 7 trillion cubic feet of natural gas.
  • It would help unlock Rs 8 lakh crore of investments
  • The weighted average of the alternate fuels will be over one year and the the price cap will be revised every six months

Points to note

  • Union Oil Minister- Dharmendra Pradhan
  • Major Oil firms- ONGC and Reliance