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PM Hints at Gas Price Hike

  • We are conscious that remunerative energy prices are needed to ensure expanded energy supply,” Singh said at the 7th Asia Gas Partnership Summit 2012 in New DelhiIn an indication of a likely increase in the price of gas from Reliance Industries Ltd’s (RIL’s) D6 field in the Krishna-Godavari (KG) basin, Prime Minister Manmohan Singh on Friday said his government had started gas pricing policy reforms to offer an incentive to producers of natural gas.“We are conscious that remunerative energy prices are needed to ensure expanded energy supply,” Singh said at the 7th Asia Gas Partnership Summit 2012 in New Delhi.

  • An RIL spokesperson didn’t comment on the development. The company may respond after reading the Prime Minister’s speech, the spokesperson said.Petroleum minister S. Jaipal Reddy, too, declined to comment. “PM made a general statement. I shouldn’t be commenting on it,” he said.Singh’s statement comes in the backdrop of RIL seeking a rise in the $4.2 (around Rs. 214 today) per million British thermal units (mmBtu) gas price from the nation’s largest gas reservoir off the eastern coast of India.

  • RIL is facing flak for declining gas production from the KG basin and is involved in a dispute with the petroleum ministry over the denial of $1.24 billion in costs claimed by the firm on the D6 field. The company had invested $5.69 billion in the block as of 31 March, 2011 and recovered $5.26 billion.“While RIL wants to raise prices, this price was decided by the eGoM (empowered group of ministers) and is applicable till 2014,” a senior official at the Planning Commission said. “It will be very difficult for the government to raise prices before then.”

  • Abdul Rahim Hashim, president of the International Gas Union, said, “Reasonability of price depends upon which market you are in...in the US market, one wouldn’t be able to sell it at that ($4.2 mmBtu) price.”The petroleum ministry has sought attorney general Goolam E. Vahanvati’s opinion on a price revision.In 2007, an eGoM headed by then external affairs minister Pranab Mukherjee had approved a price of $4.25 per mmBtu for a period of five years from the date of production. Gas production from the block began in April 2009.“Oil and gas are national resources and, therefore, should be within the framework of government and regulatory oversight,” Singh said.RIL shares rose 1.02% to Rs. 744 apiece on Friday on BSE, while the benchmark Sensex closed 0.96% up at 17,361.74.

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