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Daily cr@p from india

[Bigwhiskey]

August 28, 2015: Gas prices may fall from USD 5.16 to below USD 4.1-4.2 per mmbtu from October 1. Even at that price, India is going to have one of the cheaper gas prices and that is because the formula that was approved by this government last year gives a very high weightage to gas consumption, production and gas price in the United States. The highest consumption of gas in the US but it is also the cheapest gas in the world. Currently, prices are hovering around USD 2.5. When you even look at the price of USD 4.1-4.2, it is going to be cheaper than what you get in Europe which is around USD 6.5-7. In China, prices are at USD 5.6-8. LNG prices hovers anywhere between USD 8 and USD 11 per mmbtu.

Sources say all this is at a very early and exploratory stage. Some offices in the oil ministry believe that perhaps there is a need for this government to revise the formula that had been approved by the Cabinet last year and that is because of high weightage that has been provided to the US. US gas price is the cheapest in the world, it is also an oversupplied market, it is a huge consumer of gas and its transportation is also quite cheap, whereas in India you need to produce more gas and so to incentivise investments, to incentivise more E&P activity, it is really not going to happen unless you have gas prices which are at least similar in nature to the rest of Asia, Europe and the rest of the world. So, that is part one of the story.

Sources also add that the government has promised it will come out with premium gas pricing soon - maybe some time next week. This premium gas pricing is for difficult gas fields which the finance minister has explained as which could be in deep water, ultra deep water, high temperature, high pressure - so it costs a lot more to produce gas in such fields and therefore the thinking was to give a premium for that. So, that could come in next week but it is going to be only for new discoveries. So, that would perhaps be a setback for the current oil and gas producers who maybe have been thinking that whatever they have already discovered and exploring would get a new gas price but that is not going to be the case. However, if there is a revision for the normal oil and gas fields that could be a booster shot.