No rethink on gas price hike, says Veerappa Moily

Oil Minister M Veerappa Moily is a firm believer that higher natural gas price is a must now to encourage more investment in Indian petroleum sector and hence there will be no rethinking on the hiking gas prices. On Thursday, the cabinet rejected the idea proposed by the finance ministry to cap the gas price for fertiliser and power sector.

At a recent car award function Moily spoke to dna’s Dhwani Pandya on gas price hike, 10th round of New Exploration Licencing Policy auction scheduled in January and Reliance Industries’ bank guarantee issue. Edited excerpts.

Is the natural gas price hike decision taken on Thursday final? The finance minister had asked for cap on gas price for power and fertiliser sector, is there any rethinking on that?
Our decision is based on Rangarajan committee report, we are not going back on that. Currently gas is sold at $4.2 per mmbtu, while we are importing it at $14 per mmbtu. Import is more costly.
We need to invite investors here, we have the reserves, whether it is shale or CBM (coal bed methane) gas. When it comes to offshore and onshore, I think investment is not even 30%, while in case of shale and CBM gas it is almost nil. As far as fertiliser is concerned, it is for the fertiliser ministry to work out and take the subsidy from the finance ministry.

So when is the final notification on gas price hike coming?
The CCEA took a decision on Thursday, so as soon as the CCEA decision is communicated to our ministry, we will send notification immediately.

Is there any delay in 10th round of NELP auction?
We will go with full force as far as the 10th NELP round is concerned. 86 blocks will be offered of which 56 have been cleared by respective ministries.

All 86 blocks will be cleared before NELP?
We are trying, 56 blocks have been cleared, other blocks will also be cleared.

Many players are not likely to participate in NELP this year
No, I think now they are enthusiastic. I recall the incident, 20 days back I was in Mumbai, we had meeting of the investors and their associations. When I asked them about their impression on the petroleum sector, their prompt reply was that they were pessimistic last year but are now cautiously optimistic. So I asked, to remove the word cautiously, what needs to be done. They listed out items and I am working on it. So we are going to announce 10th round of NELP in January and bidding will commence immediately after that.

Are you still considering revenue sharing mechanism instead of current cost recovery method for production sharing contracts?
That was one of the recommendation given by Rangarajan committee, there are issues in case of the deep or ultra deep offshore sites and those will be addressed. But ultimately, we have just now signed a cabinet note to be circulated among all the ministries on the issue.

Does that mean you would introduce revenue sharing mechanism for 10th NELP?
May be, in a way it is very much before possible that it would come up before the cabinet.

What would be the bank guarantee amount in case of Reliance Industries?
Gas price hike will be effective from April 1, 2014 and it is difficult to anticipate what will be the weighted average at that time, so on that bases bank guarantee amount will be calculated later.

You have been negotiating with Reliance Industries on relinquishment of 8 blocks in KG D6 basin what is the status on that?
It is very clear they are also not interested in some blocks, which are relinquished and they are optimistic about certain blocks and we are going to consider those. But five have been relinquished, three are under consideration.