The Government has issued the Notification regarding Domestic
Natural Gas Pricing Guidelines, 2014 on 10.01.2014. These
Guidelines are hosted on website of the Ministry and will be
published in the Gazette of India. Salient features of the Domestic
Natural Gas Pricing Guidelines, 2014 are:
These guidelines will be applicable to all natural gas produced
domestically, irrespective of the source, whether conventional,
shale, CBM etc. These guidelines shall apply from 1st April
These guidelines shall not be applicable where prices have been
fixed contractually for a certain period of time, till the end of
such period. These guidelines shall also not be applicable where
the production sharing contract provides a specific formula for
natural gas price indexation / fixation. Further, the pricing of
natural gas from small / isolated fields in the nomination blocks
of NOCs will be governed by the extant policy in respect of these
blocks issued on 8th July, 2013.
The prices determined under these guidelines shall be
applicable to all consuming sectors uniformly.
These guidelines shall also be applicable for natural gas
produced by ONGC/OIL from their nominated fields.
The pricing of natural gas produced domestically shall be based
on the following methodology:
First, the netback price of all Indian imports at the wellhead
of the exporting countries will be estimated as detailed in Para
1.7 below. Since there may be several sources of gas imports, the
weighted average of such netback of import prices at the wellheads
would represent the average global price for Indian LNG
Secondly,weighted average of prices prevailing at trading points
of transactions – i.e., the hubs or balancing points of the
major global markets will be estimated. For this, (a) the hub price
(at the Henry Hub) in the US (for North America), (b) the price at
the National Balancing Point of the UK (for Europe), and (c) the
netback wellhead price at the sources of supply for Japan will be
taken as the average price for producers at their supply points
Finally, the simple average of the prices arrived at through the
aforementioned two methods will be determined as the price for
domestically produced natural gas in India.
Domestic Gas prices shall be notified in advance on a quarterly
basis using the data for four quarters, with a lag of one
In respect of D1 and D3 gas discoveries of Block KG-DWN-98/3,
these guidelines shall be applicable subject to submission of bank
guarantees in the manner to be notified separately.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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