Decision on RIL, Essar CBM Gas Price by April End

The government will decide on the price of gas that Reliance Industries and Essar Oil plan to produce from coal seams by April-end, Press Trust of India reported Friday citing an oil ministry official.

"We don't have to go to the Empowered Group of Ministers (EGoM) on coal bed methane (CBM) pricing as the Production Sharing Contract (PSC) for these are different from the ones for conventional oil and gas fields (like RIL's KG-D6 fields)," the official said.

Unlike KG-D6 fields, there is no issue of cost recovery involved in CBM blocks as the government gets a fixed royalty which the operators bid at the time of allotment of the blocks. In conventional fields, all cost incurred is first recovered by the operator and revenues are then shared with the government in a fixed proportion.

The report said the government revenues in a CBM block depend on price of gas.  Higher the price, the larger the take and vice-versa.

"We should be able to decide on the price of CBM in a month's time...certainly by April-end," the official said.

While Essar Oil has proposed to sell gas from its Raniganj block in West Bengal at $ 4.20 per million British thermal unit, RIL has sought government nod for selling CBM from its Sohagpur block at a price close to $ 13 per mmBtu.