ONGC removes marketing margin but refuses to lower gas price

State-owned Oil and Natural Gas Corporation (ONGC) has agreed to do away with charging users a marketing margin on the gas it plans to produce from its KG basin field but refused to lower the minimum rate, according to tender documents. ONGC, India’s top oil and gas producer, last month sought bids for sale of initial 2 million standard cubic meters per day of gas from its KG-DWN-98/2 block (KG-D5).

The company asked bidders to quote a rate linked to prevailing Brent crude oil prices. It fixed the floor or minimum rate at 10.5 per cent of the three-month average Brent crude oil price. On top of it, the firm sought USD 0.20 per million British thermal unit.

Potential bidders however opposed the levy of the marketing margin as well as the “high” floor price. Responding to queries raised by bidders, ONGC said the floor price cannot be changed but marketing margin is being dropped.

“Change in Reserve Gas Price (floor rate) is not agreed. However, considering requests from various bidders, the levy of marketing margin of USD 0.20 per mmBtu over and above contract price is removed,” it said.

At the current Brent crude oil price of close to USD 70, the minimum price comes to USD 7.3 per million British thermal unit.