| smooth waters
Calcutta, Nov. 19: Oil and Natural Gas Corporation (ONGC) plans to offer a discount on the proposed crude price with import parity to domestic public sector refiners.
It is toying with the move to break the deadlock over the contentious issue of pricing domestic crude produced by ONGC.
The company is seeking an import parity price from PSU refiners, which means that the c.i.f. (cost insurance freight) value of the imported crude will be the basis of the new price for ONGC crude. Sources said ONGC has demanded that the c.i.f. price of West African crude should be the basis for the new pricing formula.
Domestic refiners, who had earlier refused to pay the c.i.f. value on the crude sourced from the ONGC, have now agreed, but with some modification—they want the c.i.f. price of West Asian crude.
“Our argument is very simple. The domestic refiners import crude from West Africa because it has less sulphur content. The crude produced by us is also of the same nature. So why should we not get the c.i.f. price of West Africa,” a senior ONGC official said.
ONGC, which has already lost a huge amount of money because of the delay in fixing crude prices with the refiners, is now trying to make its proposal a little more flexible in order to settle the issue.
“Although we are still sticking to our demand for prices based on West African crude, we think some discounts can be offered,” the official said. However, he did not divulge anything about the discount that is being offered.
Currently, ONGC is getting an interim price of merely $ 22 per barrel while the international price is hovering around $ 25.
“Crude prices zoomed to over $ 30 a few months ago, but we had to be content with whatever interim price had been fixed. On a yearly production of 25 million tonnes of crude, you can easily estimate what kind of losses we have to bear if the pricing formula is not arrived at immediately,” the official said.
Meanwhile, ONGC is gearing up to sell crude and other related products directly to domestic refiners in the private sector. Until now, the public sector crude producer has been allowed to sell its products only to PSU refiners.
ONGC chairman Subir Raha earlier said the government has in principle agreed to its request for an approval whereby it can sell its products at competitive prices to the private sector.