Why in news?

• India has sought renegotiation of the natural gas price as it is to source through a proposed $10 billion Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline due to slump in global energy markets.

Pricing of natural gas:

The pricing of natural gas depends on:

• The weighted average of prices at three major gas trading points – the hub price at Henry Hub in the United States, the price at the National Balancing Point of the UK and the netback price at sources of supply for Japan.
• The prices will be reviewed every quarter, the government said, moving away from the monthly reviews suggested by the Rangarajan committee to reduce volatility and make it easier for investment decisions.

Why India seeks revision in price of gas :

• The four nations to the pipeline projects had in 2013 signed a gas sale purchase agreement (GSPA) that benchmarked the price of natural gas that Turkmenistan is to export at 55 percent of the prevailing crude oil price.
• This translates into a price of about $7.5 per million British thermal unit (mmBtu) at current oil prices at the Turkmen border.
• Added to this would be transit fee and transportation charge which would jack up the rates to over $10.5 per mmBtu at the at the Indian border.
• For a consumer, the price would be around $13 per mmBtu after adding local taxes and transportation charges.
• This rate in the present global energy scenario is unacceptable. And so taking into cognizance of the current gas market, India has proposed for re-negotiation of GSPA.
• The price of Turkmen gas is more than double of the $3.6 per mmBtu rate paid for post natural gas producers in India.

TAPI Pipeline

• The Turkmenistan–Afghanistan–Pakistan–India Pipeline(TAPI), also known as Trans-Afghanistan Pipeline, is a natural gas pipeline being developed by the Galkynysh – TAPI Pipeline Company Limited with participation of the Asian Development Bank.
• The pipeline will transport natural gas from the Galkynysh Gas Field in Turkmenistan through Afghanistan into Pakistan and then to India.
• Construction on the project started in Turkmenistan on December 13th, 2015. The pipeline is expected to be operational by 2019.