NEW DELHI: The new natural gas price of $5.61, which is already among the lowest in Asia Pacific, is likely to drop to around $5 per unit in three years due to the variables included in the formula, Goldman Sachs has said.

"While the Indian government introduced a new gas price regime in October, we believe clear direction is needed on gas pricing for higher-cost projects, such as deepwater, to induce more E&P capex," the global financial major said in a report.Stating that Indian prices for new projects are among the lowest in Asia Pacific, Goldman said China pays explorers $11.9 per mmBtu (million British Thermal Unit) rate for new projects while Indonesia and the Philippines price the fuel at $11 and $10.5 respectively.Gas from offshore fields in Myanmar, where ONGC and GAIL have stake, are sold to China for $7.72. Thailand prices gas from new projects at $8.2 per mmBtu.The only nations with lower rates are Vietnam ($5.2) and Malaysia ($5), it said."We also find that under the new pricing formula, the price of currently produced gas will gradually fall to $5 per mmBtu over the next three years from current $5.61 per mmBtu, implying falling margins as costs rise," Goldman said.The government had last month approved a new formula that priced all domestic gas at weighted average of rates prevalent in gas-surplus economies of US/Mexico, Canada and Russia."This, along with uncertain prospects in largely unexplored basins, could reduce the attractiveness of India as a future E&P destination, in our view," it said.On the premium that the government had last month said would be given to future discoveries in difficult areas like deepsea, it said, "The premium for gas from high-cost basins should be linked to international benchmarks rather than be based on block by block negotiation, in our view.""...we believe clear direction is needed on gas pricing for higher-cost projects, such as deepwater, to induce more exploration and production (E&P) capex," it said.Goldman said encouraging domestic E&P was critical for the Indian oil and gas sector in order to check the rising dependence on imports."We note that apart from high oil import dependence at 80 per cent, India's gas import dependence has also jumped to 35 per cent today vs. 20 per cent in FY10," it said.