In a setback to ONGC, OIL, prices of domestic natural gas slashed by 25%

The government has also reduced the ceiling price for gas produced from deepwater, ultra-deepwater and high pressure, and high-temperature areas by 28 per cent to $4.06 per mmBtu

In a huge setback to producers like Oil and Natural Gas Corporation (ONGC) and Oil India (OIL), the central government on Wednesday cut the price of domestic natural gas to $1.79 per million metric British thermal unit (mmBtu) for the October-March period of the current financial year, down 25 per cent from $2.39 per mmBtu in the April-September period. 

The government also reduced the ceiling price for gas produced from deepwater, ultra-deepwater and high pressure, and high-temperature areas by 28 per cent to $4.06 per mmBtu for the period under review, as compared to $5.61 per mmBtu during April-September. The current prices are the lowest since the new pricing system was implemented in November 2014. 

The price of domestic natural gas during the October-March period of FY20 was $3.23 per mmBtu, while it was $8.43 per mmBtu for difficult fields. There was a decline of 45 per cent and 52 per cent, respectively, in one year. Though not a positive sign for producers, dip in natural gas prices may help the fertilizers, electricity, CNG sectors and consumers with piped gas connections.  

This comes at a time when a committee with representatives ONGC, OIL, GAIL and the Petroleum Planning and Analysis Cell (PPAC) are expected to come out with a report on setting a floor price for natural gas. The report is expected to be submitted before the ministry of petroleum and natural gas in a fortnight and if it is accepted, the ministry is expected to move a Cabinet note for setting a floor price.

Natural gas prices are revised every six months In India and are based on a formula that is a weighted average of global benchmarks like Henry Hub, Alberta gas, NBP and Russian gas.