Natural gas prices hiked 40% to record levels; CNG, PNG to cost more

The government raised the prices of natural gas by 40 per cent to record levels on Friday. The decision, taken at the government's biannual exercise for fixing the rates for the next six months, will take effect from October 1. 

This would lead to a steep increase in higher rates for Compressed Natural Gas (CNG), and piped natural gas (PNG), which has in the last one year risen by over 70 per cent. 

The latest hike is the third increase in gas rates since April 2019 and comes on the back of firming benchmark international prices. The government had indicated prices of gas would rise since global headwinds were reducing supply. 

An escalating war in Ukraine and global uncertainties have led to the price of gas skyrocketing as major producer Russia faces global financial sanctions. Also continuing shortage in the number of available gas transporters have led to disruptions in the supply chain.

The Petroleum Planning and Analysis Cell, under the Ministry of Petroleum and Natural Gas, on Friday said natural gas being produced from discoveries in deep and ultra-deep water and high pressure, high temperature areas would now reach the price ceiling of $12.46 per Metric Million British Thermal Unit (mmbtu) till March 31, 2023.

More importantly, the rate paid for gas produced from old fields was hiked $8.57 per mmbtu from the current $6.1 per million. This type of gas makes up for about two-thirds of all gas produced domestically.

This includes difficult and newer fields operated by Reliance Industries and partner BP in the KG basin.