Government is likely to cut natural gas prices by 17 per cent from Friday to USD 3.15 per million British thermal unit from current USD 3.82.
As per the new gas pricing formula approved by the NDA-government in October 2014, gas prices are to be revised every six months and the next change is due on April 1.
Oil Ministry is likely to announce anytime a revised price of about USD 3.15 per mmBtu for the period April 1, 2016 to September 30, 2016, sources privy to the development said.
As per the formula, rates are to be determined on a semi-annual basis and calculated based on a volume weighted average of rates in gas surplus nations of the US, Canada and Russia, based on the 12-month trailing average price with a lag of three months.
Using benchmark prices for the period of January 1, 2015 to December 31, 2015, gas price for the period April 2016 to September 2016 comes about USD 3.15 per mmBtu as against USD 3.82 currently, they said.
On a net-calorific value (CV) basis, the gas price is likely to be USD 3.50 per mmBtu as compared to USD 4.24 currently.
The Ministry is also likely to announce a cap price based on alternate fuels for undeveloped gas finds in difficult areas like deepsea. The cap for April 1 to September 30 is likely to be USD 7, they said.
Natural gas prices were last cut on October 1 by a steep 18 per cent to USD 3.82 per mmBtu on gross calorific value (GCV) basis for six months, from the USD 4.66 per mmBtu.
On net calorific value (NCV) basis, the new gas price for October 1, 2015 to March 31, 2016 came to USD 4.24 per mmBtu as compared to USD 5.18 previously.
Using prevailing price in gas surplus nations like the US, Russia and Canada, the government had in October 2014 announced a new pricing formula that led to rates rising by about 33 per cent to USD 5.61 per mmBtu on NCV basis for period up to March 31, 2015 from the long-standing price of USD 4.2.
The rates, on net calorific value (NCV) basis, dropped to USD 5.05 per mmBtu for six-month period beginning April 1, 2015.
ONGC is the country's biggest gas producer, accounting
for some 60 per cent of the 90 million standard cubic meters per day current output.
All of its gas as well as that of Oil India Ltd and private sector RIL's KG-D6 block are sold at the formula approved in October 2014. This formula however does not cover gas from fields like Panna/Mukta and Tapti in western offshore and Ravva in Bay of Bengal.
The price cut should result in a reduction of Rs 0.5 to Rs 1.5 per standard cubic meter in price of piped natural gas (PNG) for domestic customers and Rs 0.8-1.5 per kg cut in CNG prices.
Retailers like Indraprastha Gas Ltd (IGL) in Delhi are likely to announce a revision in rate tomorrow.
The government had in October 2014 announced a new pricing formula that calculated local rates by using prevailing price in gas surplus nations like the US, Russia and Canada.
While the cut will impact the revenue of producers, it will bring gains for users in the power and fertiliser sector in the form of lower feedstock cost.
As per the mechanism approved in October, 2014, the price of domestically produced natural gas is to be revised every six months using weighted average or rates prevalent in gas- surplus economies of US/Mexico, Canada and Russia.
Indian gas prices are calculated by taking weighted average price at Henry Hub of the US, National Balancing Point of the UK, rates in Alberta (Canada) and Russia with a lag of one quarter.
So, the rates for October 1, 2016 to March 31, 2017 period were based on average price at the international hubs during July 1, 2015 to June 30, 2016.
