Business Standard

Natural gas prices to rise by 10 pc


Press Trust of India New Delhi
Natural gas prices will rise by 10 per cent to their highest level in three years from April 1, a move that will result in rise in CNG and piped cooking gas rates as well as cost of urea production.
The price of domestically produced natural gas will rise to USD 3.69 million British thermal unit (mmBtu) for the April-September period as opposed to USD 3.36 in the previous six months, sources said.
The price of gas produced from difficult fields will rise to USD 9.32 per mmBtu for six months beginning April 1 from current USD 7.67.
A formal notification is likely to be issued shortly.
An industry source said since general elections have been announced, the government is weighing if an approval of the Election Commission is needed even though the price revision is a six monthly event and would have gone ahead irrespective of polls or no polls.
This will be the fourth straight increase in gas prices.
Prices will be at their highest level since the October 2015-March 2016 period when the rates of domestically produced natural gas were at USD 3.82 mmBtu.
Natural gas prices are set every six months - on April 1 and October 1 every year - based on average rates in gas-surplus nations such as the US, Russia and Canada.
The rate is calculated by taking a 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, for the April 1-September 30 period, the average rates prevailing during January 1, 2018, to December 1, 2018, has been taken.
The increase in price will boost earnings of producers like Oil and Natural Gas Corp (ONGC) and Reliance Industries but will also lead to a rise in price of CNG, which uses natural gas as input.
It would also lead to higher cost of natural gas piped to households (PNG) for cooking purposes as well as of feedstock cost for manufacturing of fertilisers and petrochemicals.
Every dollar increase in gas price results in Rs 4,000 crore additional revenue for ONGC on an annual basis, sources said adding that the PSU is the country's biggest gas producer, accounting for two-thirds of the over 70 million standard cubic metres per day current output.
India imports half of its gas which costs more than double the domestic rate.
Natural gas prices were last increased on October 1, 2018, by 10 per cent when rates moved up to USD 3.36 per mmBtu from USD 3.06.
The increase will translate into a higher cap price based on alternative fuels for undeveloped gas finds in difficult areas like deep sea, which are unviable to develop as per the existing pricing formula.
The price for such fields from April 1 would be USD 9.32 per mmBtu for six month beginning April 1 as compared to USD 7.67 currently, sources said.
All of its gas, as well as that of Oil India 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 the Bay of Bengal.

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First Published: Mar 29 2019 | 5:20 PM IST

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