Govt resets domestic natural gas price to historic low of $.179 per mmBtu

• In the first half of the fiscal year, the domestic gas prices were at $2.39/mmBtu and the new price marks a drop of 25.1 percent

• The price of domestic natural gas has been decreased for a third time in a row and the current prices will be the lowest on record since the new domestic gas policy took effect

New Delhi: The Centre has reset the price of domestic natural gas to $.179 per mmBtu (million British thermal unit) for the period starting October 1 to March 31 under its pricing low. The new prices mark a historic low in the pricing of domestic natural gas and will have an adverse bearing on the revenues of gas exploration companies in India. In the first half of the fiscal year, the domestic gas prices were at $2.39/mmBtu and the new price marks a drop of 25.1 percent. The ceiling price for gas to be produced from difficult fields has also fallen to $4.06/mmBtu from $5.61/mmBtu, resulting in a decrease of 27.6 percent.

The price of domestic natural gas has been decreased for a third time in a row and the current prices will be the lowest on record since the new domestic gas policy took effect. The new price was shared by Petroleum Planning and Analysis Cell (PPAC) in circular to state-run Oil & Natural Gas Corporation (ONGC) and Oil India Limited (OIL). 

E&P companies will see their per unit realisations decline: CARE Ratings

In a report, credit ratings agency CARE Ratings said that exploration and production (E&P) companies will see their per unit realisations in the natural gas segment decline. "This could potentially discourage upstream companies to take up domestic gas exploration which is already down by 13.2 percent y-o-y in the current financial year (April-August) due to the low offtake of domestic natural gas," it said.

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"However, the 25.1 percent fall in natural gas prices augurs well for natural gas end users as it substantially decreases the cost of manufacturing of urea and petrochemicals where natural gas is used as a feedstock," said CARE Ratings. "It will also result in the fall in prices of CNG (compressed natural gas) and PNG (piped natural gas) which will benefit the consumers. Decrease in price of natural gas will also be beneficial for the margins of the power sector and sponge iron industry where it used for the generation of energy," it added.

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