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

Representative Image
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.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel