Govt cuts gas price for Reliance to $9.87; CNG, PNG rate remains same
The government has implemented a minor reduction in the price of natural gas extracted from challenging regions like the deep sea KG-D6 block, attributing the adjustment to softening benchmark international gas prices
FollowThe Central government on Sunday announced a slight reduction in the price of natural gas extracted from challenging areas such as the deep sea KG-D6 block operated by Reliance Industries, citing a decline in benchmark international gas prices. The new price stands at $9.87 per million British thermal units (mmBtu), as per an official notification.
However, the price of gas utilized for producing compressed natural gas (CNG) for automobiles or supplying to household kitchens for cooking purposes will remain unchanged. This decision is due to a price ceiling set at 30% below market rates, similar to those paid to Reliance.
For the upcoming six-month period starting from April 1, the price of gas extracted from deep sea and high-pressure, high-temperature (HPTP) areas has been reduced from $9.96 to $9.87 per mmBtu, according to the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry.
This marks the third consecutive bi-annual reduction in rates for challenging fields. Previously, the price was slashed by 18% to $9.96 per mmBtu for the period of April to September 2023 from $12.12, followed by a record rate of $12.46 for October 2022 to March 2023.
The government periodically determines prices for domestically produced natural gas, which is utilized for various purposes including CNG production, household cooking, electricity generation, and fertilizer manufacturing.
Different pricing formulas are applied to gas from legacy fields operated by national oil companies like Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) and for newer fields situated in challenging areas like the deep sea. Pricing adjustments are made on April 1 and October 1 each year. The formula for legacy fields was revised last April, linking it to 10% of the prevailing Brent crude oil price, capped at $6.5 per MMBtu. However, rates for legacy fields are now determined monthly, with April's rate calculated at $8.38 per mmBtu, yet capped at $6.5 per mmBtu due to the imposed ceiling.
Meanwhile, prices for gas from challenging areas continue to be determined using the old formula, which considers a one-year average of international LNG prices and rates from global gas hubs with a one-quarter lag. With international prices dipping in 2023, the prices for challenging fields are anticipated to decrease starting in October. India aims to increase the share of natural gas in its primary energy mix to 15% by 2030, up from the current level of approximately 6.3%, as part of its transition towards a gas-based economy.
