The government hiked natural gas prices to $8.60/mmBtu

However, gas prices from nomination gas fields of ONGC and OIL remained unchanged at $6.5 per mmBtu.

According to the notification dated August 31, “Domestic natural gas prices for the period September 1-30 have been notified at $8.60 per mmbtu on gross calorific value basis.

Since April, domestic natural gas prices have been linked to India’s crude oil basket and adjusted monthly.

The nominated fields are the fields allotted by the government to state-run ONGC and Oil India before 1999, when auctions became the basis for awarding oil and gas blocks. Gas from these fields is limited to $6.5 per mmBtu. Considering that the bulk of the country’s gas production comes from these legacy or nomination fields, consumers are unlikely to be affected by the latest price hike.

The city gas distribution (CGD) sector, the largest consumer of natural gas including piped natural gas and compressed natural gas, gets top priority in procuring gas from designated areas, the impact of this price hike on sectors such as fertilizers and gas-based power plants.

The increase was due to a rise in global crude oil prices due to supply concerns. At the time of writing, the November Brent contract closed at $87.86 per barrel, up 1.19% from the previous close.

The average price of the Indian crude basket, which serves as the base for natural gas prices, rose 7.54% to $86.43 a barrel in August. Prashant Vashishta, Vice-President, Corporate Ratings, ICRA, said, “Recession concerns, sluggish recovery in China and lower OPEC+ output could push prices.

With stimulus measures to boost the Chinese economy and expected demand for heating needs in the coming winter, crude prices could remain in the $80-90 per barrel range, he said.

Oil prices may rise, domestic gas prices may also move forward.

The new gas pricing norms were approved by the Cabinet Committee on Economic Affairs (CCEA) in April, paving the way for linking domestic natural gas prices in India with global crude prices. Under the approved guidelines, natural gas prices are calculated as the monthly average of the Indian crude basket, Dubai and Oman (sour) and Brent crude (sweet) oil prices.

The Cabinet approved a floor price of $4 per metric million British Thermal Unit (mmBtu) and a ceiling of $6.50 per mmBtu under the Administered Price Mechanism (APM) gas pricing.

According to the government, the new pricing policy aims to expand the use of natural gas and achieve the government’s target of increasing the share of natural gas in India’s primary energy mix from the current 6.5% to 15% by 2030.

The new pricing policy comes in the context of high international gas prices. Earlier, domestic gas prices were fixed based on the domestic gas price guidelines approved by the government in 2014. The 2014 price guidelines provided for fixing domestic gas prices for six months based on prevailing volume-weighted prices of the four gases. Trading Hub – Henry Hub, Albena, National Balancing Point (UK), and Russia for a period of 12 months and a quarter.

Shares of ONGC and Oil India rose between 4% and 6% during intra-day trade following the price hike. ONGC shares rose as much as 5.96% on BSE. It’s off ₹181.65, up 4.25% from the previous close. Oil India shares, though up 4.11% during the session, ended 0.27% lower ₹272.45 on the BSE.

Updated: 01 September 2023, 11:38 PM IST