Dip in natural gas price next month to benefit consumers, industries

Bills of natural gas consumers, be it residential or industrial, are set to get lighter with the benefit of lower gas prices expected to be passed on to consumers from April. Apart from individual consumers, reduced gas prices augur well for industries, gas-based power projects and city gas distribution (CGD) companies.

Globally, natural gas prices have already plummeted due to the slump in demand consequent to the spread of the COVID-19 pandemic. The price of natural gas in spot markets have halved to around $3-4 per mmBtu, which is almost near its decadal low.

Following global cues, the natural gas prices in India are estimated to be cut by a steep 25% from the next month.

Based on the current formula for price determination, market estimates suggest that the domestic gas price is likely to be cut to US$ 2.5 per million metric British thermal units (mmBtu) for the six months beginning from April. The gas price was last reduced by 12.5% to US$ 3.23 per mmBtu effective from October 1, 2019.

The Centre revises the price of domestically produced gas every six months based on average benchmark natural gas prices in US, UK, Canada and Russia. India’s natural gas requirement is met with both import of liquefied natural gas (LNG) and locally produced gas, mainly by public sector majors, ONGC Ltd and Oil India Ltd.

Domestic gas is provided on priority basis for consumption by individual households, transportation (compressed natural gas), fertilizers and power generation among other selected sectors.

“After considering operation costs and taxes, one-third of the possible 25% reduction in domestic gas price will be passed on to the consumers.

ET energy world
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