Fertilizer, city gas distribution sectors to benefit from low domestic gas price

The continuing low in domestic gas price will benefit profitability of end-user industries such as fertilizer and city gas distribution (CGD), India Ratings and Research has stated in a recent report.

However, this will impact the profitability of upstream natural gas producers, which will remain subdued due to lower realizations and higher production cost, the report added.

This comes against the backdrop of India keeping domestic natural gas price unchanged at $1.79 per metric million British thermal unit (mmBtu) for the first six months of the current financial year under the domestic gas price regime, which was introduced in 2014.

Also, the ceiling price for gas from difficult fields such as deep water, ultra-deep water and high pressure-high temperature areas for April-September was reduced to $3.62 per mmBtu from the earlier price of $4.06 per mmBtu.

“The low domestic price is a result of subdued benchmark prices, particularly the Henry Hub (HH), over the reference period 2020,” India Ratings and Research said on Wednesday.

The bi-annual price revision exercise fixes the price at which domestic natural gas is supplied by explorers such as Oil and Natural Gas Corp. Ltd (ONGC) and Oil India Ltd (OIL) to urea manufacturers, power generation firms, and compressed natural gas (CNG) and piped natural gas (PNG) firms.

“Natural gas is the primary feedstock for the majority of fertilizer production in India and this sector consumes the highest amount of natural gas (29% share) in India

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