OIL & GAS

Natural gas prices in India likely to be cut by steep 25 per cent from April

Natural gas prices in India are likely to be cut by a steep 25 per cent beginning April, in line with the slump in global rates, sources said.

The price of most of the natural gas produced by state-owned ONGC and Oil India Ltd, which account for the bulk of India’s existing gas output, is likely to be cut to around USD 2.5 per million British thermal unit for the six-month period beginning April 1, from USD 3.23 as of now.

This will be the second reduction in six months and will reduce rates to the lowest in two-and-half-years. Sources said the price of gas produced from difficult fields too is likely to be cut to USD 5.50 from USD 8.43 per mmBtu now.

Prices of natural gas, which is used to produce fertiliser and generate electricity and is also converted into CNG for use in automobiles as fuel and cooking gas for households, are set every six months — on April 1 and October 1 each year.

The rates, besides dictating the price of urea, electricity and CNG, also decide the revenue of gas producers such as Oil and Natural Gas Corp (ONGC).

Natural gas price was last cut by 12.5 per cent on October 1. Rates were cut to USD 3.23 per mmBtu from earlier USD 3.69. For difficult fields, the rates were cut from an all-time high of USD 9.32 per mmBtu to USD 8.43.

Sources said the reduction would impact revenues of India’s biggest producer ONGC as well as Reliance Industries and its partner BP plc which plan to start gas production from their ‘second-wave’ of discoveries in eastern offshore KG-D6 block from mid-2020.

The cut in price will lower the earnings of producers like ONGC but will also lead to a reduction in the price of CNG, which uses natural gas as input.

It would also lead to lower cost of natural gas piped to households (PNG) for cooking purposes as well as of feedstock cost for the manufacturing of fertilisers and petrochemicals.

Source
ET News
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