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29 September 2017
 |
| compressed natural gas (The Total Investment & Insurance Solutions) |
The government Friday hiked natural
gas price by 16.5 per cent to USD 2.89 per million British thermal unit, the
first increase in nearly three years that will give relief to producers but
raises rates of CNG.
Price of natural gas has been raised
from USD 2.48 per MMBtu to USD 2.89 per MMBtu for six months beginning October
1, oil ministry's Petroleum Planning and Analysis Cell (PPCA) said. The Total Investment & Insurance
Solutions
The rate hike, which will be
applicable for gas produced from existing fields of state-owned Oil and Natural
Gas Corp (ONGC) and Reliance Industries, comes after five rounds of reduction,
the last being on April 1.
As per the new gas pricing formula
approved by the NDA- government in October 2014, gas prices are to be revised
every six months.
The increase in natural gas prices
would mean higher raw material cost for compressed natural gas (CNG) and
natural gas piped to households (PNG). It would also mean higher feedstock cost
for power generation and manufacturing of fertilisers and petrochemicals. The Total Investment & Insurance
Solutions
Rates were last cut marginally to USD
2.48 per MMBtu effective April 1 from USD 2.5 per MMBtu previously. Prior to
that prices were cut by 18 per cent with effect from October 1, 2016. That had
followed a 20 per cent reduction to USD 3.06 last April. The price of gas
between October 1, 2015 and March 31, 2016 was USD 3.81 per mmBtu and USD 4.66
in prior six month period.
The hike will boost producers like
ONGC. Every dollar increase in gas price results in Rs 4,000 crore additional
revenue for the PSU on an annual basis.
The government also hiked the cap
price based on alternate fuels for undeveloped gas finds in difficult areas
like deepsea which are unviable to develop as per the existing pricing formula.
The cap for October 1, 2017 to March
31, 2017 will be USD 6.3 per MMBtu, up from USD 5.56, PPAC said. The Total Investment & Insurance
Solutions
ONGC is the country's biggest gas
producer, accounting for some 60 per cent of the 90 million standard cubic
meters per day current output.
All of its gas as well as that of Oil
India Ltd and private sector RIL's KG-D6 block are sold at the formula approved
in October 2014. This formula however does not cover gas from fields like
Panna/Mukta and Tapti in western offshore and Ravva in Bay of Bengal. The Total Investment & Insurance
Solutions
The government had in October 2014
announced a new pricing formula that calculated local rates by using prevailing
price in gas surplus nations like the US, Russia and Canada. The Total Investment & Insurance
Solutions
As per the mechanism approved in
October, 2014, the price of domestically produced natural gas is to be revised
every six months using weighted average or rates prevalent in gas- surplus
economies of US/Mexico, Canada and Russia.
Indian gas prices are calculated by
taking weighted average price at Henry Hub of the US, National Balancing Point
of the UK, rates in Alberta (Canada) and Russia with a lag of one quarter. The Total Investment & Insurance
Solutions
So, the rate for October 2017 to March
2016 is based on average price at the international hubs during July 1, 2015 to
June 30, 2017.The Total Investment
& Insurance Solutions
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