Govt more than doubles price of locally produced gas – Times of India
Price of locally produced gas from old fields has been raised to a record high of $6.1 per million metric British thermal units (mmBtu) for the period April-September 2022.
The price has been raised from $2.90/mmBtu till now.
The hike comes on the back of rising global energy prices, in wake of the ongoing war between Russia and Ukraine.
With this, regulated fields of state-owned oil firms like ONGC, Oil India Ltd will receive record rates for their produce, thereby boosting earnings.
In a separate release, the PPAC raised ceiling price for gas produced from more challenging field to $9.92 per mmBtu for April-September from $6.13 per mmBtu.
The rate is applicable to newer and difficult fields such as ones of Reliance Industries Ltd in deepsea KG-D6 block.
The latest gas price rise comes at a time when petrol and diesel prices have jumped over Rs 6 per litre in the past 10 days. Even LPG cylinder price is at record high after the latest hike.
These are the highest prices ever paid to Indian gas producers.
The government sets the price of gas every six months — on April 1 and October 1 — each year based on rates prevalent in gas surplus nations such as the US, Canada and Russia.
The increase in gas price is likely to result in a 10-15 per cent rise in CNG and piped cooking gas rates in cities such as Delhi and Mumbai, industry sources told news agency PTI.
The price hike will also lead to a rise in the cost of generating electricity but consumers may not feel any major pinch as the share of power produced from gas is very low.
Similarly, the cost of producing fertiliser will also go up but as the government subsidises the crop nutrient, an increase in rates is unlikely.
This is the second straight hike in prices and betters $5.05 paid to ONGC and Oil India Ltd for old fields between November 2014 and March 2015 and $9.32 to newer fields in April-September 2019.
The new rates reflect the spike in prices at the global benchmarks – US-based Henry Hub, Canada-based Alberta gas, UK-based NBP and Russia gas as well as in rates of liquefied natural gas (LNG) in 2021 following a supply crunch with return of demand after devastation by pandemic.
Domestic rates are fixed based on volume weighted average price in a year in these global benchmarks with a lag of one quarter. So, the price for April 1 to September 30 is based on the average price from January 2021 to December 2021. This is the period when global rates shot through the roofs.
For difficult fields like discoveries in deepwater, ultra-deepwater and high pressure-high temperature areas, a slightly modified formula is used by incorporating the price of LNG, which too had shot through the roof in 2021.
Reliance-bp operated KG fields are classified as difficult fields. Such field operators are allowed to discover market price but this is subject to cap fixed for the difficult fields twice every year.
For producers, this will be the first time in six years that they will get a remunerative price.
ONGC had been incurring losses on the 65 million standard cubic meters per day of gas it produces from domestic fields shortly after the government in November 2014 introduced a new gas pricing formula that had “inherent limitations” as it was based on pricing hubs of gas surplus nations.
The sources said ONGC had in several communications to the government stated that the break-even price to produce gas from new discoveries was in the range of $5-9 per mmBtu and that for old fields such as Mumbai High and Bassein is about $3.6-3.7 per mmBtu.
(With inputs from agencies)
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