ONGC, Re­liance face 20% cut in gas price to $2.45/unit by Oc­to­ber

Resource Digest - - CONTENT -

Nat­u­ral gas price paid to pro­duc­ers like state-owned Oil and Nat­u­ral Gas Corp (ONGC) and Re­liance In­dus­tries is likely to fall 20% to $2.45 in Oc­to­ber. This will be the fourth re­duc­tion in last 18 months fol­low­ing the for­mula ap­proved by the gov­ern­ment in Oc­to­ber 2014.

Price of nat­u­ral gas pro­duced from ex­ist­ing fields of ONGC and RIL is likely to fall to $2.45 per mil­lion Bri­tish ther­mal unit with ef­fect from Oc­to­ber 1 as op­posed to $3.06 cur­rently, a se­nior of­fi­cial said.

This rate is on gross calorific value (GCV) ba­sis.

The gas price was last cut on April 1 from $3.82 per mmbtu to $3.06 per mmbtu. On a net-calorific value (NCV) ba­sis, the gas price was on that day cut to $3.4 per mmbtu as com­pared to USD 4.24 pre­vi­ously.

On NCV ba­sis, the new gas price is likely to be $2.7 from Oc­to­ber 1.

As per the new gas pric­ing for­mula ap­proved by the Ndagovernment in Oc­to­ber 2014, gas prices are to be re­vised ev­ery six months and the next change is due on Oc­to­ber 1.

The re­duc­tion in nat­u­ral gas prices would mean lower raw ma­te­rial cost for com­pressed nat­u­ral gas (CNG) and nat­u­ral gas piped to house­holds (PNG) and would trans­late into re­duc­tion in re­tail prices.

This will be the fourth con­sec­u­tive re­duc­tion since the im­ple­men­ta­tion of the do­mes­tic gas pric­ing for­mula that cal­cu­lates the rate on a vol­ume weighted av­er­age of rates in gas sur­plus na­tions of the US, Canada and Rus­sia, based on the 12-month trail­ing av­er­age price with a lag of three months.

The price of gas has de­clined by around 39 per cent since the im­ple­men­ta­tion of the gas pric­ing for­mula in Oc­to­ber 2014.

On Oc­to­ber 1, 2015 price of nat­u­ral gas was low­ered to $3.82 per mmbtu from $4.66.

The price cut on Oc­to­ber 1, 2016 will put fur­ther pres­sure on fi­nances of up­stream pro­duc­ers who do not find the cur­rent rate in­cen­tivis­ing enough to in­vest more in oil and gas hunt.

The of­fi­cial said the cap price based on al­ter­na­tive fu­els for un­de­vel­oped gas finds in dif­fi­cult ar­eas like deep sea will also fall to around $5.2-5.3 per mmbtu from $6.61 cur­rently.

The gov­ern­ment had ear­lier this year ap­proved mar­ket­ing and pric­ing free­dom for all un­de­vel­oped dis­cov­er­ies ly­ing in dif­fi­cult ar­eas sub­ject to a cap. The cap for April 1 to Septem­ber 30 was $6.61 per mmbtu on GCV ba­sis and $ 7.3 on NCV ba­sis, the of­fi­cial said.

AS PER THE NEW GAS PRIC­ING FOR­MULA AP­PROVED BY THE NDAGOVERNMENT IN OC­TO­BER 2014, GAS PRICES ARE TO BE RE­VISED EV­ERY SIX MONTHS AND THE NEXT CHANGE IS DUE ON OC­TO­BER 1

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