NEW DELHI: Come April 1, the price of natural gas will rise by 10 per cent to their highest level in three years. Sources say that the price of domestically produced natural gas will rise to $3.69 million British thermal units (mmBtu) for the April-September period as opposed to $3.36 in the previous six months.
The rate is calculated by taking the 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. So, for the April 1 to September 30 period, the average rates prevailing during January 1, 2018, to December 1, 2018, has been taken.
The increase will translate into a higher cap price, based on alternative fuels for undeveloped gas finds in difficult areas such as the deep sea, which are unviable to develop at the existing pricing formula. Price for gas to be produced from difficult fields has been set at $9.32 per mmBtu for April-September, up about 21.5 per cent from $7.67 per mmBtu in the previous six months. A formal notification is likely to be issued shortly.
The hike in price will boost the earnings of producers such as Oil and Natural Gas Corp (ONGC) and Reliance Industries, but will also lead to a rise in the price of Compressed Natural Gas (CNG), which uses natural gas as input.
The move would also result in a rise in natural gas piped to households (PNG) for cooking purposes as well as feedstock cost for manufacturing fertilisers and petrochemicals. Every dollar increase in gas price results in Rs 4,000 crore in additional revenue for ONGC on an annual basis, sources said, adding that the PSU is the country’s biggest gas producer, accounting for two-thirds of the over 70 million standard cubic metres output a day.
The country imports half of its gas, which costs more than double the domestic rate. Natural gas prices were last increased on October 1, 2018, by 10 per cent when rates moved up to $3.36 per mmBtu from $3.06. Prices are set every six months — on April 1 and October 1 every year — based on the average rates in gas-surplus nations such as the US, Russia and Canada.