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16% to $4.24 per Unit Price Cut in Natural

Report9 : Today, the government reduced natural gas prices by 16 per cent to $4.24 per unit for the six-month period, beginning October 1.

As per a formula sanctioned by the government in October last year, natural gas prices, will fall to $4.24 per million British thermal unit on net calorific value (NCV) basis from the current $5.50 per mmBtu.

Officials said, on gross calorific value (GCV) basis, the fresh gas price for October 1 to March 31 would be $3.82 per mmBtu as compared to $4.66 currently.

Using present price in gas surplus nations like the US, Russia and Canada, the government had in October last year declared a new pricing formula that resulted in rates rising nearly about 33 per cent to $5.61 per mmBtu for a period up to March 31, 2015 from the long-standing price of $4.2.

The rates, on net calorific value (NCV) basis, dropped to $5.05 per mmBtu for six month period beginning April 1,2015.The price cut is the second reduction in rates ever the first being on April 1.

As the cut will affect the revenue of producers like Oil and Natural Gas Corp (ONGC) and Reliance Industries, it will bring gains for users in the power and fertilizer sector in the form of lower feed stock cost.

As per the mechanism sanctioned in October 2014, price of domestically produced natural gas is to be reconsidered every six months using weighted average or rates prevalent in gas-surplus economies of US/Mexico, Canada and Russia to incentive’s exploration in deep-sea that wasn’t viable at $4.2 rate. 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. Therefore, the rates for April 1 to September 30 period were based on average price at the international hubs during January to December 2014.

The October 1, 2015 to March 31, 2016 rate will depend on average of prices during July 1, 2014 to June 30,

2015. The current price of $5.61 per mmBtu is already among the lowest in Asia Pacific. China pays explorers

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$11.9 per mmBtu rate for new projects while Indonesia and the Philippines prices of fuel are at $11 and $10.5, respectively.

Gas from offshore fields in Myanmar, where Indian firms ONGCBSE 1.35 % and GAIL have stake, are sold to China for $7.72 per unit.

Thailand prices of gas in the new projects are at $8.2 per mmBtu. The only nations with lower rates than prevailing price are Vietnam ($5.2) and Malaysia ($5).

About the author

Santosh Thallam

Santosh Thallam is the Chief Editor and Founder of Report9 Media. He is very passionate about writing the truth behind lies

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