Mumbai: The government has reset the price of domestic natural gas to a record low of $ .179 per mmBtu (million British thermal units) from October 1 to March 31 under its pricing policy. While gas exploration companies will see their revenues fall in the second half of this fiscal year due to this, industries that use natural gas as an input, mainly fertilizers and energy, will benefit.
The price of gas for the locally produced fields was $ 2.39 / mmBtu in the first half of the fiscal year; the new price lowers it by 25.1%. Meanwhile, the maximum price of gas to be produced in difficult fields has also fallen to $ 4.06 / mmBtu from $ 5.61 / mmBtu, resulting in a decrease of 27.6%.
Domestic natural gas prices have now fallen for the third time in a row and prevailing prices from H2-FY21 onwards will be the lowest gas prices ever recorded under the new domestic gas policy.
The new price was announced by Praveen Khanooja, Director General of the Petroleum Planning and Analysis Cell, a department under the Ministry of Petroleum and Natural Gas, in a circular to ONGC, OIL Ltd and the Director General of Hydrocarbons on Wednesday.
In a research note analyzing the impact of falling prices, the credit rating agency CARE Ratings said that upstream oil and gas exploration companies will see their per-unit realizations decline in the natural gas segment. This could potentially discourage upstream companies from undertaking domestic gas exploration, which is already down 13.2% year-on-year in the current financial year (April-August) due to low domestic natural gas uptake, he said.
“However, the 25.1% drop in natural gas prices bodes well for end users of natural gas, as it substantially reduces the cost of manufacturing urea and petrochemicals where natural gas is used as a raw material. “says the note. the fall in the prices of CNG (compressed natural gas) and PNG (piped natural gas) that will benefit consumers. The fall in the price of natural gas will also benefit the margins of the electricity sector and the sponge iron industry where it is used for power generation. “
Mint reported earlier this month that gas-fired power plants on the west coast have increased power generation in recent months following a drop in international LNG (liquefied natural gas) spot rates. India has approximately 25 GW of gas power plants, of which 14.3 GW are stranded. The operating plants reported an average PLF (plant load factor) increased of 28.63% in July, compared to 22.13% in January. A further drop in domestic gas prices is likely to further boost generation at power plants.
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