NEW DELHI: The price of natural gas produced in domestic fields plunged to its lowest level at $ 1.79 per unit (million British thermal units or mBtu) from $ 2.39 on Wednesday, clouding the future capacity of domestic producers like ONGC and OIL to continue supplying, but setting the stage for cheaper CNG and PNG for consumers.
The semi-annual price review according to the government formula also reduced the price of gas from new discoveries in deep water and high pressure and high temperature blocks to $ 4.06 per unit from $ 5.6, which will negatively affect the viability of the East Coast. ONGC projects and RIL-BP in total worth 10 billion%.
This is the third consecutive reduction in gas prices. The price was last reduced by 26% to $ 2.39 in April. Unlike, LNG (liquefied natural gas) October prices are set at $ 4- $ 4.5 per unit in international markets.
Natural gas prices are readjusted on April 1 and October 1 of each year according to a formula compared to rates in surplus markets such as the USA, Canada, the UK and FSU (former Soviet Union). ) with a delay of three months. The formula was introduced in 2014.
It is estimated that ONGC will be hit by Rs 6 billion for the 65 million cubic meters of gas it produces due to the latest price cut. Previously, it had suffered a loss of Rs 4,272 crore in 2017-18. But while high oil prices have offset the impact in the past, the company does not have a similar cushion due to low oil prices.
Company executives estimate that it costs $ 3.7 per unit to produce gas in the fields it was awarded before the bidding regime was introduced. The break-even point for gas from new discoveries is between $ 5 and $ 9 per unit.
The price at the time of the first review under the new formula was $ 5.05 and then continued to decline in subsequent reviews to reach $ 2.48 for the period April to September 2017. The price increased again to $ 3.69 in April of 2019 before going down in October. 2019 at $ 3.23.
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