Domestic natural gas prices likely to rise to $ 3.15 per million British Thermal Units (mBtu) in October this year

On the back of rising global crude oil and natural gas rates, analysts expect the price of domestic gas to increase to $ 3.15  per million British thermal units (mBtu) for the October-March period.

In September 2020, the Centre had slashed domestic gas price to an all-time low rate of $ 1.79 per mBtu and had kept the rate unchanged for the April-October 2021 period. The price is much below the breakeven point of $ 3.2-3.5 per mbtu for most domestic gas fields. This has impacted the realisations of domestic producers like the state-run Oil and Natural Gas Corporation (ONGC) and Oil India. Domestic gas price is linked to the weighted average price of four global benchmarks (US, UK, Canada and Russia).

Asia’s spot liquefied natural gas prices have soared to multi-year summer highs owing to strong regional demand and Henry Hub prices have risen to around $ 4.2 per mBtu levels in August from about $ 2.4 per mBtu in April owing to strong exports and heat wave in the US.

Analysts expect the LNG prices will go up substantially during 2022.  The ONGC management said in June that the company expected nearly 50- 60 per cent increase in gas prices in the second half of the fiscal with international rates strengthening. Domestic natural gas production increased 18.4per cent to 2,892 million standard cubic metre (mscm) in July on a year-on-year (y-o-y) basis, mainly due to higher production from Reliance Industries and BP’s ultra-deep-water field in the KG-D6 Block of the Krishna Godavari basin on the east coast. The output had fallen 8.1 per cent y-o-y to 28,670.6 mscm in FY21. For ultra-deep-water gas fields like the Krishna Godavari basin, which have higher pricing and marketing freedom, the current price cap is set at $ 3.62 per mBtu.

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