Natural gas price to more than double from tomorrow; household cooking gas users to bear the brunt

Administered price mechanism (APM) of natural gas in India will more than double from tomorrow, 1 April, 2022. By October, it could be more than four times the current level. ‘Market-determined’ price of gas produced from ‘difficult’ fields such as the KG-D6 block in KG basin operated by Reliance-BP combine, will also see a similar hike.

In a bonanza for gas producers, Reliance Industries is set to get a record price of around $ 10 per MMBtu for the KG gas, while state-owned ONGC is likely to fetch more than double the rate for its Mumbai High and other fields, sources said.

The government-dictated price for natural gas produced in the country is to be revised on April 1 and factoring in the spike in energy prices witnessed last year, the rate paid for gas produced from fields given to state-owned Oil and Natural Gas Corporation (ONGC) on nomination basis is likely to rise to $ 5.93 per million British thermal units (mBtU ) from current $ 2.9 per mBtU. Simultaneously, difficult fields like the ones in Reliance-BP operated D6 block in KG basin, are likely to get $9.9-10.1 price compared to the current rate of $6.13 per mBtU.

Both of India’s gas producers, Reliance Industries and ONGC seek to ramp up production from existing and new fields. Reliance-BP will start production at MJ fields in KG-D6 block in the last quarter of 2022, which will nearly double the block’s output.

The APM price hike, however does not augur well for households and other non-industrial users. City-gas distribution (CGD) companies like Mahanagar Gas, Indraprastha Gas and Gujarat Gas, being the main buyers of domestic gas, will find their costs going up. For gas-based power, a fuel cost above $4.5/mmBtu (net calorific value basis) could be prohibitive. So any delay in a corresponding tariff revision could result in a further drop in their capacity utilisation. The prospect of a further reduction in gas-fired power unit’s plant load factor come at a time when elevated prices and short supply of coal are threatening to cause power outages as demand peaks during the upcoming summer.

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