personal finance

Prices of natural gas likely to rise by 10%


New Delhi: Natural gas price will likely rise 10% and the price cap for gas from difficult fields jump 21%, people with knowledge of the matter said. This would boost the earnings of gas producers such as ONGC and Reliance Industries, but hurt households and factories that consume the fuel.

The price of locally produced natural gas, decided by a government-set formula that takes average rates from international trading hubs, is published for six months and announced twice a year on the last working days of March and September.

The announcement, slated for Friday, had not been made till late in the night as oil ministry officials awaited a nod from the Election Commission on the matter, the people said. The ministry had sought EC’s permission for publishing the gas price.

Based on the formula, the domestic price of gas has likely risen to $3.69 per million metric British thermal unit (mmBtu) for the April-September period, the people said. The maximum price producers can charge for gas from difficult fields has increased to $9.32 per mmBtu from $7.67 per mmBtu, they said. The spot liquefied natural gas rates for Asia delivery have been declining for months and are around $6.50 per mmBtu, mainly due to oversupply in the region.

The formula price is the average of the rates from gas trading hubs in the US, UK, Canada and Russia. The rates are calculated on gross calorific value basis. The government introduced the formula for domestic gas in November 2014.

Currently, very little gas is produced from difficult fields. But in the coming years, big volume is expected to come from such fields operated by ONGC and Reliance Industries. Most of the locally produced gas gets the formula price.

A jump in the gas price will boost the profitability of producers such as ONGC, Oil India, RIL and Vedanta, but will hurt consumers, including those driving CNG powered vehicles, households using piped gas and factories that use natural gas as energy or feedstock. The input cost for power, fertiliser and petrochemicals plants will also rise.





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