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Thursday, April 22, 2021

Government keeps domestic price of natural gas unchanged at $ 1.79 / mmBtu

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“Depending on the location of the gas field, the production cost for upstream players may vary and therefore a fall in the price of natural gas would thwart their profits or even lead to losses if the production cost is higher than the production cost. “. Care Ratings analysts said while commenting on the impact of the latest gasoline prices.

The Union government has kept the price of domestic gas unchanged at $ 1.79 per million British thermal units (mmBtu), as higher production against a background of declining demand continues to keep global gas prices. gas suppressed. The ceiling price for gas to be produced from difficult fields – whose prices and freedom to market are higher – has, however, been reduced by 10.8% to $ 3.62 / mmBtu. The new prices will be in effect for six months from April 1.

The Center had reduced the price of domestic gas by 25.1% to the lowest level ever in September 2020. The price of domestic gas is linked to the weighted average price of four global benchmarks (United States, United Kingdom). United, Canada and Russia). US LNG spot prices have risen 2.4% in the past six months to $ 2.5 / mmBtu.

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“Depending on the location of the gas field, the production cost for upstream players may vary and therefore a fall in the price of natural gas would thwart their profits or even lead to losses if the production cost is higher than the production cost. “. Care Ratings analysts said while commenting on the impact of the latest gasoline prices. The average gas production cost of the state-owned Oil and Natural Gas Corporation (ONGC) – which produces about 80% of domestic natural gas – is $ 3.7 / mmBtu. ONGC had indicated earlier that it could face a loss of around Rs 7,000 crore in FY21 from its gas activities. Over 95% of the gas currently produced by ONGC is sold at rates determined by the government. HSBC Securities analysts had pointed out that a change of $ 1 / mmBtu in the price of gas could have a 20% impact on the company’s earnings for fiscal 22.

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“India needs to move towards a market-driven pricing mechanism to encourage domestic gas production,” Debasish Mishra, energy resources leader at Deloitte India told FE. The country aims to increase the share of natural gas in its energy mix to 15% by 2030 from the current level of around 6%. The fall in natural gas prices will be positive for fertilizer and town gas distribution companies (CGD). Domestic production of natural gas only meets about 51% of the country’s needs. The demand for natural gas in the domestic market is traditionally dependent on the fertilizer industries (28%), electricity (23%), CGD entities (16%), refineries (12%) and petrochemical industries (8 %).

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National gas production fell 2.8% year-on-year to 31,168.4 mmscm in FY20, reversing the growth trend recorded since FY18 due to aging of existing fields and moderate industry response to be undertaken. new projects.

Production has however shown recent signs of recovery with the start of production at Reliance Industries and BP’s ultra-deep water field in the KG D6 block on the east coast of India.

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