Gas price for Reliance trimmed to $9.87; rate for gas that feeds CNG, PNG supplies still at $6.5

NEW DELHI: The government on Sunday cut the price of natural gas produced from difficult areas like deep sea KG-D6 block of Reliance Industries, marginally to USD 9.87 per million British thermal unit in line with softening of benchmark international gas prices, an official notification said.

However, the price of gas that is used for making CNG for fuelling automobiles or piping to household kitchens for cooking purposes will remain unchanged due to a price cap that is set at 30 per cent less than market rates such as that paid to Reliance.

For the six-month period starting April 1, the price of gas from deepsea and high-pressure, high-temperature (HPTP) areas has been cut to USD 9.87 per mmBtu from USD 9.96, oil ministry's Petroleum Planning and Analysis Cell (PPAC) said in a notification.

This is the third straight bi-annual reduction in rates for difficult fields. Price was for six months beginning October 1, 2023 slashed 18 per cent to USD 9.96 per mmBtu from USD 12.12 for the April to September 2023 period. Prior to that, the rate was a record USD 12.46 for October 2022 to March 2023.

The government bi-annually fixes prices of the locally-produced natural gas -- which is converted into CNG for use in automobiles, piped to household kitchens for cooking and used to generate electricity and make fertilisers.

Two different formulas govern rates paid for gas produced from legacy or old fields of national oil companies like Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL), and for newer fields lying in difficult-to-tap areas, such as deepsea.

Rates are fixed on April 1 and October 1 each year.

In April last year, the formula governing legacy fields was changed and indexed to 10 per cent of the prevailing Brent crude oil price. The rate was, however, capped at USD 6.5 per mmBtu.

Rates for legacy fields are now decided on a monthly basis. For April, the price came to USD 8.38 per mmBtu but because of the cap, the producers would get only USD 6.5 per mmBtu, the PPAC said.

The price for difficult area gas continues to be governed by the old formula that takes a one-year average of international LNG prices and rates at some global gas hubs with a lag of one quarter.

International prices had fallen in 2023 and so it will translate into lower prices for difficult fields starting October.

India is aiming to become a gas-based economy with the share of natural gas in its primary energy mix targeted to rise to 15 per cent by 2030 from the existing level of around 6.3 per cent.