Govt lowers price of natural gas by 7.72%

New Delhi: The government on Tuesday lowered the price of natural gas by 7.72% with effect from 1 April in a move that will benefit consumers, but dent the revenues of domestic gas producers such as state-owned Oil and Natural Gas Corp. Ltd (ONGC) and Reliance Industries Ltd (RIL).
The price will be cut to $4.66 per million British thermal units (mmBtu) from the current $5.05 per mmBtu on a gross calorific value (GCV) basis.
On a net calorific value (NCV) basis, the price applicable from 1 April to 30 September will be around $5.18 per mmBtu from the current $5.61 per mmBtu. Domestic prices were boosted by one-third to $5.61 per mmBtu on 1 November.
Calorific value is heat value obtained from one volume unit of gas. While NCV doesn’t take into account the latent heat of vaporization, GCV includes all the heat released by the fuel.
The new price for gas that is supplied to city gas distribution companies, fertilizer plants and power projects will benefit consumers, but will have an impact on the revenue and profits of gas producers.
The reduction has been aided by a steep fall in the prices of crude oil and gas. The price of crude oil, to which liquefied natural gas price is typically linked, has plunged by half in the past year. In October, the National Democratic Alliance government announced a new gas pricing formula using the weighted averages of prices in the three major international gas trading hubs of US Henry Hub, the UK National Balancing Point and Japan’s custom-cleared rate.
While ONGC executives have played down the impact on the company, a spokesperson for RIL, which has been engaged in a dispute over the recovery of cost to develop gas fields with the government, declined to comment immediately.
Source: Mint; 01 April 2015
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