Government Hikes APM Gas Price for ONGC, Oil to $7 per mmBtu
Hike in regulated gas for ONGC, Oil India Limited may raise costs
New Delhi: The government has raised the administered price mechanism (APM) gas price for state-run producers like state-owned Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) to $7 per mmBtu, up from $6.75 per mmBtu. The revision follows the pricing mechanism that the government had approved in 2023, according to an official notification.
The revision applies to gas produced from legacy fields under the regulated pricing regime. APM gas makes up for about 60 per cent of the domestic gas production at 92 million standard cubic metres per day, and a hike in its rates will impact user industries - from fertiliser to CNG and piped cooking gas.
Natural gas pumped from below the earth's surface and seabed is used to produce fertiliser, generate electricity, turned into CNG to power automobiles, piped into household kitchens for cooking and used in industries as feedstock. The price revision comes amid the war in West Asia, straining global energy supply chains and leading to elevated prices. Crude oil prices have risen by almost 50 per cent in the last one month to over $100 per barrel.
Under the revised guidelines, the price of such natural gas produced from old and legacy fields, which were given to ONGC and OIL without bidding, is determined as 10 percent of the monthly average of the Indian Crude Basket and is notified on a monthly basis.
For gas produced by ONGC and OIL from their nomination blocks, the APM price is subject to a floor of $4 per million British thermal unit (mmBtu) and a ceiling of $6.5 per mmBtu. The ceiling was to be maintained for two financial years (2023-24 and 2024-25) and then increased by $0.25 per mmBtu. Following this formula, the ceiling was raised to $6.75 for the fiscal year, starting April 1, 2025, and is now $7.
The oil ministry's petroleum planning and analysis cell (PPAC), in an official order, said the price of domestic natural gas for April is $10.76 per mmBtu on gross calorific value (GCV) basis. However, this price is subject to the floor and ceiling. “For the gas produced by ONGC and OIL from their nomination fields, the above-mentioned APM price shall be subject to a ceiling of $7 per mmBtu on GCV basis for the same period,” the PPAC said.
The government had, through a notification dated April 7, 2023, also allowed a premium of 20 per cent over the APM prices on gas produced from new wells and well interventions of ONGC and OIL from their nomination fields.
Also, the government has provided marketing and pricing freedom for gas produced from difficult fields, such as deepwater, ultra-deepwater and high-pressure-high-temperature areas, such as KG-D6 fields of Reliance Industries Ltd. They are allowed a higher price than APM, subject to a ceiling.