Govt Hikes Gas Price Ceiling for Difficult Fields to $9.89/MMBtu; Retains $7 Cap for Legacy Fields
The government has raised the ceiling price for natural gas produced from difficult fields such as the KG-D6 block to $9.89 per MMBtu for six months from October.
New Delhi: The government has raised the ceiling price for natural gas produced from difficult fields such as the KG-D6 block of Reliance Industries and BP to $9.89 from $8.90 per million British thermal units (MMBtu) for the six months beginning October 1.
However, it keeps the ceiling for gas produced from the legacy fields of state-run ONGC and Oil India Ltd at $7 per MMBtu, according to a notification issued by the Petroleum Planning and Analysis Cell of the oil ministry.
As per the ministry, the new ceiling for gas from deepwater, ultra-deepwater and high-pressure, high-temperature discoveries is applicable for the period October 1, 2026 to March 31, 2027.
Gas produced from such difficult areas enjoys marketing and pricing freedom under the government's policy, but is subject to a government-notified ceiling.
The higher ceiling could provide some relief to producers developing India’s more technically challenging offshore gas resources, where production costs are generally higher than those from mature onshore and legacy fields.
For gas produced by ONGC and OIL from their nomination fields, the government has notified an Administered Price Mechanism (APM) price of $11.22 per MMBtu for October, but the actual price remains capped at $7 per MMBtu, according to PPAC.
The APM gas price applies to gas produced from the legacy fields of state-owned ONGC and OIL and is used by priority sectors including city gas distribution, fertiliser and power.
For gas produced from new wells of ONGC and OIL in their nomination blocks, the government allows a 10 per cent premium over the prevailing APM gas price, subject to the applicable ceiling. With the APM price for October capped at $7 per MMBtu, the effective price for new-well gas would accordingly be up to $7.70 per MMBtu.
The higher price for new-well gas is aimed at incentivising ONGC and OIL to invest in developing additional reserves and bringing new production on stream, while maintaining the existing ceiling for gas from their older, legacy fields.
India follows separate pricing mechanisms for gas from legacy fields of national oil companies and newer discoveries in difficult areas.