The new price will replace the existing price of $4.2 per mBtu and will be in effect for five months from November 1, 2014, to March 31, 2015. “In accordance with the New Domestic Natural Gas Pricing Guidelines 2014 issued by the ministry, the price of domestic natural gas would be $5.05 per mBtu on GCV basis,” the oil ministry said.
The Union Cabinet had on October 18 approved increasing the gas price from the current $4.2 per mBtu based on net calorific value (NCV) to $5.61 per mBtu. In GCV terms, the price was seen increasing from $3.79 to $5.05 per mBtu.
Heat produced from natural gas is measured in calorific value. Gas producers prefer GCV because it translates into higher price realisation for them whereas net payment is made after discounting for fuel impurities. For state-run Oil and Natural Gas Corporation, every $1 increase in gas price translates into Rs 4,000 crore of revenue and Rs 2,300 crore of profit after tax, according to its chairman and managing director D K Sarraf.
Overall, the gas price rise will raise the rate of gas-based power by 63 paise a unit, fertiliser costs by Rs 1,370 a tonne, compressed natural gas rates by Rs 4.25 a kg while piped natural gas prices will rise by Rs 2.60 a standard cubic metre.
The new gas price will be reviewed every six months and would be applicable to all gas produced from nomination fields of ONGC and OIL India, NELP blocks, a few Pre-NELP blocks and CBM blocks.
India's gas production fell 13% from 111 mmscmd in 2012-13 to 97 mmscmd last fiscal (2013-14). Output is expected to pick up marginally to 100 mmscmd (or 36 bcm) in the current fiscal including 24 bcm from ONGC, 2.8 bcm from Oil India (OIL) and 9.7 bcm from PSC regime blocks.
A bulk of the additional gas would come from ONGC's ramp up in output from the 24 bcm in current fiscal to 35 bcm by 2019 on the back of development of C-26 cluster next fiscal and Daman offshore block.
OIL is also expected to increase production from existing 2.8 bcm to 4 bcm by 2018-19 with production kicking off from Baghjan field in Assam next fiscal and incremental gas output from its Nelp blocks.