 "Domestic gas price to fall to $5.01/mBtu")
Domestic gas prices are set to fall about nine per cent to $5.01 per million British thermal units (mBtu) on the basis of net calorific value (NCV) and $4.56 on gross calorific value (GCV) from April 1, owing to lower global benchmark prices last year.
NCV is derived after deducting the heat released by the water content in the gas , while GCV is the total heat released after burning a unit of gas. Currently, domestic gas producers are entitled to a uniform price of $5.61 on an NCV basis and $5.05 per mBtu on a GCV basis.
In October 2014, the government had put in place a methodology for pricing natural gas, after modifying a formula recommended by a panel headed by C Rangarajan, former chief of the Reserve Bank of India. This led to gas prices increasing from $4.2 per mBtu, fixed five years ago. The government, however, claimed it was 75 per cent less than what would have been applicable if the Rangarajan panel formula was applied.
The new price, to be applicable till September 30, is the average of the prices between January 1 and December 31, 2014. According to a government decision, price and volume data used to calculate the applicable price would be data for trailing four quarters, with a quarter’s lag.
“From April 1, the price of gas on a GCV basis will be $4.56 per mBtu,” said a senior government official.
Though the reduction in gas price will help consumers in the fertiliser and power sectors, it will yield lower returns to companies such as Oil and Natural Gas Corporation, Oil India Ltd and Cairn India. Reliance Industries Ltd (RIL), currently locked in a dispute with the government, was denied a price revision. The differential between the previous price of $4.2 and the new price was to be deposited in the gas pool account maintained by GAIL; whether the amount so collected was payable to RIL or not would depend on the outcome of the pending arbitration.
Union Petroleum Minister Dharmendra Pradhan, however, did not indicate a likely price, saying, “If we are getting a cheaper price, it is good for the economy.”
NCV is derived after deducting the heat released by the water content in the gas , while GCV is the total heat released after burning a unit of gas. Currently, domestic gas producers are entitled to a uniform price of $5.61 on an NCV basis and $5.05 per mBtu on a GCV basis.
In October 2014, the government had put in place a methodology for pricing natural gas, after modifying a formula recommended by a panel headed by C Rangarajan, former chief of the Reserve Bank of India. This led to gas prices increasing from $4.2 per mBtu, fixed five years ago. The government, however, claimed it was 75 per cent less than what would have been applicable if the Rangarajan panel formula was applied.
The new price, to be applicable till September 30, is the average of the prices between January 1 and December 31, 2014. According to a government decision, price and volume data used to calculate the applicable price would be data for trailing four quarters, with a quarter’s lag.
“From April 1, the price of gas on a GCV basis will be $4.56 per mBtu,” said a senior government official.
Though the reduction in gas price will help consumers in the fertiliser and power sectors, it will yield lower returns to companies such as Oil and Natural Gas Corporation, Oil India Ltd and Cairn India. Reliance Industries Ltd (RIL), currently locked in a dispute with the government, was denied a price revision. The differential between the previous price of $4.2 and the new price was to be deposited in the gas pool account maintained by GAIL; whether the amount so collected was payable to RIL or not would depend on the outcome of the pending arbitration.
Union Petroleum Minister Dharmendra Pradhan, however, did not indicate a likely price, saying, “If we are getting a cheaper price, it is good for the economy.”
The wellhead price for the three different hubs and Russia is determined by deducting $0.50/mBtu towards transportation and treatment charges from each price.