The price of domestically produced natural gas is likely to be slashed by over 10 per cent to USD 5.02 per unit from April 1, the first ever reduction in rates of the fuel.
The move will hit revenues of companies like ONGC and Reliance Industries.
The prices of natural gas are due to be revised based on average rates at key international hubs. The new rate will be around USD 5.02 per million British thermal unit (mmBtu) as compared to the current price of USD 5.61, mainly because of slump in rates in second half of 2014, sources privy to the development said.
On a gross-calorific value basis, the price will be around USD 4.67 per mmBtu as compared to USD 5.05 currently.
The BJP-led NDA government had in October 2014 used a new formula to fix price of almost all domestically produced natural gas at USD 5.61 per mmBtu for the period up to March 31.
The rates were to be revised every six month using average price at Henry Hub of US, National Balancing Point of UK, rates in Alberta (Canada) and Russia with a lag of one quarter.
So, rate for April 1 to September 30 would be based on average price at the international hubs during January to December 2014.
Sources said the Oil Ministry is likely to announce the price for next six months sometime this week.
There was a drop in prices at international gas hubs in the second half - US Henry Hub dropped from USD 6 per mmBtu in February to USD 3.78 per mmBtu in October, and from USD 10.72 per mmBtu on NBP in January to USD 6.40.
The government had on October 17, 2014 approved a new formula that priced all domestic gas at weighted average of rates prevalent in gas-surplus economies of US/Mexico, Canada and Russia.
This will be the first reduction in natural gas in India. Domestic gas price was raised from USD 4.2 per mmBtu to USD 5.61 per mmBtu effective November 1.
The current price of USD 5.61 per mmBtu is already among the lowest in Asia Pacific. China pays explorers USD 11.9 per mmBtu rate for new projects while Indonesia and the Philippines price the fuel at USD 11 and USD 10.5 respectively.
Gas from offshore fields in Myanmar, where Indian firms ONGC and GAIL have stake, are sold to China for USD 7.72. Thailand prices gas from new projects at USD 8.2 per mmBtu.
The only nations with lower rates are Vietnam (USD 5.2) and Malaysia (USD 5).
