Oil Min cuts natural gas prices by 8% to $4.66 per unit

Oil Min cuts natural gas prices by 8% to $4.66 per unit

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Natural gas prices were cut by about 8 per cent to US$ 4.66 a unit to reflect the softening in international prices, a move that will lower electricity and fertilizer costs. Oil Ministry’s pricing cell, PPAC said domestically produced natural gas will cost US$ 4.66 per million British thermal unit from April 1 to September 30 on gross clarofic value basis (GCV) as opposed to US$ 5.05 per mmBtu currently. On net clarofic value (NCV) basis, the rate would be US$ 5.1726 or US$ 5.18 as compared to US$ 5.61 currently. The new rates are as per the formula approved by the government in October last year.

While the cut will impact the revenue producers like  ONGC and Reliance Industries, it will bring gains for users in the power and fertilizer sector in form of lower feedstock cost. As per mechanism approved in October 2014, price of domestically produced natural gas are to be revised every six months using weighted average or rates prevalent in gassurplus economies of US/Mexico, Canada and Russia. Indian gas price is calculated by taking weighted 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, the rates for April 1 to September 30 are based on average price at the international hubs during January to December 2014.