Domestic Natural Gas Prices Hiked For October 2023: Here's What You Should Know

The Oil Ministry has hiked the prices of natural gas which are produced in domestic fields, by at least 7% from the entire October month. Also, the deepwater gas price ceiling is increased. Natural gas stocks on exchanges will be in focus.

As per the notification of the Petroleum Planning & Analysis Cell, the price of domestic natural gas for October 1 to 31st, is hiked to $9.20 per MMBTU on a gross calorific Value (GCV) basis. Earlier, the price was $8.6 per MMBTU.

However, the ceiling on gas produced by ONGC and Oil India from their nomination fields is kept unchanged at $6.50 per MMBTU on GCV basis for the same period.

Further, for gas produced from discoveries in deepwater, ultra-deepwater, high-pressure and high-temperature areas, the price ceiling has been decided to $9.96 MMBTU on GCV. Billionaire Mukesh Ambani-backed Reliance Industries and BP are among the companies to operate such fields.

In April, the Union Cabinet approved the revised domestic natural gas pricing guidelines for gas produced from nomination fields of ONGC/OIL, New Exploration Licensing Policy (NELP) blocks and pre-NELP blocks, where the Production Sharing Contract (PSC) provides for the Government's approval of prices.

Also, the price of such natural gas shall be 10% of the monthly average of Indian Crude Basket and shall be notified every month. For the gas produced by ONGC & OIL from their nomination blocks, the Administered Price Mechanism (APM) price shall be subject to a floor and a ceiling. Gas produced from new wells or well interventions in the nomination fields of ONGC & OIL would be allowed a premium of 20% over the APM price.

The government aims to increase the share of natural gas in the primary energy mix in India from current 6.5% to 15% by 2030.

Earlier, the natural gas prices were determined for 6 months based on the volume-weighted prices prevailing at four gas trading hubs - Henry Hub, Albena, National Balancing Point (UK), and Russia for a period of 12 months and a time lag of a quarter.

The revised pricing formula links natural gas prices to crude, which is a practice now followed in most industry contracts, is more relevant to our consumption basket and has deeper liquidity in global trading markets, on a real time basis. Data of Indian Crude basket price from the previous month would form the basis for APM gas price determination.

Oil & gas stocks like Reliance, ONGC, GAIL, Indraprastha Gas, Mahanagar Gas, Gujarat Gast, and Oil India among others will be in focus this week.