Natural gas prices, which are used to create fertilizers. electricity, and CNG to power vehicles, were boosted by 40% to unprecedented levels on September 30th, in line with the worldwide tightening up of energy costs.
In accordance with instruction from the Oil Ministry’s Petroleum Planning and Analysis Cell, the rate paid for gas generated from old fields, which account for around two-thirds of all gas produced in the country, has been raised to $8.57 per million British thermal power stations from the current $6.1. (PPAC).
These represent the highest costs for managed/regulated fields and free-market locations (such as the KG basin). Furthermore, this is going to be third rate rise since April 2019, and it comes as benchmark worldwide prices have firmed.
Gas is used in the production of manure as well as the generation of power. It is also turned into CNG and supplied to residential kitchens for cooking. A sharp increase in pricing is anticipated to result in increased charges for CNG and piped natural gas (PNG), which has grown by more than 70% in the previous year.
The government determines the gasoline price every six months, on April 1 and October 1 of each year, based on prices common in gas-surplus countries such as the United States, Canada, and Russia in one calendar year with a one-quarter lag.
So, from October 1 to March 31, the price is determined by the mean price from July 2021 to June 2022. This is the time when global interest rates skyrocketed.
Because increasing gas prices might fuel inflation, which has remained persistently over the RBI’s normal routine for the past eight months, the government has formed a committee to evaluate the pricing mechanism.
Rates based on this formula were moderate and, at times, cheaper than the cost of production until March 2022, but then surged rapidly, mirroring the spike in worldwide rates following Russia’s invasion of Ukraine.
From April 1, the price of gas from historic fields, which are largely operated by state-controlled corporations such as Oil India Ltd and ONGC., more than quadrupled to $6.1 per mmBtu.
Likewise, Reliance’s pricing for gas from problematic fields, such as deepsea KG-D6, increased to $9.92 per mmBtu on April 1 from $6.13 per mmBtu previously.
The government intends to more than treble natural gas’s proportion of the main energy budget to 15% by 2030, up from 6.7% currently.
The volume-weighted mean of the price prevailing in a period of 12 months in the Canada-based Alberta gas, Russia gas, US-based Henry Hub, the United Kingdom-based NBP, and is used to set pricing for ONGC and Oil India Ltd-managed fields.
For problematic resources, such as deepwater, ultra-deepwater, and high-pressure-high temperature finds, A slightly adjusted formula is used, which includes the value of LNG, which also risen dramatically in 2021.
