According to industry sources, natural gas prices in India will possibly increase by 8% to $2.7 per million British thermal units (mBtu) in April this year, as the global gas hub rates spikes.
This will be the first increase in natural gas prices, which will last until the end of September, since the hub-based formula introduced in the country was approved in 2014. The types of natural gas that will be affected by the price changes will include those used for producing electricity and for making petrochemicals, fertilizers, and compressed natural gas (CNG) for vehicles.
As for its impact on exploration firms, the price hike is stated to boost their revenues. This is especially true for Oil and Natural Gas Corp (ONGC) and Oil India, considering that the government is looking at a consolidation of state-owned oil companies. Also, gas from these two companies, as well as private sector RIL’s KG-D6 blocks, are being sold on the 2014 hub-based formula.
Sharing his opinion about the impact of the price hike, India Ratings & Research director Salil Garg said:
“The upward trend will impact different sectors differently. It will provide relief to upstream and downstream companies. The prices will be viable for the industry as the government has given pricing freedom for gas produced from deepwater, ultra deepwater and high pressure-high temperature areas.”
Prices will be calculated based on the volume-weighted rate average at the National Balancing Point in the UK, Henry Hub in the US, and the Alberta Hub of Canada.