Government raises natural gas prices to $8.60/mmBtu

livemint.com:

NEW DELHI : The ministry of petroleum and natural gas has raised the price of natural gas for September to $8.60 per mmBtu (metric million British thermal unit), up from $7.85 in August. However, the price for gas from ONGC’s and OIL’s nomination gas fields is unchanged capped at $6.5 per mmBtu . “The price of domestic natural gas for the 1 -30 September period is notified at $8.60 per mmBtu on gross calorific value basis," according to the notification dated 31 August.

Since April, domestic natural gas prices have been linked to the India crude oil basket and are adjusted monthly. Nomination fields are areas the government granted to state-run ONGC and Oil India before 1999, when auctions became the basis for awarding oil and gas blocks. Gas from these fields is capped at $6.5 an mmBtu .

Given that majority of the country’s gas production comes from these legacy or nomination fields, consumers are not likely to be affected by the latest price increase. Considering that the city gas distribution (CGD) sector, the largest consumer of natural gas, including piped natural gas, and compressed natural gas), receives top priority in gas procurement from nominated fields, this price increase could have an impact on sectors such as fertilizers and gas-based power plants. This hike is due to a rise in global crude oil prices following supply concerns.

At the time of writing, November Brent contract closed at $87.86 per barrel, up 1.19% from its previous close. The average price of Indian crude basket, which serves as the basis for natural gas prices, rose 7.54% in August, reaching $86.43 a barrel. “Recessionary concerns, sluggish recovery in China and OPEC+ output cut may keep prices elevated," said Prashant Vashisht,