The government has lowered the gas price ceiling to $9.87 per million metric British thermal unit of gas, effective April 1, impacting profit margin of companies exploring and producing gas from these areas.
The gas price ceiling has been reduced for gas being produced from discoveries in deep-water, ultra deepwater and high-pressure, high-temperature areas, according to the notification by the Petroleum Planning and Analysis Cell of India dated March 31.
The new gas price ceiling of $9.87 per million metric British thermal unit of gas is a 1% reduction from the previous ceiling of $9.96 per million metric British thermal unit, and is applicable from April 1, 2024, to Sept. 30, 2024.
What Is The Impact
For companies exploring and producing gas in deep-water, ultra deep-water and HPHT areas, the lower price ceiling indicates a smaller profit margin per unit of gas sold.
The companies impacted by the revision are state-owned Oil and Natural Gas Corp., the leader in making deep-water discoveries; Oil India Ltd.; Reliance Industries Ltd.; and Vedanta Ltd.
However, from the consumer perspective, in theory, a lower price ceiling could lead to a decrease in the final gas price paid by consumers, like households using piped gas or industries using natural gas.
Domestic Natural Gas Prices
The domestic natural gas price for April 2024 has been notified at $8.38 per million metric British thermal unit, according to the PPAC. This marks a 2.6% month-on-month jump from the $8.16 per mmBtu price in March 2024.
The ministry also notified that for gas produced by ONGC and Oil India from their nomination fields, the APM or Administered Price Mechanism gas price is maintained at $6.5 per million metric British thermal unit.
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