Gas Price of $5.05 mmBtu for Five Months Notified

The petroleum ministry has notified the new base price for domestically produced gas as $5.05 per million British thermal units (mBtu), based on the gross calorific value (GCV) that takes into account the heat value of the fuel, including impurities.

The new price will replace the existing price of $4.2 per mBtu and will be in effect for five months from November 1, 2014, to March 31, 2015. “In accordance with the New Domestic Natural Gas Pricing Guidelines 2014 issued by the ministry, the price of domestic natural gas would be $5.05 per mBtu on GCV basis,” the oil ministry said.

The Union Cabinet had on October 18 approved increasing the gas price from the current $4.2 per mBtu based on net calorific value (NCV) to $5.61 per mBtu. In GCV terms, the price was seen increasing from $3.79 to $5.05 per mBtu.

Heat produced from natural gas is measured in calorific value. Gas producers prefer GCV because it translates into higher price realisation for them whereas net payment is made after discounting for fuel impurities. For state-run Oil and Natural Gas Corporation, every $1 increase in gas price translates into Rs 4,000 crore of revenue and Rs 2,300 crore of profit after tax, according to its chairman and managing director D K Sarraf.

Overall, the gas price rise will raise the rate of gas-based power by 63 paise a unit, fertiliser costs by Rs 1,370 a tonne, compressed natural gas rates by Rs 4.25 a kg while piped natural gas prices will rise by Rs 2.60 a standard cubic metre.

The new gas price will be reviewed every six months and would be applicable to all gas produced from nomination fields of ONGC and OIL India, NELP blocks, a few Pre-NELP blocks and CBM blocks.