Natural gas price to double; booty for ONGC, OIL, Reliance - Daily News & Analysis

The government on Thursday paved the way for doubling of natural gas prices in the country by accepting most of the recommendations of the Rangarajan committee. Gas prices will be revised every three months starting April 1 next year till fiscal 2017, after which they would be market-linked, it was said after the cabinet committee on economic affairs cleared the move. The Rangarajan panel had mooted a monthly revision. From April 1, 2014, the price of natural gas will be $8.4 per million metric British thermal unit (mmBtu), up from the current $4.2. While the decision will mean a windfall to gas producers (including the government-owned ONGC and Oil India, as also Mukesh Ambani-led Reliance Industries), it will be a big blow to power and fertiliser companies. Reliance, the operator of India's most prolific natural gas field in the Krishna-Godavari basin off the Bay of Bengal, gets $4.2/mmBtu. The administered pricing mechanism blocks operated by ONGC and Oil India, too, get the same rate, while fuel from the Ravva and Panna-Mukta fields fetch $3.5 and $5.73, respectively. Gas from Tapti oil field is priced at $5.7. The increase will mean the cost of generating electricity by gas-based power plants more than doubles. The cost of electricity generation is currently at Rs 2.93 per unit, which can go up to as much as Rs6.40/unit, according to estimates given by the ministry of power. According to the fertiliser ministry's estimates, a $1 hike in natural gas prices results in an annual hit of Rs3,155 crore for fertiliser plants producing 23 million tonnes of urea. The Rangarajan committee's formula to decide the price of natural gas was based on weighted average of three international hubs of natural gas – the Henry Hub (US), the PNB (UK) and the well-head price in Japan. via Business - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNFGXHmrMNLbrtJA20Fn70G6I3p-BA&url=http://www.dnaindia.com/money/1854230/report-natural-gas-price-to-double-booty-for-ongc-oil-reliance

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