Natural gas price cut to $5.02/unit - Economic Times

NEW DELHI: Natural gas prices will fall 10% to $5.02 per unit from April 1, after the first price revision since the new gas formula was announced by the government last year, a government official said.

The government will also announce in the next few days the premium that producer can charge on the price of gas pumped from new discoveries in challenging, deep-water fields. The premium, which would depend on the level of difficulties in deep water gas fields, would reduce uncertainties for companies that negotiate challenging terrains and bet billions on exploration and production.

The government had announced a formula in October that uses average annual price at four energy hubs in US, Canada, Russia and European Union to calculate the gas price that could be offered to gas producers at most of the local domestic fields. The formula was chalked out after extensive debates in which energy firms wanted prices to be high enough to lure investors but consumers lobbied for lower rates.

The new price, significantly lower than $5.61/mmbtu valid till the end of March, will be applicable for six months, a source in the government said. The fall tracks the crash in gas prices globally, but come as a disincentive to explorers. Since last year, crude prices have almost halved, while the price of liquefied natural gas (LNG) has dropped from about $14 a unit to less than $8. The current spot price of LNG is lower than the price of gas that was approved, but not implemented, by the UPA government.

The government will announce the premium for deep water exploration in the next few days, the source said.

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