India May Raise Natural Gas Price First Time in 3 Years: SurveyBy
Gas price may be raised by about 13 percent from Oct. 1
India has been cutting natural gas prices since April 2015
India may increase domestic natural gas prices for the first time in nearly three years, providing some relief to producers who are struggling to recover costs, a Bloomberg survey of analysts and industry participants showed.
The government is likely to raise natural gas prices for the six months beginning Oct. 1 to $2.8 per million British thermal units, almost 13 percent higher than the current price of $2.48, according to an average of eight responses. The government sets the rate every six months and an announcement on the price is due this week.
The forecasts compiled by Bloomberg range from $2.60 to $3.15.
The government last raised gas prices when it introduced a new pricing formula in November 2014. Since then, it has reduced prices by more than half through five successive cuts. Lower prices have squeezed the margins of explorers such as Oil & Natural Gas Corp. and Reliance Industries Ltd. but have helped the government increase demand for the fuel from fertilizer companies and power generators, and encouraged its use in transport and cooking.
“Not much relief is expected for Indian producers,” Vaibhav Chowdhry, an analyst at K.R. Choksey Shares and Securities Pvt., said over phone, adding he expects gas prices to rise again in April. “The price revision won’t be a big help for producers like ONGC as its average cost of production is about $3.5 per mmbtu.”
The current gas-price formula is based on U.S., Canadian, U.K. and Russian rates.
ONGC produced about 66.3 million cubic meters a day of natural gas in the first quarter of the financial year that began in April, comprising about three-quarters of India’s total gas output. Its output is set to increase by about 10 percent by the end of the financial year as the company boosts production from its offshore fields on the west and east coast.
Reliance spokesman Tushar Pania, ONGC spokesman Pallab Bhattacharya and oil ministry spokesman Rahul Gowlikar didn’t respond to emails seeking comment.
Companies producing gas from some deep-water fields with high pressure and high temperature areas are allowed a higher tariff of about $5.56 per million British thermal units. That price is also due to be revised from Oct. 1.