Natural gas price paid to producers, including state-owned ONGC, will be cut by 20 per cent to $2.5 per million British thermal unit in October, in line with a softening global trend, CMD D K Sarraf said today.
This will be the fourth reduction in the last 18 months following the formula approved by the government in October 2014. Price of natural gas produced from the existing fields of ONGC and RIL is likely to fall to USD 2.5 per mmBtu with effect from October 1 as opposed to USD 3.06 currently, he said.
“The price of normal domestic gas has been coming down because it is linked to gas price in certain markets. We have Canadian and the US price. They have been coming down,” he told reporters here.
“We had started from $5.05, which used to be earlier $4.2 mmBtu. The current price is $3.06. As per the workings (calculations) which we have made, which will be effective October 1, it is going to be somewhere around or even less than $2.5 per mmBtu.”
As per the new gas pricing formula approved by the NDA- government in October 2014, gas prices are to be revised every six months and the next change is due on October 1.
The gas price was last slashed on April 1 to USD 3.06, from USD 3.82. On October 1 last year, the price of natural gas was lowered to $3.82, from $4.66.
A price reduction on October 1 this year will put further pressure on finances of upstream producers that do not find the current rate higher enough to invest more in oil and gas hunt.
“In terms of revenue, there will be a reduction of Rs 4,200 crore per dollar in a year. It translates into Rs 2,400 crore on the bottom line and Rs 4,200 crore on top line, Sarraf said.
He went on to add that the government will support explorers if price is unremunerative.
“I have full confidence that if our exploration or exploitation is not viable at $2.5 per mmBtu, then the government would definitely consider increase in price like they did for difficult fields,” he said.
The government had earlier this year approved marketing and pricing freedom for all undeveloped discoveries in difficult areas subject to a cap. The limit for April 1 to September 30 was $6.61 per mmBtu.