By how much has the price of natural gas gone down? After the current revision, the price of domestically produced natural gas has come down by nearly a quarter in a year’s time.
On gross calorific value (GCV) basis, the new gas price for October 1 to March 31 would be Dollars 3.82 per mmBtu as compared to USD 4.66 now, officials said. “Globally, several E&P companies have scaled back spending and put new exploration projects on hold amid low hydrocarbon prices”, S&P said. The new price is applicable from October 1 to March 31, 2016.
Stating that the formula prices domestic gas on the basis of rates in gas-surplus geographies such as the U.S. and Canada which have developed gas transportation infrastructure, S&P said comparing prices in similar geographies as India would have been more relevant. Are they higher or lower? The new gas price is the average of the four global prices in this 12-month period.
Calorific value is the heat value obtained from one volume unit of gas. According to India Ratings and Research, the benefit from reduced prices will be partly offset by the near 6% depreciation of the rupee over April-September 2015. Thus, the net impact of the reduced domestic gas prices in rupee terms would be almost 11-16 percent.
The fall in prices is negative for other gas producers – Reliance Industries, Cairn and Oil India – as well, but the stocks of these companies have already factored in the price drop. It further expects an Rs2.1/scm-Rs2.3/scm cut in PNG prices and an Rs 2.8/kg-Rs3.0/kg cut in CNG prices.
“The city gas distribution (CGD) companies will gain the most as the segment gets 100 per cent allocation of cheap domestic gas, which will enhance CGD margins”.
Impact on government finances is likely to be mixed.
This reduction, the steepest ever, will hit producers like state-owned ONGC as well as central government whose earnings from royalty and income tax will dip by about Rs. 800 crore during the remainder of the fiscal, according to industry estimates.
As Bloomberg TV India reported on September 29, sources said the gas price has fallen below $4 million British thermal units for the second half of FY16.
