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The Ministry of Petroleum and Natural Gas has lowered the price of domestically produced natural gas to $ 3.23 per million British thermal unit (mBtu). This price will be applicable from October 1, 2019 to March 31, 2020. The new price is 12.5 per cent lower than the $ 3.69 mBtu natural gas price for the April 1, 2019 to September 30, 2019 period.
The ceiling price allowed for gas to be produced from difficult fields has also been lowered to $ 8.43 a mBtu from $ 9.32 a mBtu. Domestic natural gas price in the country is governed as per the New Domestic Gas policy, 2014.
Commenting on the impact of this cut, a CARE Ratings statement said, “As per our estimates, a 12.5 per cent fall in natural gas prices could potentially lead to a 6 per cent decrease in cost of production of urea, thus decreasing the working capital intensity of the fertiliser manufacturers and also acting as a relief for the fiscal spending of the government while disbursing the urea subsidy.”
CARE Ratings also said that a lowered gas price could deter investments in domestic production. The ratings agency said, “Upstream oil and gas exploration companies will not benefit with the decrease in gas prices as it will lead to low earnings due to decline in per unit realisations in the natural gas segment. This could potentially discourage upstream companies to take up domestic gas exploration.”
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