The government has raised the price of natural gas under the administered price mechanism (APM) to $6.89 per million British thermal units (mBTU) for July 2025 as crude oil prices rose due to escalating tensions in the Middle East.

According to the Petroleum Planning & Analysis Cell (PPAC), the price of domestic natural gas for July 1 to July 31, 2025, is notified as $6.89 per mBtu on a Gross Calorific Value (GCV) basis.

Besides, for gas produced by State-run ONGC and Oil India from their nomination fields, the APM price shall be subject to a ceiling of $6.75 per mBtu on a GCV basis, it added.

Last month, government reduced APM gas prices to $6.41 per mBtu from $6.75, the first such revision since April 2023 when the Kirit Parikh Committee’s recommendations were implemented. Under the Kirit Parikh formula, APM gas prices are revised and determined as a 10 per cent slope to crude oil prices, but with a floor and ceiling price.

The higher gas price is a reflection of the uptick in crude oil prices due to rising tension in the Middle East between Iran and Israel, which threatened to disrupt the Strait of Hormuz (SoH), considered the world’s most critical oil and gas transportation channel.

Nearly 54 per cent of natural gas imports for India pass through SoH as a major share of term LNG originates from Qatar (under the RasGas contract) and the UAE.

Earlier this month, ratings agency ICRA said that domestic gas prices and LNG contracts with crude oil linked pricing will witness an uptick as crude oil prices firm up.

Earlier this month, ICAR said the Iran-Israel war leading to a flare up in crude oil prices coupled with the intensifying conflict may push up APM gas and New Well Gas (NWG) prices.

Supply disruption

Disruption in the SoH may result in supply uncertainties from Qatar and the UAE, which may result in higher dependence on the spot LNG market. Any such disruptions are also expected to result in higher spot LNG prices as well as higher LNG tanker rates, impacting end-user industries, the ratings agency projected.

“Given the sharp rise in crude oil prices, the APM gas price is likely to revert to $6.75 per mBtu, while the NWG price is expected to rise by around 10 per cent in July 2025, if the crude oil prices sustain at current levels. With mounting tensions resulting in disruption in LNG transit from Qatar, spot LNG prices would rise sharply,” ICRA anticipated.

Brent crude oil prices experienced a notable downward trend in April 2025 and remained low in May 2025 driven by concerns over rising inventories and weaker-than-expected demand, amid unwinding of production cuts from OPEC+ and threats of tariff wars.

Subsequently, the latest geopolitical issues in West Asia resulted in sharp increase in crude prices to around $74-75/bbl in mid-June 2025. On June 13, 2025, a conflict started between Israel and Iran, following which crude prices surged to around $74-75 per barrel from about $64-65.

Published on June 30, 2025