The government has cut the price of natural gas used in the production of PNG for CNG and kitchen for the first time in 2 years. This indicates a decline in benchmark rates. According to a notification by the Petroleum Planning and Analysis Cell (PPAC) of the Ministry of Petroleum, the public sector company ONGC without auction has been reduced to the price of ALGC fields or natural gas emanating from the old areas from $ 6.75 to $ 6.41 per 10 lakh British thermal units (mbtu).
This is the first cut since the government implemented a new formula for the price of such gas in April 2023. This will help urban gas retailers like Indraprastha Gas Limited, Metropolitan Gas Limited and Adani-Total Gas Limited. These production costs were under pressure from increase in cost.
APM gas is the gas that is produced from areas by government oil companies Oil and Natural Gas Corporation (ONGC) and Oil India Limited from areas that were given to them on the basis of nomination. This gas is the input that is used to make LPG transported through pipes in the domestic kitchen, CNG for automobiles, to make fertilizers and produce power.
What is the new formula
In April 2023, the Union Cabinet approved the report of an expert committee, in which the price of ‘Gas received from the old areas’ called APM gas was said to be fixed on the monthly basis at 10 percent of the crude -oil average import price. It had a limit of $ 4 $ 4 and maximum $ 6.5 per 10 lakh British thermal unit (cap). The maximum price was to remain as it was for 2 years and after that it was to grow at the rate of $ 0.25 every year. Accordingly, the maximum price in April increased to $ 6.75 per mmbu.
In the first two years, the price of gas using this formula was between $ 7.29 per MMBTU to $ 9.12 per MMBTU. But the cap ensured that the rate remained at $ 6.50 per MMBTU. According to this formula in April, the price increased to $ 7.26 per MMBTU, but the final rate was $ 6.75 in line with the final rate. The price in May was $ 6.93, but was limited to $ 6.75 for consumers.
International oil prices fall
In view of the fall in international oil prices in view of the uncertain demand outlook, India’s average value of crude oil imports in May stood at around $ 64 in May. According to PPAC, the price of APM Gas increased to $ 6.41 per mMBU based on the gross calorific value (GCV), using it as a benchmark. PPAC said, “For gas produced by ONGC/Oil India Limited from its nomination fields, the APM price from June 1, 2025 to 30 June, 2025 will also be the APM price will also be $ 6.41 per MMBTU on the GCV basis.” The decline in benchmark also means that the price of gas produced by the new wells in APM fields will also decrease.