AsianOil: India raises gas prices

The Indian government has increased natural gas prices for the majority of the country’s production by 62% for the next six months.
The Ministry for Petroleum and Natural Gas’ Petroleum Planning and Analysis Cell (PPAC) announced on September 30 that rates for New Exploration Licensing Policy (NELP) and pre-NELP blocks for the six months from October 1 would climb from $1.79 per mmBtu ($49.51 per 1,000 cubic metres) to $2.9 per mmBtu ($80.21 per 1,000 cubic metres)
At the same time, the government raised the price ceiling for gas produced from challenging fields, such as deepwater permits, from $3.62 per mmBtu ($100.13 per 1,000 cubic metres) to $6.13 per mmBtu ($169.56 per 1,000 cubic metres).
“The domestic gas price increase was driven by the significant run-up in the prices of gas at global gas hubs. The increase in gas prices provides limited relief to Indian upstream producers, as even at these prices, gas production remains a loss-making proposition for most fields for the Indian upstream producers, notwithstanding some decline in oilfield services/equipment costs,” credit rating agency ICRA’s senior vice-president and head of corporate sector ratings Sabyasachi Majumdar said.
New Delhi sets domestic gas prices every six months using the weighted average price of gas at hubs in the US, Canada, the UK and Russia. These tariffs are also set at a three-month lag to prevailing market rates at those hubs and come with a built-in $0.50 per mmBtu ($13.83 per 1,000 cubic metres) discount to the international average.
The former chairman of state-run Oil and Natural Gas Corp. (ONGC), Shashi Shanker, said last year that the current system of pricing used for the majority of the country’s production made little sense. Prior to his exit in June, Shanker argued that the country needed to move away from a system that adopted an average price determined in gas-rich hubs to set rates in a gas-poor market.
ONGC has told the government that developing new gas discoveries requires a price of $5-9 per mmBtu ($138.3-248.94 per 1,000 cubic metres) just to break even.