Domestic gas prices may fall below $4.2 per million British thermal unit (mBtu) from October, a rate that was used last year to devise a new pricing formula to incentivise exploration.
Using the prevailing price in gas surplus nations such as the US, Russia and Canada, the government had in October last year announced a new formula that led to the rates rising by about 33 per cent to $5.61 per mBtu for a period up to March 31 from the long-standing price of $4.2 per mBtu.
The rates, on net calorific value (NCV) basis dropped to $5.05 per mBtu for the six month period beginning April.
“Preliminary calculations based on average price in the gas hubs stated in the formula indicate that the rate from October is likely to be $4.16, or $4.17 per mBtu on NCV basis,” an oil ministry official said.
On gross calorific value (GCV) basis, the rate will be about $3.8 per mBtu compared with $4.66 currently.
“These are preliminary calculations and final numbers may vary by a few cents but the general trend is that prices will fall,” he said.
The October 1 price cut will be the second reduction in rates ever – the first being on April 1. While the cut will impact the revenue of producers such as ONGC and Reliance Industries, it will bring gains for users in the power and fertiliser sector in the form of lower feedstock cost.
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