India mulls lowering gas price by 10% as global energy costs plunge
By RAKTEEM KATAKEY
Bloomberg
India will probably cut the price of locally produced natural gas starting next month as global energy costs slump, a government official said.
Prices will probably be lowered to $5.02/MMBtu, the official told reporters Thursday in New Delhi, asking not to be identified because of rules. The price is based on the net heat value of gas and will be lower at a gross value, he said, declining to give a specific figure.
Domestic prices, due for review April 1, were boosted by one-third to $5.6/MMBtu on Nov. 1.
The government continues to work on a plan to allow a premium for gas produced from deep-water fields, the official said. The premium will be applicable only to gas discovered and produced after November 2014 and will be a percentage, rather than a specific number. The percentage may vary for different depths of fields, according to the official.
The cost of overseas liquefied natural gas (LNG) for India has dropped to about $9/MMBtu, curbing the government’s scope to increase rates for local producers, Oil Minister Dharmendra Pradhan said in an interview last month.
LNG is about $7/MMBtu and it costs about $2 per unit more to ship it to India, Pradhan said. The difference between the price of LNG -- gas chilled to a liquid for ease of transport by ships -- and local prices is too small, he said.
While Prime Minister Narendra Modi has made boosting energy supplies a priority to curb blackouts, explorers such as Reliance Industries and BP argue higher domestic gas prices are needed to spur investment and raise output. BP last year wrote off $770 million from an undersea Indian gas block, while Canada’s Niko Resources is seeking to sell its stake in the project because of uncertainty about the long-term pricing outlook in India.
India in October approved a pricing formula for domestic gas. The price is an average of rates in the US, Canada, UK and Russia.
The prospective cut in local gas prices comes amid a plunge of 50% in crude oil over the past year. Brent for May settlement dropped as much as $1.26, or 2.1%, to $57.93/bbl on the London-based ICE Futures Europe exchange on Friday. LNG prices are typically linked to oil.
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