Sunday, March 26, 2023

On September 30, 2022, the Ministry of Petroleum and Natural Gas increased the price of natural gas by 40% to an all-time high of $8.57/mmbtu (metric million British thermal unit) for the second half of the current fiscal, based on the administered pricing formula1 (APM).

This followed a 110% increase already applicable for the first half. The APM gas is supplied largely to compressed natural gas (CNG) and domestic piped natural gas (PNG) consumers, who contribute to 50% and 10% of city gas volume, respectively.

The price for the balance 40% of city gas volume – supplied to industries – have also surged and remain elevated amid the protracted Russia-Ukraine conflict. Over the past 12 months, the average price of liquefied natural gas (LNG) contracts, benchmarked against crude oil prices, rose ~45% to $14.5-15.0 per mmbtu, while spot LNG prices have surged ~150% to $38-40 per mmbtu.

Expected sustenance of these high gas prices will moderate India’s city gas consumption volume growth to 8-10% this fiscal versus an earlier projection of 20-25%2.

CRISIL Ratings’ analysis of five large city gas distributors3, which account for almost 70% of the industry’s volume, indicates as much.