Increase in Gas price has little effect on CNG and PNG rates

As the majority of the gas for these sectors comes from state-run ONGC and Oil India nomination fields, where prices are capped at $6.5 per million British thermal units (mmBtu), analysts say the recent increase in natural gas prices is unlikely to exert any significant upward pressure on domestic compressed natural gas (CNG) or piped natural gas (PNG). The nomination-field petrol prices are restricted to $6.5 per million British thermal units (mmBtu) for a period of two years, despite the recent increase in crude oil prices brought on by Organization of the Petroleum Exporting Countries supply restrictions.

“The nominated fields provide the bulk of the gas for CNG and PNG. Even if the price of Indian crude oil rises more in the near future, customers of CNG and PNG shouldn’t see significant price increases, according to vice-president of ICRA, a credit rating firm. The price of domestic natural gas was raised by the government on Sunday from $8.60 to $9.20 per metric million British thermal unit (mmBtu) for the month of October.

The cost of petrol generated by ONGC and OIL from their respective nomination fields remained constant at $6.5 mmBtu, nevertheless. CNG prices would rise by 4.5–4.7 rupees per kilogram for every $1 increase in domestic petrol prices, according to vice-president of ICRA. This will only occur, though, if there is a complete pass through to consumers, which is improbable.

The system for calculating natural gas prices was amended by the government earlier in April, and as part of that revision, it began to take into account the pricing of the Indian crude basket. Currently, petrol prices are 10% more than the average cost of Indian crude over the previous month. The government also reduced the cost of gas from deep-sea and high-pressure temperature zones from $12.12 mmBtu to $9.96 mmBtu for the period from October through March 2024.

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