India sets domestic natural gas prices lower for June

India's oil ministry has set the June domestic natural gas price at $7.58/mn Btu, in line with a new mechanism that sets prices at 10pc of the monthly average of the Indian crude basket.

This marks a 8.3pc fall from May when the oil ministry set natural gas prices at $8.27/mn Btu.

The government approved a revised natural gas pricing mechanism in April, under which domestic gas prices would be revised every month. Prices were previously revised every six months.

Under the mechanism, natural gas prices will be benchmarked to 10pc of the monthly average of the Indian crude basket, which is a weighted average of Dubai and Oman sour grades and Brent sweet crude prices.

But the price for conventional gas produced by state-controlled oil marketing companies such as ONGC and Oil India (OIL) has been set at $6.50/mn Btu, a ceiling price that will remain in place for the next two years to ensure a stable pricing regime for domestic gas consumers. This has been done also to provide adequate protection to producers from adverse market fluctuations and incentivise more output, the oil ministry had previously said.

Gas produced from new wells or well interventions in the nomination fields of ONGC and OIL will be allowed a premium of 20pc to India's administered price mechanism (APM), details of which are yet to be released. The APM fixes prices of gas sold by state-controlled producers and sets a pricing floor for the industry.

Gas produced from deepwater, ultra-deepwater, high-temperature and high-pressure areas will be priced at $12.12/mn Btu until 30 September.

India's natural gas production was at 2.7bn m³ in April, largely unchanged from a year earlier. Output from ONGC and OIL was at 1.6bn m³ and 237mn m³ respectively, while private-sector companies produced 901mn m³, oil ministry data show. Natural gas consumption and imports totalled 4.9bn m³ and 2.21bn m³, respectively.

The government has outlined plans to make the country a gas-based economy, with the share of natural gas in its primary energy mix targeted to rise to 15pc by 2030 from around 6pc in 2022. It also aims to expand domestic gas consumption as it tries to move away from more polluting fuels like coal, in its efforts to cut carbon emissions by 1bn t by 2030 from 2005 levels, progressing towards net zero emissions by 2070.

By Rituparna Ghosh