Govt cuts natural gas prices to $3.06 per mmBtu

Amid fall in global prices, the government has reduced the cost of locally produced gas by about 20% for the six months period starting 1 April 2016 compared with previous six months period. Prices will be cut to $3.06 per million British thermal units (mmBtu) in the first half of the next fiscal year, on gross heat value basis. It will cost about $3.4 per mmBtu on a net heat value basis compared with $4.24 per mmBtu in the period between October 2015 to March 2016. The move will benefit fertiliser, power and steel companies who heavily rely on natural gas as it will ease the working capital burden.

During the revision in October last year, gas price had reduced by 18% to $3.82 per unit from $4.66 per, reflecting the declining trend in the benchmark markets. On net calorific value (NCV) basis, the new gas price for October 1, 2015 to March 31, 2016 came to $4.24 per mmBtu as compared to $5.18 previously.

As per the new gas pricing formula approved by the NDA-government in October 2014, gas prices are to be revised every six months and calculated based on a volume weighted average of rates in gas surplus nations of the US, Canada and Russia, based on the 12-month trailing average price with a lag of three months.