Oil producers such as ONGC,
, , and BP have been clamouring for higher prices as they believe low prices discourage investments in new gas production. For ONGC, the current price of $1.79 per mmBtu is way below its average gas production cost of $3.75 per mmBtu. produces most of the country’s gas output.
A drop in price for gas from difficult fields will hurt RIL and BP that have recently started production from their deep sea fields in the KG Basin. ONGC also has small production from a difficult field.
Lower prices, however, keep costs low for gas-consuming homes, factories and vehicles. It also helps keep fertilizer and power subsidies low for the government.
Domestic natural gas price, which is derived from a government-set formula that factors in rates from some of the key gas markets in the world, is applicable to most locally-produced gas. Prices for gas from difficult fields is linked to alternative fuels.
Both prices are revised every six months. The new rates will be applicable until the end of September.