2 weeks Ago By PTI
India's top oil and gas producer Oil and Natural Gas Corporation Ltd. has seen a drop in natural gas production from aging fields that supply CNG and piped cooking gas, resulting in supply reductions for city gas distributors like IGL and MGL, officials said.ONCG is offsetting the natural decline in output from ageing gas fields by drilling new wells.
However, gas from these new wells is sold at a higher price to cover the added costs, officials said.Natural gas extracted from the ground and seabed is converted into CNG for vehicles and used as cooking fuel when piped to households. Gas from fields allocated to ONGC on a nomination basis is priced by the government and referred to as APM gas.
This APM gas serves as the feedstock for city gas distributors.APM gas is priced at 10% of the monthly average rate of the crude oil basket India imports for its energy needs. However, the price is capped with a floor of $4 per million British thermal units and a ceiling of $6.
75.Gas from new wells drilled by ONGC in the same nomination fields is priced at 12% of the Indian crude oil basket.Officials said ONGC sells that APM gas to state-owned GAIL (India) Ltd.
, which makes onward supplies to city gas retailers like Indraprastha Gas Ltd. and Mahanagar Gas Ltd.The APM gas is currently priced at $6.
75 per MMBtu.With production falling, GAIL intimated the city gas retailers of up to 20% cut in APM gas supplies effective April 16. The lost volumes were made good by supply of new well gas, they said.
This month, ONGC added about 3 million standard cubic metres per day of new well gas for supplies to city gas companies. This made up for an almost equivalent decline in lower priced APM gas production.With this, ONGC's new well gas supplies have almost doubled to 6.
8 mmscmd.Officials said of the 22-23 mmscmd of APM gas production of ONGC coming to Hazira in Gujarat, 4 mmscmd goes to fertilizer companies for production of urea, 1.1 mmscmd is supplied to industries in Agra as per a Supreme Court order and 1.
56 mmscmd is meant for the Bawana power plant in Delhi.About 10 mmscmd of that gas is supplied to city gas companies at USD 6.75 per MMBtu rate.
City gas firms also get 6.8 mmscmd of new well gas, which is priced at almost USD 8 per MMBtu.The difference will further narrow next month, when rates are expected to be revised lower in line with declining oil prices.
APM gas is declining at the rate of 9-10% annually as recovery from old and ageing fields falls. In the last one year, APM gas supplies to city gas retailers have been cut by almost 50%.With the latest cut, the APM gas now meets about 34% of the total city gas requirement, down from 51% previously.
Earlier this week, IGL, the firm that retails CNG to automobiles and piped cooking gas to households in the national capital and adjoining cities, in a stock exchange filing stated that it gets 'domestic gas allocation for meeting the requirement of piped natural gas (to household kitchens) and CNG sales volumes at the pricing fixed by the government (presently at USD 6.75 per MMbtu).'"Based on communication received by the company from GAIL (India) (the nodal agency for domestic gas allocation), this is to inform that there has been a reduction in domestic gas allocation to the company effective from April 16, 2025.
The revised domestic gas allocation to the company is approximately 20% lesser than previous allocation," IGL said, adding that it has been allocated an additional 125% of the reduction in domestic gas volumes as New Well Gas (NWG), which is priced at 12 per cent of Indian Crude Basket. This, it said, is expected to impact the profitability of the company.MGL, the city gas retailer in Mumbai, said as per Policy Guideline dated August 10, 2022, issued by the Ministry of Petroleum and Natural Gas, domestically produced Administrative Price Mechanisms (APM) natural gas is to be allocated to City Gas Distribution (CGD) companies for priority segments, specifically domestic Piped Natural Gas supplies (PNG) to household kitchens for cooking and CNG (transport fuel).
The policy states that the supply of domestic gas to CGD entities will be made only up to the quantity available and allocated to GAIL for these segments.'In line with this policy, the company was allocated APM natural gas for Domestic PNG and CNG (Transport) based on APM gas availability. Allocation of APM to the company has been reduced by 18%, effective April 16, 2025, compared to the previous fortnight APM allocation,' MGL said.
'Reduction of APM volume has been replaced with New Well/Well Intervention gas (NWG). This will have an adverse impact on the profitability, however, the company is in the process of exploring all measures to mitigate the impact,' it said.Adani Total Gas Ltd, the equal joint venture of Adani Group and TotalEnergies of France, said it has been informed by GAIL 'for a reduction of APM gas allocation by 15%'.
'This lower allocation of APM gas is being replaced with New Well Gas,' it said.'However, the higher-priced NWG and lower APM gas allocation will have an adverse impact on the profitability of the company. The company is exploring all measures to mitigate the impact,' it added.
The cut in APM gas allocation translates into higher input costs for CGD companies, which could result in another CNG price hike by the companies.Sehul Bhatt, director-research at Crisil Intelligence, said, the reduction in allocation of APM gas for CNG will likely prompt CNG players to hike prices by Rs 1-2 per kg to maintain their margins. 'The latest reduction takes the cumulative reduction in allocation since the beginning of last fiscal to 45% amid multiple revisions.
Over this period, while most players have increased retail CNG prices by Rs 2-5 per kg, some have absorbed part of the hike to maintain volume growth despite the dent on margins.' Coal India Arm SECL Enters Into Rs 7,040-Crore Pact With TMC Mineral Resources. Read more on Business by NDTV Profit.
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