Revised Domestic Gas Pricing Guidelines

7th April, 2023 Economy

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Context

The Union Cabinet approved revised domestic gas pricing guidelines.
This is a move to ensure stable pricing in the regime and provide adequate protection to producers from adverse market fluctuation.

Present Rules

Currently, domestic gas prices are fixed every six months based on prices at four gas trading hubs - Henry Hub, Albena, National Balancing Point (Britain) and Russia.
The government said the pricing method based on the four gas hubs had a significant time lag and very high volatility.

So, the need for this reform was felt

New Rules

Natural gas produced from legacy old fields, known as APM gas, will now be linked to crude oil price instead of gas prices in surplus nations such as the US, Canada and Russia.
Now, gas price, instead of international hub gas price, has been linked to imported crude. And price of domestic gas will be 10% of international price of Indian crude basket, to be notified monthly.
In short, the price of natural gas will be 10 percent of the monthly average of the Indian crude basket.
The floor price has been set at $4/mmBtu (Metric Million British Thermal Unit), and the ceiling has been fixed at $6.50/mmBtu. The prices will be reset every month, and these gas pricing norms will continue for two years, instead of six months as per the current practice.

The revised guidelines make prices linked to crude, which is a practice now followed in most industry contracts, is more relevant to our consumption basket and has deeper liquidity in global trading markets, on a real-time basis.

Applicability

The guidelines will be applicable to the gas produced from nomination fields of ONGC/OIL, new exploration license policy blocks (NELP) and pre-NELP blocks. The new guidelines will come into force from 8^th

Benefits of the move

This will make piped natural gas (PNG) cheaper by 10 percent and lower the cost of compressed natural gas (CNG) by 6 per cent to 9 per cent.
The move will ensure stable pricing in the regime and provide adequate protection to producers from adverse market fluctuation.
The reforms will lead to a significant decrease in prices of Piped Natural Gas (PNG) for households and Compressed Natural Gas (CNG) for transport.
The reduced prices shall also lower the fertilizer subsidy burden and help the domestic power sector.
The revised pricing guidelines will also promote a lower carbon footprint through the growth of a gas-based economy.
This will also provide incentives for enhancing production.

With this announcement, consumers can expect a drop in the prices of CNG and PNG in the coming days. This decision will also bring relief to industries dependent on natural gas as it will reduce their input costs.

READ:

HELP: https://www.iasgyan.in/daily-current-affairs/hydrocarbon-exploration-and-licensing-policy-help

NATURAL GAS RESERVES: https://www.iasgyan.in/blogs/natural-gas-reserves-india-and-the-world

ONE NATION-ONE GAS GRID: https://www.iasgyan.in/ig-uploads/pdf/rstv41.pdf

PRACTICE QUESTION

Q. Which of the following statements are incorrect in reference to Natural Gas?

a) Wet Natural Gas is almost completely Methane.

b) Dry Natural Gas contains Ethan and Butane and hence Methane content is lower.

c) Natural Gas is a potent greenhouse gas.

d) Often natural gases contain substantial quantities of hydrogen sulfide or other organic sulfur compounds. In this case, the gas is known as sour gas.

1. a and b

2. b and d

3. a, c and d.

4. None of the above.

Correct Answer: Option 1

Explanations, in the links given.

NATURAL GAS RESERVES: https://www.iasgyan.in/blogs/natural-gas-reserves-india-and-the-world

ONE NATION-ONE GAS GRID: https://www.iasgyan.in/ig-uploads/pdf/rstv41.pdf