0

0

0

0

0

0

0

0

0

India hikes domestic natural gas prices, here's why

Mini

Gas prices have risen globally to multi-year highs as the market first reeled from the impact of the pandemic and now can't keep up with the rising global demand. While this is a normal trend for commodities, natural gas supplies are the worst hit. In India, we have already seen over 60 percent hike in natural gas prices. Elsewhere in Asia, importers are paying record prices for gas this year. 

India hikes domestic natural gas prices, here's why
The government has raised the prices of natural gas by 62 percent under the domestic price regime, for the first time after April 2019. The price rise will be different for different natural gas fields and will be applicable from October 1 to March 31.
Natural gas deposits are found on land, while some are offshore, some deep under the ocean floor. Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) produce natural gas from offshore fields. And the price paid to them will increase to $2.90 million British thermal units (mmBtu).
The prices for deep-sea field producers -- such as Reliance Industries and its partner BP Plc -- will rise from $3.62 to $6.13 per mmBtu. This price range is the same for fields in ultra-deepwater and high pressure-high temperature areas.
How will it affect consumers?
Natural gas is used for producing compressed natural gas (CNG). CNG is, in turn, used to fuel automobiles and cooking gas in households. So as the prices rise, the gas price will likely rise by 10-11 percent in Delhi and Mumbai.
The cost of generating electricity will also increase. However, consumers will not be affected as the share of power produced from natural gas is very low.
The cost of producing fertilisers will also go up. But it will not have a visible impact as government subsidies will prevent a price hike.
Why the price rise?
Gas prices have risen globally to multi-year highs as the market first reeled from the impact of the COVID-19 pandemic and now can't keep up with the rising global demand. While this is a normal trend for commodities, natural gas supplies are the worst hit.
After the COVID-19 outbreak, companies did not maintain their oil and gas fields as well as they could have. As a result, now the world is alarmingly short of supply of natural gas as there isn't enough gas to fuel the post-pandemic recovery and refill depleting stocks.
While the crisis is global, Europe seems to be the worst hit by several factors, aggravating the crisis all the more. One, it endured colder winters last year with people heating their homes longer than usual.
Two, fierce competition between European, Asian, and Russian buyers is further giving a boost to prices.
Three, Europe is trying to curb domestic gas production. The Netherlands, Europe’s top gas producer, had begun fading out its fields in 2018. Now, governments in the zone are sending out warnings of blackouts and shutting down factories.
Moreover, Europe is running out of other energy sources too. Coal supplies are dwindling, wind production was bad due to calmer weather, and nuclear plants are being phased out. The crunch is expected to get worse as temperatures drop following which people would need heat to keep their houses warm.
No wonder gas prices surged in Europe by 500 percent in 2020 and continue to hit record highs.
Therefore, even if winters in Northern Hemisphere are normal this year, the prices will further climb and this will have a bad spillover effect.
China, which is already dealing with Evergrande fallout, will hike the prices of products like glass, ceramics, cement. China is also the world's biggest buyer of natural gas.
Brazil, which is already reeling with several natural disasters, will have to face costlier power bills. Pakistan and Bangladesh, which cannot afford higher prices, will run out of power.
In India, we have already seen over 60 percent hike in natural gas prices. Elsewhere in Asia, importers are paying record prices for gas this year.
next story