NATURAL GAS
1. Context
The government announced that domestically produced natural gas would be priced at $3.82 per million British thermal units (mmBtu) on a gross calorific value (GCV) basis for the second half of the fiscal year 2015-16 that is from October 2015 to March 2016 end.
This is a reduction of 18 per cent of prevailing prices, which came into effect on April 1, 2023.
2. Key Points
- Prices of locally produced natural gas are revised every six months as part of a new system of gas pricing initiated in October 2014.
- As such, this is a scheduled price revision and is in line with the fall in market prices of natural gas across the world.
- According to the new formula, domestic prices are a function of the prices of locally produced gas in four key markets of the world: National Balancing Point (UK), Henry Hub (US), Alberta Hub (US), Alberta Hub (Canada) and Federal Tariff of the Russian government.
3. Prices in India
- Indian prices are a weighted average of the four main markets.
- The volume of gas consumed in the corresponding markets weighs the prices.
- As such, Indian prices are not the same as those in any one market.
- However, the bi-annual revision ensures that Indian prices move in sync with global benchmarks.
4. Lowest prices
- Consumers of natural gas, including common people, will gain from the cheaper availability of compressed natural gas (CNG) and piped natural gas (PNG).
- According to India Ratings and Research, the benefit from reduced prices will be partly offset by the nearly 6 per cent depreciation of the rupee over April-September 2015.
- Even so, the net impact of reduced domestic gas prices, in rupee terms, would range between 11 per cent and 16 per cent.
- The move is likely to result in a cut of Rs 2.1-2.3/scm (Standard cubic metre) in PNG prices and a Rs 2.8-3.0/kg reduction in CNG prices. Retail prices of both CNG and PNG were cut.
- Companies in the business of gas distribution will benefit too.
- Shares of these companies rose on Wednesday Indraprastha Gas was up 3.7 per cent, Gujarat Gas gained 2.76 per cent, Gujarat State Petronet 1.42 per cent and Petronet LNG 1.16 per cent on the BSE.
5. Impact of lower prices
- The impact on government finances is likely to be mixed. The government will gain due to a reduction in the subsidy burden on account of urea but will lose out on income from state-owned producers of gas.
- Producers of domestic gas like ONGC Ltd, Oil India Ltd and Reliance Industries Ltd will be impacted adversely.
- India Ratings and Research estimate that ONGC will see its revenues decline by Rs 10.8 billion-11.5 billion and Oil by Rs 1.2 billion-1.3 billion.
For Prelims
| For Prelims: Natural Gas, CNG, PNG, ONGC |
Previous Year Questions
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1. Consider the following statements: (UPSC 2013)
1. Natural gas occurs in the Gondwana beds.
2. Mica occurs in abundance in Kodarma.
3. Dharwars are famous for petroleum.
Which of the statements given above is/are correct?
A. 1 and 2 B. 2 only C. 2 and 3 D. None
Answer: B
2. Consider the following statements: (UPSC 2019)
1. Petroleum and Natural Gas Regulatory Board (PNGRB) is the first regulatory body set up by the Government of India.
2. One of the tasks of PNGRB is to ensure competitive markets for gas.
3. Appeals against the decisions of PNGRB go before the Appellate Tribunals for Electricity. Which of the statements given above are correct?
A. 1 and 2 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3
Answer: B
3. In the context of proposals to the use of hydrogen-enriched CNG (H-CNG) as fuel for buses in public transport, consider the following statements: (UPSC 2019)
1. The main advantage of the use of H-CNG is the elimination of carbon monoxide emissions. 2. H-CNG as a fuel reduces carbon dioxide and hydrocarbon emissions.
3. Hydrogen up to one-fifth by volume can be blended with CNG as fuel for buses.
4. H-CNG makes the fuel less expensive than CNG.
Which of the statements given above is/are correct?
A. 1 only B. 2 and 3 only C. 4 only D. 1, 2, 3 and 4
Answer: B
4. Full form of CNG is _______. (HP JBT TET 2017)
A. Combined Natural Gas
B. Compressed Natural Gas
C. Clean Natural Gas
D. Carbon Natural Gas
Answer: B
5. ONGC ______ is a subsidiary of the Indian public sector enterprise, Oil and Natural Gas Corporation. (SSC CPO 2020)
A. Videsh
B. Vinesh
C. Vighnesh
D. Vishesh
Answer: A
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Source: The Indian Express
