India Raises Deepwater Gas Price to Boost Offshore Production
India has adjusted its natural gas pricing structure to balance production incentives with consumer costs. The government raised the ceiling price for gas from deepwater and other challenging fields to $9.89 per million British thermal units (MMBtu) for the period from October 1, 2023, to March 31, 2024. This is an increase from the previous ceiling of $8.90. The move aims to encourage investment in technically demanding offshore gas resources, where production costs are typically higher than in mature onshore and legacy fields.
For gas produced by state-run Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) from their legacy fields, the price remains capped at $7 per MMBtu. However, new wells in these fields can fetch up to $7.70 per MMBtu, a 10 percent premium over the prevailing APM gas price. This incentive is designed to spur additional investment in developing new reserves and boosting production.
The higher price for deepwater gas applies to fields like the KG-D6 block, operated by Reliance Industries and BP. These areas enjoy marketing and pricing freedom under government policy but are subject to a ceiling price. The separate pricing mechanisms for different gas sources reflect India's strategy to foster investment in challenging hydrocarbon resources while maintaining affordability for key sectors like fertiliser production, power generation, and city gas distribution.