India raises deepwater gas price cap to $9.89 for difficult fields; Reliance-BP's KG-D6 in favor of

The government raised the price ceiling for natural gas produced from troubled fields such as Reliance Industries and BP’s KG-D6 block to $9.89 per million British thermal units (MMBtu) for six months starting October 1 from $8.90 earlier, leaving the ceiling for gas produced from state-run ONGC and Oil India Ltdtu’s older fields at $7.

The new cap for gas from deepwater, ultradeepwater and high-pressure, high-temperature discoveries applies for the period from October 1, 2026 to March 31, 2027, according to an announcement by the Petroleum Planning and Analysis Center of the Ministry of Petroleum.

Gas produced from such difficult areas has the freedom to market and set prices according to government policy, but is subject to a cap announced by the government.

A higher cap could provide some relief to producers developing more technically demanding offshore gas resources in India, where production costs are generally higher than those of mature offshore and older fields.

For gas produced by ONGC and OIL from their nomination fields, the government announced an APM price of $11.22 per MMBtu for October, but the actual price remains capped at $7 per MMBtu under the PPAC.

The APM gas price applies to gas produced from legacy fields of state-owned ONGC and OIL and is used by priority sectors including city gas distribution, fertilizers and electricity.

For gas produced from ONGC and OIL’s new wells in their nomination blocks, the government allows a 10% premium over the prevailing APM gas price, subject to the applicable ceiling. With the APM price for October capped at $7 per MMBtu, the effective gas price from new wells would be up to $7.70 per MMBtu.

The higher price of gas from new wells aims to incentivize ONGC and OIL to invest in developing additional reserves and commissioning new production while maintaining the existing cap on gas from their older, legacy fields.

India operates separate pricing mechanisms for gas from older fields of national oil companies and newer discoveries in difficult areas.

In April 2023, the government moved gas prices from original fields to a formula linked to 10 percent of the monthly average oil import price, subject to a floor and ceiling. The cap was originally set at $6.50 per MMBtu and was subsequently raised by $0.25 per year after a two-year freeze.

The APM cap was raised to $6.75 per MMBtu from April 2025 and moved to $7 this April.

Prior to the 2023 reform, APM gas prices were revised every six months based on international gas benchmarks and fluctuated wildly, ranging from $1.79 per MMBtu in 2021 to $8.57 for the six months ending March 2023.

A separate regime for deepwater and other difficult fields was introduced to encourage investment in India’s technically demanding hydrocarbon resources by allowing producers greater pricing and marketing flexibility.

Reliance Industries and its partner BP are producing gas from the KG-D6 block in the Krishna-Godavari basin, one of India’s key deepwater gas-producing areas.

Natural gas is a key raw material for fertilizer production and is also used in electricity generation and by city gas distributors to supply compressed natural gas (CNG) and piped natural gas (PNG). Changes in domestic gas prices can therefore affect input costs across these sectors.

Disclaimer: This story was published from the agency’s news feed without editing the text. Only the title was changed.

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