Government raises deepwater gas price cap to $9.89/MMBtu; APM gas cap at $7

The new ceiling for gas from deep, ultra-deep and high-pressure, high-temperature discoveries is valid for the period from October 1, 2026 to March 31, 2027, according to a notification by the Petroleum Planning and Analysis Cell (PPAC) of the Ministry of Petroleum. | Photo credit: Getty Images/iStockphoto

The government raised the ceiling price of natural gas produced from difficult fields such as the KG-D6 block by Reliance Industries and BP to $9.89 per million British thermal units (MMBtu) for six months starting October 1, 2026 from $8.90 earlier, while retaining the ceiling for natural gas produced from the original fields of state-owned fields (OIL and OONG Natural Ga7) by state-owned OIL and OONG Natural Ga7 USD Limited Corporation for MMBtu.

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 Administered Price Mechanism (APM) price of $11.22 per MMBtu for October, but the actual price remains capped at $7 per MMBtu, according to the PPAC.

The APM gas price applies to gas produced from the original fields of the two state-owned companies and is used by priority sectors including city gas distribution, fertilizer 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% 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 in April 2026.

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

Published – October 4, 2026 12:30 PM IST