Oil and Natural Gas Corporation (ONGC) has witnessed a decline in production of low-cost Administrative Price Mechanism (APM) gas from ageing fields, prompting state-owned Gas Authority of India Ltd (GAIL) to cut supply to city gas distributors such as Indraprastha Gas Ltd (IGL), Mahanagar Gas Ltd (MGL), and Adani Total Gas Ltd by up to twenty per cent.

APM gas, allocated to ONGC on a nomination basis and priced at ten per cent of the Indian crude oil basket (with a floor of USD four and a ceiling of USD 6.75 per million British thermal units), currently meets thirty-four per cent of total city gas demand, down from fifty-one per cent.

To compensate, GAIL has replaced the shortfall with New Well Gas, priced at twelve per cent of the crude basket, averaging close to USD 8 per million British thermal units. ONGC’s supply of this higher-priced gas has doubled to 6.8 million standard cubic metres per day.

This shift is expected to impact the profitability of CGD firms, many of whom have already announced or are considering price hikes to maintain margins.

Source: Press Trust of India