The formula driven bi-annual domestic natural gas prices are likely to double from October 1 from the present $1.79 per mBtu (million British thermal unit) following a spike in prices at the benchmark global hubs, analysts said.

“Domestic gas prices are expected to almost double in the next revision owing to increase in prices at various international hubs,” rating agency Icra said in a research note.

For the first half of the current fiscal, the price was notified at $1.79/mBtu (GCV basis), the lowest since the introduction of the modified Rangarajan formula.

However, the upstream players were making losses at such low prices..

The current domestic prices are the lowest since 2014, when the nation began to link the price of locally produced gas from old fields to a formula tied to global benchmarks, including Henry Hub, Alberta gas, NBP and Russian gas.

Low natural gas prices affect the earnings of producers Oil and Natural Gas Corp and Oil India Ltd.

Asia’s spot LNG prices have soared to multi-year summer highs owing to strong regional demand and surging prices in European gas hubs and have exceeded Rasgas term LNG price significantly. Henry hub prices have risen to $4.2/ mbtu levels in August 2021 from $2.4/ mbtu in April 2021 owing to strong exports and heat waves in the US.

BPCL doubts

Fitch Ratings on Monday said uncertainty over the bidder consortiums and process complexity, including valuation, may lead to potential delays in privatisation of India’s second-largest fuel retailer, Bharat Petroleum Corporation Ltd (BPCL).

Affirming BPCL’s rating at ‘BBB-’ with a negative outlook, Fitch said it continues to treat the potential divestment of the company by the Indian government as an event risk.

“We believe the risks of further Covid-19 waves and global oil and gas companies’ increased focus on energy transition lead to additional uncertainty over the timing and valuation of potentially large acquisitions in the sector,” it said. Fitch said it will review the ratings once significant progress is made.

The government is selling its entire 52.98 per cent stake in BPCL for which three expressions of interest, including one from Vedanta Group, have been received.