India’s gas price to hit sub $5

New Delhi: The new natural gas price of $5.61, which is already among the lowest in Asia Pacific, is likely to drop to around $5 per unit in three years due to the variables included in the formula, Goldman Sachs has said. “While the Indian government introduced a new gas price regime in October, we believe clear direction is needed on gas pricing for higher-cost projects, such as deepwater, to induce more E&P capex,” the global financial major said in a report.

Stating that Indian prices for new projects are among the lowest in Asia Pacific, Goldman said China pays explorers $11.9 per mmBtu (million British Thermal Unit) rate for new projects while Indonesia and the Philippines price the fuel at $11 and $10.5 respectively.Gas from offshore fields in Myanmar, where Indian firms ONGC and GAIL have stake, are sold to China for $7.72. Thailand prices gas from new projects at $8.2 per mmBtu. The only nations with lower rates are Vietnam ($5.2) and Malaysia ($5), it said.

“We also find that under the new pricing formula, the price of currently produced gas will gradually fall to $5 per mmBtu over the next three years from current $5.61 per mmBtu, implying falling margins as costs rise,” Goldman said.The government had last month approved a new formula that priced all domestic gas at weigh-ted average of rates prev-alent in gas-surplus econ-omies of the United States, Mexico, Canada and Russia.