Latest news with #AdministeredPriceMechanism
News18
3 days ago
- Business
- News18
India's Oil & Gas Exploration: Reforms, Big Discoveries Pave Way For Viksit Bharat
Last Updated: As India builds its energy future, the last few years reflect a strategic, tech-forward, and investor-friendly pivot in upstream oil and gas India's exploration and production (E&P) sector has undergone a transformative journey in the past three-four years, getting a robust foundation built on improved data access, investor confidence, cutting-edge technology, and better access to capital. The government's decision to slash 'no-go" areas by a staggering 99% in 2022 opened up over 1 million square kilometers of India's Exclusive Economic Zone (EEZ) for oil and gas exploration, which marked a bold step towards energy security. In a landmark move in April 2023, the Centre revised the pricing mechanism for domestically produced natural gas. The new formula pegs prices to 10% of the monthly average of the Indian crude basket, updated every month. Additionally, new wells by ONGC and OIL are entitled to a 20% premium over the APM (Administered Price Mechanism) rate, which came as a shot in the arm for India's upstream sector. Backing this policy thrust is a Rs 3,200-crore drilling campaign launched in 2024, targeting four offshore stratigraphic wells across the Mahanadi, Bengal, Saurashtra, and Andaman basins to map India's untapped petroleum potential. A look at several highlights of the journey: KEY DISCOVERIES Oil India Limited (OIL) has made seven key discoveries, adding 18 MMTOE and over 2,700 MMSCM of gas reserves. Among the major basin-wise discoveries are: Mumbai Offshore Basin: Discoveries like Suryamani, Vajramani, Moti, Amrit show high initial production rates; Amrit alone holds 8.0 MMTOE of reserves. Mahanadi Basin: Konark and Utkal delivered major gas finds, with Konark accounting for 21 MMTOE. Cauvery Basin: The ultra-deepwater Chola-1 yielded 37.5 MMTOE, a standout discovery. Cambay Basin: Moderate oil and gas yields from PURN-1 and West Amod-1. In the east, post-2022 clearance from defence agencies, the Andaman offshore area was finally opened for E&P. Two wells have already been drilled in the region. A significant development in 2025 saw ONGC signing a Technical Services Agreement with bp, which will now serve as the technical partner for Mumbai High field. The goal: to stabilize declining production and achieve a 44% rise in oil output and 89% increase in gas production. As India builds its energy future, the last few years reflect a strategic, tech-forward, and investor-friendly pivot in upstream oil and gas. With a reformed regulatory landscape, landmark discoveries, and global interest reignited, the country is poised to unlock new hydrocarbon frontiers, laying the path for long-term energy resilience.
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Business Standard
4 days ago
- Business
- Business Standard
Mahanagar Gas top pick among CGDs, Gujarat Gas least preferred: Nomura
Nomura on CGDs: Japan-based brokerage Nomura has reiterated its bullish view on Mahanagar Gas Ltd (MGL), upgrading the stock to 'Buy' from 'Neutral' and naming it the top pick among city gas distributors (CGDs). The upgrade is driven by MGL's robust volume growth outlook, limited exposure to the volatile industrial and commercial (I&C) segment, and attractive valuation. The target price has also been raised to ₹1,680 from ₹1,345 earlier. 'We prefer Mahanagar Gas (MAHGL IN, Buy) due to its highest expected volume growth among peers, limited exposure to volatile industrial and commercial (I&C) segments, and attractive valuation compared to peers. MGL is also better placed than IGL on EV-related regulatory challenges, in our view,' said Bineet Banka, research analyst at Nomura, in a note dated June 16. In contrast, Nomura has maintained a 'Reduce' rating on Gujarat Gas Ltd (GGL), citing intense competition in the I&C space, subdued volume growth prospects, and constrained pricing power. The target price for GGL has been cut to ₹406 from ₹470. For Indraprastha Gas Ltd (IGL), Nomura retained a 'Neutral' rating, with a revised target price of ₹210, up from ₹199. On the bourses, around 10:15 AM, Mahanagar Gas was trading 1.68 per cent higher at ₹1,413; Indraprastha Gas was down 0.38 per cent at ₹211.45; and Gujarat Gas was trading 0.45 per cent higher at ₹480.40. While the recent 18-20 per cent cut in Administered Price Mechanism (APM) gas allocation has emerged as a short-term headwind for CGDs, Nomura noted that companies have already initiated moderate price hikes of over 2 per cent in both the compressed natural gas (CNG) and domestic piped natural gas (PNG) segments to offset the shortfall. Among the three key players, Indraprastha Gas Ltd (IGL) has been most affected due to its high CNG exposure (about 73 per cent of sales). MGL, with a relatively balanced portfolio, is seen managing the disruption more effectively. GGL, on the other hand, has limited exposure (about 44 per cent) to the priority sectors impacted by APM cuts but faces its own set of challenges. Its considerable presence in the I&C segment (about 56 per cent of total volumes) is under pressure from low-cost propane, especially in Gujarat's Morbi ceramics cluster. With CNG adoption in new vehicles already high at around 31 per cent in the state—compared to 22 per cent in Delhi and Maharashtra—GGL also has limited headroom for growth in the CNG business. Catch Stock Market Updates Today LIVE State EV policies to weigh on CNG growth Nomura flagged policy developments around electric vehicles (EVs) as another important trend impacting the sector. While Delhi and Mumbai continue to tighten their EV policies to combat air pollution, MGL is seen as better positioned than IGL to navigate this transition. Mumbai's comparatively lower air pollution levels, combined with a policy focus that may initially target liquid fuels over CNG, could offer a temporary reprieve for MGL. Moreover, MGL's representation in the Maharashtra High Court-monitored EV committee indicates its proactive approach, with the management optimistic about CNG's role under the new state EV policy. Apart from that, a key catalyst across the sector, analysts said, could be the inclusion of natural gas under the Goods and Services Tax (GST) regime. Currently, gas is taxed under a patchwork of indirect levies like state VAT, central excise, and sales tax. Bringing gas under GST would streamline taxation, reduce cost burdens, and enable industrial customers to claim input tax credit—especially beneficial in price-sensitive regions like Morbi, where propane already enjoys GST benefits. Nomura believes GGL stands to gain the most from this reform, given its major I&C customer base. That said, Nomura prefers MGL for its superior volume outlook, low regulatory risk from EV policies, and attractive valuation. GGL is rated 'Reduce' due to demand headwinds in the I&C segment and a challenging competitive landscape, though GST inclusion remains a key upside risk.
Hindustan Times
05-06-2025
- Business
- Hindustan Times
Choose green energy, not gas, for power-hungry data centres
Data centres are the engine rooms of the global digital economy, which artificial intelligence (AI) is rapidly reshaping. Collectively, data centres form 'the cloud' that stores, processes and generates our precious information. But their insatiable appetite for energy is such that data-centre capacity is no longer measured in computing power, but rather in their energy consumption. This has profound implications for India's electricity demand and supply. The Union government has taken significant steps to bolster the data centre segment of the digital economy, granting it infrastructure status and encouraging local and international investment. Over the past decade, this has attracted investments estimated at $6.5 billion, generating an impressive $1.2 billion in revenue last year. The country is now home to 262 data centres and ranks seventh in the world, just behind France and Canada (264 each). India's data centre capacity is expected to grow exponentially from 1.4 gigawatts (GW) in 2024 to 9GW in 2030, and in doing so, it is likely to consume about 3% of India's electricity in 2030, up from less than 1% currently. The challenge is to meet such demands sustainably, and the answer lies in battery storage and renewable energy. While natural gas has been hailed as a cleaner alternative to coal, the energy crisis of 2022 raised questions about its viability. Domestic gas production meets only half of India's needs and cannot keep pace with surging demand from the residential, commercial and industrial sectors, which is expected to drive demand up by 60% by 2030, leading to a greater reliance on imports. The growing reliance on imports would expose data centres to volatile pricing and higher costs amid rising global tensions and trade wars, undermining the purported benefits of natural gas as a stable energy source. Meanwhile, battery costs and renewable energy tariffs have been falling. The latest tariffs for firm and dispatchable renewable energy, which provides a continuous power supply source, is ₹4.98-4.99, below the Central Energy Authority's median natural gas tariff of ₹5.4. Last month, India's domestic gas price cap was raised by 3.7%, from $6.50 to $6.75 per million British thermal units. It was the first rise since 2023, when the government reviewed the Administered Price Mechanism (APM) following the global energy crisis in 2022. With gas from old fields drying up, and new fields and imports exempt, the proportion of gas priced under the APM fell from 85% in 2020 to 64% last year, 'indicating a clear shift towards higher-priced gas as new volumes came online', according to the IEA. India will need to import more to bridge the demand gap as the amount of gas priced under the APM is likely to fall further, exposing more users to volatile spot market pricing. Switching data centres to gas at this critical juncture would be out of step for such an intrinsically innovative industry, ideally suited to lead the government's ambitious plan to install 500GW of renewable energy capacity by 2030. India has five major data-centre hubs: Mumbai (61), Hyderabad (33), Delhi NCR (31), Bangalore (31) and Chennai (30). Clustering is a feature of the industry globally. In India, however, such highly concentrated energy demand will further strain local power networks, given that an average data centre consumes as much power as an aluminium smelter or the equivalent of 100,000 homes. Conversely, these clusters are prime sites for renewable energy resources such as rooftop solar, battery plus energy storage systems (BESS) and local microgrids. Globally, renewables power half of the new data centre and India is no exception. For example, the colossal Yotta NM1 data centre near Mumbai, India's biggest, already gets half of its power from renewables, with a target of 70%. Government incentives have created a frenzy of activity in the energy storage sector. A key enabler is the Viability Gap Funding (VGF) scheme, which offers up to 30% support for capital expenditure to standalone BESS projects. In the first quarter of this year alone, Standalone ESS tenders reached 6.1GW, comprising 64% of all utility-scale energy storage tenders and exceeding the total capacity issued last year, according to a recent report by JMK Research and Analytics and IEEFA. The potential synergies here for the data centre sector are far more compelling than gas. India's rapid transformation into a digital economy has driven energy demand growth to 7% annually. Increasing internet penetration, mobile use, e-commerce, electric vehicles, data centres and AI will accelerate this demand in coming years, adding to the pressure on networks. Data centres are at the cutting edge of information technology and the AI revolution. It doesn't take AI to tell us they should be powered by the most advanced, efficient and economical technology available rather than a fossil fuel with volatile pricing and costly, unbuilt or nonexistent infrastructure. As battery storage grows cheaper and more accessible by the year, an investment in renewables backed by storage will pay dividends for decades. As India's data centres approach this crossroads, this is not the time to step on the gas. Vibhuti Garg is director, IEEFA-South Asia. The views expressed are personal.
Time of India
01-06-2025
- Business
- Time of India
Govt cuts APM gas price for first time in 2 years
For the first time in two years, the government has reduced the price of natural gas used for producing CNG for vehicles and cooking gas, reflecting a decline in benchmark rates. The price of natural gas from legacy fields allocated to state-owned ONGC without auction has been reduced from USD 6.75 to USD 6.41 per million British thermal units (mmBtu), according to a notification from the Oil Ministry's Petroleum Planning and Analysis Cell (PPAC). The reduction, which is the first since the government in April 2023 implemented a new formula to price such gas, will aid city gas retailers like Indraprastha Gas Ltd , Mahanagar Gas Ltd and Adani-Total Gas Ltd who had been reeling under cost pressures from rise in input cost. In April 2023, the Union Cabinet accepted an expert committee report to price on a monthly basis the gas from legacy fields, called APM gas, at 10 per cent of monthly average import price of crude oil with a floor of USD 4 and a cap of USD 6.5 per mmBtu. The cap price was to remain unchanged for two years and rise by USD 0.25 annually thereafter. In line with this, the cap rose to USD 6.75 per mmBtu in April. In the first two years, the price of gas using this formula ranged between USD 7.29 per mmBtu and USD 9.12 but the cap ensured that the rate were fixed at USD 6.50 per mmBtu. In April, the price according to this formula came to USD 7.26 per mmBtu but the final rate was USD 6.75 in line with higher cap. In May, the price came to USD 6.93 but was capped to USD 6.75 for consumers. Since there has been a fall in international oil prices in view of uncertain demand outlook, the Indian basket of crude oil averaged around USD 64 in May. Using this as a benchmark, the APM gas price came to USD 6.41 per mmBtu on gross calorific value (GCV) basis, according to PPAC. "For gas produced by Oil and Natural Gas Corporation/Oil India Ltd from their nomination fields, the APM price shall also be USD 6.41 per mmBtu on GCV basis" for the period June 1, 2025 to June 30, 2025, PPAC said. The fall in benchmark also means that the price of gas that ONGC produced from new wells in the APM fields would also come down. The government had allowed ONGC to charge 12 per cent of the oil price for the gas coming from new wells it drills. The higher price was to make up for the capex incurred in drilling new wells. As much as 5 million standard cubic meters per day of gas - or a 10th of all gas produced by ONGC - comes from new wells, according to industry sources. APM gas is one produced by state-owned firms Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) from fields that were given to them on nomination basis. This gas is the input that is used in the cooking gas piped to household kitchens as well as turned into CNG for running automobiles, making fertilizers and producing electricity. Prior to April 2023, the price of gas produced from fields covered under the Administered Price Mechanism (APM) regime -- which accounts for 70 per cent of domestic gas production -- was determined semi-annually based on a formula that benchmarked it to average international prices at four gas trading hubs. APM gas is provided to city gas distributors for supply to CNG and residential PNG segments, which together accounts for 60 per cent of their sales volume. Subsequent to the April 2023 decision, APM gas prices are revised on a monthly basis but subject to ceiling and floor price. The ceiling price now is USD 6.75 per mmBtu and will rise by another USD 0.25 per mmBtu in April next year. APM gas prices had seen wide fluctuations in the years running up to the April 2023 decision. From a low of USD 1.79 per mmBtu in 2021, to a high of USD 8.57 for the 6-month period ended March 2023. The rate for difficult fields like KG-D6 of Reliance Industries has been set at USD 10.04 per mmBtu for six months beginning April 1 as compared to USD 10.16 in the preceding six months period, according to PPAC.
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Business Standard
01-06-2025
- Business
- Business Standard
Govt cuts natural gas price for CNG, cooking use for first time in 2 yrs
For the first time in two years, the government has reduced the price of natural gas used for producing CNG for vehicles and cooking gas, reflecting a decline in benchmark rates. The price of natural gas from legacy fields allocated to state-owned ONGC without auction has been reduced from $6.75 to $6.41 per million British thermal units (mmBtu), according to a notification from the Oil Ministry's Petroleum Planning and Analysis Cell (PPAC). The reduction, which is the first since the government in April 2023 implemented a new formula to price such gas, will aid city gas retailers like Indraprastha Gas Ltd, Mahanagar Gas Ltd and Adani-Total Gas Ltd who had been reeling under cost pressures from rise in input cost. In April 2023, the Union Cabinet accepted an expert committee report to price on a monthly basis the gas from legacy fields, called APM gas, at 10 per cent of monthly average import price of crude oil with a floor of $4 and a cap of $6.5 per mmBtu. The cap price was to remain unchanged for two years and rise by $0.25 annually thereafter. In line with this, the cap rose to USD 6.75 per mmBtu in April. In the first two years, the price of gas using this formula ranged between USD 7.29 per mmBtu and USD 9.12 but the cap ensured that the rate were fixed at USD 6.50 per mmBtu. In April, the price according to this formula came to USD 7.26 per mmBtu but the final rate was USD 6.75 in line with higher cap. In May, the price came to USD 6.93 but was capped to USD 6.75 for consumers. Since there has been a fall in international oil prices in view of uncertain demand outlook, the Indian basket of crude oil averaged around USD 64 in May. Using this as a benchmark, the APM gas price came to USD 6.41 per mmBtu on gross calorific value (GCV) basis, according to PPAC. "For gas produced by Oil and Natural Gas Corporation/Oil India Ltd from their nomination fields, the APM price shall also be USD 6.41 per mmBtu on GCV basis" for the period June 1, 2025 to June 30, 2025, PPAC said. The fall in benchmark also means that the price of gas that ONGC produced from new wells in the APM fields would also come down. The government had allowed ONGC to charge 12 per cent of the oil price for the gas coming from new wells it drills. The higher price was to make up for the capex incurred in drilling new wells. As much as 5 million standard cubic meters per day of gas - or a 10th of all gas produced by ONGC - comes from new wells, according to industry sources. APM gas is one produced by state-owned firms Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) from fields that were given to them on nomination basis. This gas is the input that is used in the cooking gas piped to household kitchens as well as turned into CNG for running automobiles, making fertilizers and producing electricity. Prior to April 2023, the price of gas produced from fields covered under the Administered Price Mechanism (APM) regime -- which accounts for 70 per cent of domestic gas production -- was determined semi-annually based on a formula that benchmarked it to average international prices at four gas trading hubs. APM gas is provided to city gas distributors for supply to CNG and residential PNG segments, which together accounts for 60 per cent of their sales volume. Subsequent to the April 2023 decision, APM gas prices are revised on a monthly basis but subject to ceiling and floor price. The ceiling price now is USD 6.75 per mmBtu and will rise by another USD 0.25 per mmBtu in April next year. APM gas prices had seen wide fluctuations in the years running up to the April 2023 decision. From a low of USD 1.79 per mmBtu in 2021, to a high of USD 8.57 for the 6-month period ended March 2023. The rate for difficult fields like KG-D6 of Reliance Industries has been set at USD 10.04 per mmBtu for six months beginning April 1 as compared to USD 10.16 in the preceding six months period, according to PPAC.
