India More Than Doubles Gas Price

The APM gas price is based the volume-weighted annual average prices of four global benchmarks—US Henry Hub, Canada Alberta gas, UK NBP, and Russian Natural Gas—with a lag of one quarter. The price is revised semi-annually.

Between January and December 2021, prices of Henry Hub and Canada Alberta jumped 1.4 times and 1.7 times, respectively, whereas UK NBP gas surged more than 3.6 times. NBP and US Henry Hub together constitute around 75% weight in the APM formula.

The international gas prices have surged in the past few months due to low gas inventories in storage, strong demand in Asia, odd weather patterns, including a cold European spring and hot Asian summer, and supply disruptions. The price rally is further fuelled due to Russia-Ukraine tensions and uncertainty of Russian gas supply to central Europe.

The gas price rise may benefit Oil & Natural Gas Corp., Oil India Ltd., and Reliance Industries Ltd. Emkay Global estimates that for every $1 an mmBtu change in APM price, ONGC and Oil India’s FY23 standalone EPS will change by 10% and 12%, respectively.

Consumers such as city gas distributors, however, are likely to face margin pressure due to the hike. ICRA estimates that for a $1/mmBtu increase in domestic gas prices, CGD firms could increase CNG price and PNG (domestic) prices by Rs 4.5-4.7 a Kg and Rs 2.5-2.7 an scm (standard cubic meter), respectively, in Delhi to maintain their margins.