Government raises deepwater gas price ceiling to $9.89 per MMBtu for October-March period
The government has increased the ceiling price for natural gas produced from difficult fields such as deepwater, ultra-deepwater and high-pressure, high-temperature discoveries to $9.89 per million British thermal units (MMBtu) for the six-month period beginning October 1, 2026, up from the previous level of $8.90 per MMBtu. This new ceiling will remain in effect until March 31, 2027, as notified by the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry.
For gas produced from legacy fields of state-owned ONGC and Oil India Ltd (OIL), the administered price mechanism (APM) ceiling continues to be held at $7 per MMBtu. Although the APM price for October has been notified at $11.22 per MMBtu, the actual price paid to producers remains capped at $7 per MMBtu under the existing ceiling.
Gas from difficult areas enjoys marketing and pricing freedom under government policy but is subject to a government-notified ceiling, which is periodically revised to reflect cost dynamics and encourage investment in technically challenging resources.
The higher ceiling for deepwater gas is intended to provide relief to producers like Reliance Industries and its partner BP, who operate in high-cost offshore areas such as the KG-D6 block in the Krishna-Godavari basin, where development and production costs exceed those of mature onshore fields.
For new wells drilled by ONGC and OIL in their nomination blocks, a 10% premium over the prevailing APM price is permitted, subject to the applicable ceiling. With the APM ceiling at $7 per MMBtu, the effective price for new-well gas from these companies would be up to $7.70 per MMBtu, aimed at incentivising further reserve development and production growth.
India maintains separate pricing regimes: one for legacy fields of national oil companies linked to crude oil prices with a floor and ceiling, and another for newer discoveries in difficult areas that allows greater pricing flexibility. The APM ceiling was raised to $6.75 per MMBtu from April 2025 and increased to $7 in April 2026, following a shift in 2023 that moved away from six-monthly revisions based on international gas benchmarks.
Prior to the 2023 reform, APM gas prices had fluctuated sharply, reaching as low as $1.79 per MMBtu in 2021 and as high as $8.57 per MMBtu in the six months ended March 2023. The current framework seeks to stabilise returns for producers while ensuring affordability for priority sectors such as fertilisers, power, and city gas distribution.
Natural gas remains a critical input for fertiliser manufacturing, power generation, and city gas distributors supplying compressed natural gas (CNG) and piped natural gas (PNG), meaning changes in domestic gas prices directly influence input costs across these key industries.
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