Gas Price Shock: Government Hikes Deepwater Ceiling to $9.89/MMBtu, APM Cap Frozen at $7

The Indian government has raised the ceiling price for natural gas produced from deepwater and difficult fields, including the KG-D6 block, to $9.89 per MMBtu for the six-month period from October 2026 to March 2027, according to an official notification. The price cap for gas from legacy or nomination fields operated by state-owned ONGC and Oil India Limited (OIL), known as the Administered Pricing Mechanism (APM), remains unchanged at $7 per MMBtu.

This is the first revision in the deepwater gas price ceiling since April 2023, when it was set at $9.87 per MMBtu. The ceiling is determined based on a formula linked to global benchmarks, including Dutch TTF and US Henry Hub prices, with a cap. The government had previously raised the APM gas price to $7 per MMBtu in April 2023, but it has been kept unchanged despite falling global prices, leading to concerns among producers about under-recovery. The KG-D6 block, operated by Reliance Industries and BP, is a key deepwater asset that contributes significantly to India's domestic gas production.

The decision to increase the deepwater ceiling is expected to incentivize further investment in difficult fields, boosting domestic gas output and reducing import dependence. However, the unchanged APM cap may continue to strain the finances of ONGC and OIL, potentially affecting their ability to invest in exploration and production. The move comes amid global energy market volatility and India's push to increase the share of natural gas in its energy mix to 15% by 2030. Stakeholders will be watching for any subsequent revisions and the impact on gas-based industries and consumers.