Government raises deepwater gas price ceiling to $9.89/MMBtu; APM gas cap at $7

India's government has raised the maximum allowable price for natural gas produced from challenging offshore fields to $9.89 per million British thermal units (MMBtu) for the six months starting October 1, 2026. This increase, from the previous $8.90 ceiling, applies specifically to deepwater, ultra-deepwater, and high-pressure, high-temperature gas discoveries.

These high-cost areas currently enjoy marketing and pricing freedom under government policy but are subject to the newly set ceiling. The higher price aims to incentivize producers of India's more technically difficult offshore gas resources, where production costs are typically higher than for mature onshore and legacy fields. Meanwhile, the government maintains a $7 per MMBtu ceiling for gas from legacy fields of state-run Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL).

This cap applies to gas produced by the two state-owned companies in their nomination fields, which are utilized by priority sectors such as city gas distribution, fertiliser, and power generation. The government's Administered Price Mechanism (APM) for ONGC and OIL gas is currently set at $11.22 per MMBtu for October, but is capped at $7 per MMBtu for these legacy fields.

For ONGC and OIL gas from new wells in their nomination blocks, producers receive a 10% premium over the prevailing APM price, also subject to the ceiling. This separate pricing structure for difficult offshore gas fields was introduced to encourage investment in technically challenging hydrocarbon resources by providing producers greater pricing and marketing flexibility.