State-owned Oil and Natural Gas Corp (ONGC) will barely break even at the new natural gas price that will come into effect from October 1, its Chairman and Managing Director Shashi Shanker has said.

The Government has announced a 10 per cent higher price for natural gas at $3.36 per million British thermal unit for six month period beginning October 1.

Shanker said the average cost of production of natural gas by ONGC during 2017-18 was $3.59 per million British thermal unit.

 In the current fiscal, it may be slightly less as cost of service has come down and so “maybe we will just be able to break even after the new gas price”, he told reporters here.

ONGC’s average cost of production of natural gas during 2016-17 was $3.10 per mmBtu and at the Government mandated prices it was incurring significant under-recoveries from its gas business, he said.

Loss of revenues on gas business significantly impaired the company’s ability to fund its capex plans and hampers most ongoing and future development projects.

ONGC has long complained that gas price is unremunerative and it incurs loss on the business.

As per a new mechanism approved by the government in October 2014, the price of domestically produced natural gas is to be revised every six months — April 1 and October 1 — using weighted average of rates prevalent in gas surplus markets like Henry Hub (US), National Balancing Point (UK excluding Russia), Alberta (Canada) and Russia.

Using this formula, the price for October 2018 to March 2019 came to $3.36 per mmBtu as compared to $3.06 in the previous six months.

ONGC officials said the $3.59 per mmBtu average cost is without taking into account return on capital and after considering a decent return the price should be not less than $4.