Gas Price Hike Will Benefit Producers By Rs 1,300 Crore: Ind-Ra

Gas Price Hike Will Benefit Producers By Rs 1,300 Crore: Ind-Ra

The increase in natural gas prices from this month would benefit domestic gas producers by around Rs 1,300 crore during the second half of the current fiscal, India Ratings and Research (Ind-Ra) said on Tuesday.

“The recent gas price increase would lead to an increase in revenue for domestic gas producers by around Rs 13 billion during 2HFY18,” an Ind-Ra statement here said.

The government has increased the price payable for domestic natural gas by around 17 per cent to $2.89 per million British thermal unit (mbtu) for the period October 2017 to March 2018.

“Prior to this, the gas prices have been revised downward by about 50 per cent since the implementation of the gas pricing formula in October 2014,” it said.

This is the first price increase after five consecutive domestic gas price reductions, and has been driven by an increase in the average gas prices prevalent at the reference gas hubs over the period July 2016 to June 2017.

The price ceiling for gas from difficult deep-sea and high-pressure high-temperature areas/fields has been raised 13 per cent to $6.30 per mbtu.

The gas price for the April-September period was $2.48 per mbtu, and the ceiling for gas from difficult fields was $5.56.

“State-run explorers Oil India and Oil and Natural Gas Corp, which contribute around 80 per cent to the total domestic production, would be the largest beneficiaries of the price increase,” Ind-Ra said.

“In the mid-stream segment, Gail (India)’s marketing segment could see about Rs 15 billion higher trading revenue from the sale of domestic gases during 2HFY18.”

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“However, compressed natural gas (CNG) and piped natural gas (PNG domestic) end-consumers of city gas distribution (CGD) entities could bear the burden of price increase, as it is usually passed on to the customers,” it added.

Prices of domestic natural gas are revised twice a year. Last year, the government allowed pricing freedom to producers of gas from difficult areas, with a ceiling linked to a mix of other fuels such as coal, liquefied natural gas (LNG), naphtha and fuel oil. Read more

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