Gas producers continue to bleed as govt-dictated prices remain low, says Icra

Natural gas production remains a loss-making proposition for many fields for the Indian upstream producers as government-dictated gas worth remains at its lowest level, rating agency Icra has aforesaid.

The domestic gas worth notified at USD 1.79 per million British thermal units for the six months starting April 1 remains all-time low since the establishment of the changed Rangarajan formula.

Additionally, the ceiling on worth for gas made from trouble, ultra-deepwater, warmth, and aggressive fields has additionally been proclaimed at USD 3.62 per mmBtu for April-September 2021-22 that is 10.8 % not up to the worth ceiling of USD 4.06 for October-March 2020-21 which might dampen the event of such comes.

“While this is often unfavorable for domestic producers, it’ll profit gas customers. The customers will profit within the long-standing time from the expectations of a continuing provide overhang,” Icra aforesaid commenting on the gas worth notified by the government earlier in the week.

As per Associate in Nursing Icra note, at such low gas costs, gas production remains a loss-making proposition for many fields for the Indian upstream producers still some decline in oil field services/equipment prices. However, the depreciation of Indian rupee against United States greenback, would aid the realizations of the gas producers however solely to Associate in Nursing extent.

Sabyasachi Majumdar, Senior Vice-President & cluster Head, company Sector Ratings, Icra, said, “Going forward, the provision glut is anticipated to stay costs of domestic gas low within the with reference to medium term resulting in poor returns whilst domestic gas producers like ONGC and Reliance Industries Ltd (RIL)-BP increase gas production considerably.”

The absence of a floor and sustained low costs as has been seen within the past few years post-implementation of the changed Rangarajan formula create exploration and production unviable even for benign geologies, Icra noted.

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