Upper basin gas producers will see a visual increase with price increases

Considering the increase in global gas prices, it is not surprising that 62% of India’s domestic gas prices are 2.9 / mmBtu (metric million British units) from 1.79 / mmBtu. While inflation may hurt some sectors, riparian gas producers such as Onjisi Limited and Oil India Limited are the biggest beneficiaries.

Henry Hubb of the United States, NBP of the United Kingdom. Gross gas prices and domestic raw cocktail prices are determined by domestic gas prices. It should be noted that domestic gas prices have been sliding since 2019 and this is the first price increase since then.

The biggest beneficiary is India’s largest domestic gas producer ONGC. Analysts expect domestic gas prices to rise further in the next six months. Therefore, the rising cost of crude oil has a negative view of revenue.

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Reversing trend

In a September 25 note, Morgan Stanley analysts said: “India’s gas prices are set to rise for the first time since 2015 and to reach higher levels by mid-2022, reflecting a rise in global gas prices. , 2-3x higher than pre-covide levels. “If the domestic gas business is profitable in two decades, it will see a significant windfall for the ANC.”

The company’s international investments in the oil and gas fields in Russia and other countries are also becoming more profitable. According to BofA Securities Ltd, ONGC is one of the key players in the field. In addition, for the first half of the year, the price of natural gas for the hard-to-reach areas increased from $ 3.22 to $ 3.62 / mmBtu to $ 6.23 / mm. This is positive for OGC and Real Estate Limited (RL) for recent gas production from difficult areas.

Although RIL is also a beneficiary of a gas price increase, it is unlikely that there will be any material impact on revenues given the low contribution of this segment. Oil and gas exploration and production contributed only 2-5% to Abel. Ibbitda is an income before interest, tax, deduction and sale.

The rise of other gas companies, such as GAIL Limited, could have a negative impact on their LPG (Liquid Gas) division, which is a domestic gas supplier. Analysts say that to some extent the current high LPG prices could compensate for this effect. In addition, urban gas distribution companies (Inrarapasta Gas Limited, Mahanagar Gas Limited and Gujarat Gas Limited) can deliver to consumers an increase in gas costs that are independent of the Abida margin, according to real estate analyst Yoges Patil. Limited

On the positive side, shares of upper riparian companies such as ONGC and Oil India have recently risen sharply. Possible gas price increases could keep the balance in these stocks.

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