Page 6 - AsianOil Week 14 2022

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India hikes price for locally produced gas

POLICY THE Indian government has raised the price prices were below the cost of production,” Fitch
of locally produced natural gas by 110%, effec- Ratings said in a commentary. “The domestic
tive from April 1. Driven by the global price price is based on the prices of four global lique-
increases for oil and gas, the Petroleum Plan- fied natural gas [LNG] benchmarks of the last
ning and Analysis Cell for the federal oil min- 12 months, implemented with a quarter’s lag.
istry announced that the price of natural gas We also expect prices to be revised higher in the
would be raised from $2.90 per million British next reset in October 2022 in light of the high gas
thermal units ($80.21 per 1,000 cubic metres) prices to date,” the agency added.
to $6.10 per mmBtu ($168.73 per 1,000 cubic Higher oil and gas prices will raise the input The price
metres) during the first half of the current fis- cost for end-consumer sectors in the Indian
cal year. The price increase will apply to fields economy to the extent the price hike is passed increases are
that are regulated by state-owned Oil and on, Fitch Ratings said. “The increase will also be
Natural Gas Corp. (ONGC) and Oil India Ltd reflected in the escalation in other costs related expected to boost
(OIL). to transportation and insurance. Domestically
The price hike will also have an impact on produced gas is supplied on a priority basis to profitability for
gas production by privately owned Reliance certain sectors, with power producers consum- the upstream
Industries Ltd (RIL). Prices paid for gas from ing 30%, the fertiliser sector around 27% and city
deepwater and other difficult fields will be gas distributors 19%” during the 2021 fiscal year, companies.
increased from $6.10 per mmBtu to $9.90 per the commentary said.
mmBtu ($273.83 per 1,000 cubic metres). RIL The gas price increase, along with the rising
and ONGC will both benefit from that new price cost of oil, is anticipated to push prices up in the
ceiling. The price increases are expected to boost fertiliser sector, as well as for motor vehicle fuels
profitability for the upstream companies and and electrical power generation. India’s annual
support investment spending and shareholder retail inflation rate rose by 6% for a second con-
dividends. secutive month in February, according to Indian
Indian media reports said the price increases media reports. It has been estimated that every
would likely result in ONGC seeing a rise of $10 per barrel increase in the price of oil pushes
$3bn in annual earnings, and RIL earning $1.5bn India’s consumer price index (CPI) inflation
more. up by 20-25 basis points, widens the current
“This should improve the upstream compa- account gap by 0.3% GDP, and poses a downside
nies’ profitability from gas fields where domestic risk of 15 basis points to growth.™

P6 www. NEWSBASE .com Week 14 08•April•2022