In addition to points mentioned by @santoshj KP committee has kept a floor price of US$ 4MMBTU which will protect the downside for upstream companies like ONGC,OIL and Reliance. When gas prices were crashed during covid lockdown period these companies were unable to cover their cost of production which is around US$3 -3.5/MMBTU. Now with floor price fixed at 4mmbtu,these companies will have certainity that they will not faces loss in case gas prices were to crash again.
This price regulation applies for APM gas produced from old legacy fields only.
Gas produced from offshore, HTHP fields will continue to enjoy the premium price(?20% premium).
These factors will help exploration companies to invest and produce more gas domestically. Currently around 50% of consumed gas in India is imported. Govt wants to increase the contribution of gas in total energy consumption to 15% from current level of 6% for which country needs to produce more gas and incentivize the upstream companies.
Going by some of the research reports with the current recommendations the gas sourcing cost for IGL and MGL likely to reduce by Rs.6/scm which helps to improve margins. IGL and MGL margins were down to 15-17% during last few quarters when APM prices went more than US$8/MMBTU.
( I am unable to find complete report of KP committee. If anyone comes across kindly share. Reading the complete report will be helpfull)
| Subscribe To Our Free Newsletter |
