Gas producers will benefit from new price norms: S&P
The new guidelines allow ONGC, OIL to charge a premium of 20 per cent over the administered price for gas produced from new wells
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New Delhi: India's new gas pricing regime will offer greater downside protection for earnings of gas companies such as Oil and Natural Gas Corp (ONGC) and Oil India Ltd, S&P Ratings said on Friday.
The new norms will not affect the pricing for gas produced from difficult fields that companies like Reliance Industries Ltd operate.
Under the new guidelines announced on April 6, 2023, the government will set prices for domestically produced gas on a monthly basis; the rate will be 10 per cent of the average price of the Indian crude basket in the preceding month. The price will have a floor of $4 per million British thermal unit (mmbtu) and a ceiling of $6.5 per mmBtu.
“We expect the new gas pricing terms to result in more fluid market price revisions,” said S&P Global Ratings credit analyst Shruti Zatakia.
Under the earlier regime, prices were reset semi-annually and were linked to gas prices in key international trading hubs.
The pricing mechanism for gas production from deep water, ultra-deep water, high-temperature, and high-pressure fields is unchanged. This means companies such as ONGC and RIL that operate such fields will maintain marketing and pricing freedom, subject to a ceiling price that is revised semi-annually.
