Oil, Gas Sector Check - Price Cap Removes Overhang Of High Gas Prices: Prabhudas Lilladher

Prabhudas Lilladher Report

The government appointed panel for reviewing prices of natural gas (headed by Mr. Kirit Parikh) have submitted their recommendations, which is yet to be approved by the Cabinet before finalising domestic gas price.

A cap of $4-6.5/metric million British thermal unit has been suggested for gas produced from older fields by Oil and Natural Gas Corporation Ltd. and Oil India Ltd., with cap rising by $0.5/mmbtu every year and full deregulation in January-2027.

Also to promote new investment, gas produced from new fields are to be given pricing and marketing freedom, which is positive for Reliance Industries Ltd. and ONGC.

Capping APM gas prices is encouraging for city gas distributions, as they account for ~90% of priority sector demand (compressed natural gas plus piped natural gas domestic).

Falling domestic gas and spot LNG prices is positive for Indraprastha Gas Ltd. and Mahanagar Gas Ltd. followed by Gujarat Gas Ltd.

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