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Motilal Oswal Report
The Kirit Parikh Committee has recommended a dynamic ceiling and a fixed floor for current gas production from the APM fields of Oil and Natural Gas Corporation Ltd. and Oil India Ltd.
The floor has been fixed at $4/metric million British thermal unit. The first ceiling has been set at $6.5/mmBtu. The ceiling is to be raised by $0.5/mmBtu annually.
Around 10% of last month’s Indian crude basket will be priced similar to the current production of APM gas.
The recommendations will raise gas prices for the compressed natural gas segment of companies and will hence be negative. ONGC and Oil India will be guaranteed a minimum $4/mmBtu for their APM gas. This provides a big relief to ONGC and Oil India as they had to produce gas below the cost of production for quite a long time.
The recommendations will be positive for ONGC and Oil India and negative for city gas distributions like Indraprastha Gas Ltd. and Mahanagar Gas Ltd., which will be the most adversely impacted.
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