Oil & Gas - Draft Kirit Parikh Committee Recommendations – A Positive Development For CGDs: ICICI Securities

ICICI Securities Report

As per news reports, the draft recommendations of the Kirit Parikh Committee imply:

1. Current domestic gas prices for priority segment will be capped at $6.5-7/metric million British thermal unit (current prices at gross calorific basis of $8.6/ mmbtu, implying a delivered price on net calorific of $9.6/mmbtu),

2. annual escalation of $0.5/ mmbtu for the next few years,

3. a gradual move to market pricing of gas in three-four years.

We do not have access to the draft report, hence, we are not sure of what price has been determined for the hitherto premium gas price eligible fields.

However, given the mandate to encourage investments in new gas assets, we would assume premium gas pricing would have some linkage with term LNG prices and hence, this will remain lucrative for Reliance Industries Ltd. and Oil and Natural Gas Corporation Ltd.’s new gas production.

Overall, ~$2/mmbtu reduction in FY24E effective gas cost for priority sector has Rs 7.7/8/1.2 per kg implication for CNG and Rs 4.9/5/0.8 per standard cubic metre implication for the domestic segment of Indraprastha Gas Ltd., Mahanagar Gas Ltd. and Gujarat Gas Ltd.

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