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Gas Price Hike Boosts Upstream Companies’ Profits
The more than doubling of natural gas and oil prices will boost the profitability of oil and gas producers like ONGC and Reliance Industries Ltd, Fitch Ratings said on Tuesday.
From April 1, the government has raised the price of gas for old fields of state-owned Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) to $6.1 per million British thermal unit for April-September 2022 from $2.9.
The rate for difficult fields of deepsea KG-D6 of Reliance has gone up to $9.9 per mmBtu from $6.1.
The “increase in natural gas prices by the Indian government, along with a recent revision in our Brent crude oil price assumptions to $100 per barrel in 2022, from $70 earlier, and $80 in 2023, from $60 previously, will boost the profitability of rated Indian upstream companies and support their investment spending and shareholder distributions,” Fitch said.
The rise in prices “should improve the upstream companies’ profitability from gas fields where domestic prices were below the cost of production,” it said.
“We also expect prices to be revised higher in the next reset in October 2022 in light of the high gas prices to date,” it added
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