Wednesday, December 7, 2022
News

Gas price hike reduces past decade of skepticism on quality of returns for hydrocarbon producers

   SocialTwist Tell-a-Friend    Print this Page   COMMENT

New Delhi | Tuesday, 2022 1:15:10 AM IST
India's producer price increase to the highest ever should not only surprise investors but also reduce past decade of skepticism on quality of returns for hydrocarbon producers, foreign brokerage, Morgan Stanley said in a report.

While the hike was in line with our estimates and benefits ONGC, OIL and RIL, Gujarat Gas remains our key underweight, Morgan Stanley said.

In the biannual revision, India's domestic gas prices rose by 40% from US$6.10/mmbtu to US$8.57/mmbtu, in line with domestic gas prices seen in multiple geographies, but slightly above mid-cycle gas prices seen globally for domestically produced gas.

Producer prices for deepwater gas fields were raised by 25% to US$12.50/mmbtu. We think the hike highlights the government's focus on energy security and reduces concerns on domestic gas price caps by the government, considering news flow over recent months.

We expect producer gas prices to decline and average US$6-7/mmbtu medium term as gas markets tighten slightly but keep global benchmark prices at elevated levels,Morgan Stanley said.

The rise in the producer price would necessitate an 8-10% increase in CNG consumer prices regardless of depreciation of the rupee.

While certain players like Adani Gas announced a 4-5% price hike over the weekend, we estimate a staggered increase to follow from the other city gas distributors. CNG gas demand growth has been robust over the past year at an 8% CAGR vs. pre-Covid, despite a 70% price hike by likes of IGL. The CNG price hike should lower the discount to alternative fuels like gas and diesel from 15-40% currently to 15-25%, Morgan Stanley said.

We think higher allocation of domestic gas and flexibility to source its own LNG will help IGL manage its margins better, Morgan Stanley said.

--IANS san/arm

( 305 Words)

2022-10-03-19:06:01 (IANS)

 
  LATEST COMMENTS (0)
POST YOUR COMMENT
Comments Not Available
 
POST YOUR COMMENT
 
 
TRENDING TOPICS
 
 
CITY NEWS
MORE CITIES
 
 
 
MORE BUSINESS NEWS
Airlines cut losses in 2022, will return...
Monday's punishing selloff in US markets...
'Can't fold hands and sit because it's a...
Protests against Vizhinjam port project ...
Simplilearn launches SimpliRecruit to he...
PM Modi condoles demise of economist and...
More...
 
INDIA WORLD ASIA
6-yr-old falls into borewell in MP, resc...
'Nobody should go to sleep empty stomach...
NGT orders Rs 2.4 cr compensation for 12...
Projects worth 40,000 cr to be launched ...
Hyderabad Police creates green channel f...
Individuals diagnosed with mental disord...
More...    
 
 Top Stories
Locus launches Delivery Linked Chec... 
As Delhi witnesses 'too close to ca... 
This tiny, hidden galaxy provides a... 
Opposition leaders' meeting underwa... 
As India assumes G20 presidency, PM... 
MP: Rescue operation underway to sa... 
RBI Monetary Policy Committee hikes... 
Wild elephant found dead at tea est...