New Delhi: A 62 percent increase in natural gas prices by the government will increase the profitability of the upstream company in the country and support their investment expenditure, Fitch Ratings said on Tuesday.
Prices for gas from fields assigned by state for oil companies, mainly oil and gas natural gas (ONGC) and Indian Oil Ltd.
(oil), increased to $ 2.90 per million English thermal units (MMBTU) for March 2021, 2022, Of the $ 1.79 per mmbtu in the previous six months.
“Higher gas prices will increase input costs for the main sectors of consumers, as far as the price increase is continued,” Fitch said.
Gas produced domestically supplied based on priority for certain sectors, with 30 percent of it is consumed by electricity producers, around 27 percent by the fertilizer sector and 19 percent by city gas distributors in FY21.
The increase in gas prices will achieve the profitability of the fertilizer sector by increasing working capital requirements, Fitch said.
The price of automatic gas fuel will remain competitive on liquid fuel, although with differential reduction, regardless of the increase in gas prices.
This is because liquid fuel prices have also climbed in recent months, given the increase in crude oil prices.
The power costs generated by gas-based power plants will increase, which will then reduce its utilization.
“ONGC Ranking and Oil and Mandiri Credit Profile (SCP) remain unchanged because the price increase is largely in line with Fitch’s hopes, driven by a global price increase during 2020 June 2021,” the rating agency said.
However, high gas prices will strengthen the SCP ‘BBB +’ ONC and will increase credit metrics for oil, which will support his ax to expand the capacity to the Numaligarh Refinery subsidiary Ltd the government also increases the price of ceilings for gas and others.
Difficult fields up to $ 6.13 per mmbtu of $ 3.62 per mmbtu.
“Reliance Industries Ltd Gas production from Kg Basin will benefit from a higher price ceiling, but the impact on the minimum RIL financial profile because the gas makes a limited contribution on its income,” Fitch said.
Rating agency estimates that Net Ongc leverage, measured by a net debt / EBITDA, to increase around 2.1x in the financial year ended March 2022 (FY22) of 2.7x in FY21 as upstream income recovered and downstream income remains strong.
The earth’s gas section of consolidated income is in a mid-numbers for ONC, considering the integrated business model.
It expects FY22 oil leverage to 1.9x.
Natural gas accounts for around 13 percent of upstream oil income in FY21, Fitch said.
Gas Prices Increase Positive for ONC, Reliance: Fitch
