Sharp decrease in domestic gas prices will worsen losses for upstream producers: ICRA

The domestic gas price notified at $1.79/mmbtu (GCV basis) for the period H2 FY2021 is 25.1% lower from the price of $2.39/mmbtu (GCV basis) for H1 FY2021 and is the lowest since the institution of the modified Rangarajan formula. As per an ICRA note, the decline in domestic gas price is in line with the fall in global gas indices over the reference period. It is likely to adversely impact the upstream producers. The Asian spot prices of LNG had declined to below ~$2/mmbtu in May 2020, owing to demand destruction due to outbreak of corona virus amid increasing global supplies. The GoI has also additionally announced the ceiling on price for gas produced from deep water, ultra deep-water, high temperature and high-pressure fields at $4.06/mmbtu for the period H2 FY2021 which is 27.6% lower than the price ceiling of $5.61/mmbtu for the period H1 FY2021 which would dampen the development of such projects.

Advertising