Reliance Industries has urged the government to remove the cap on gas price since it “remains disconnected with the global price trends, irrespective of any rise or a fall”.
The government sets the administered price of gas for normal fields every six months — on April 1 and October 1 — based on rates prevalent in select global gas markets, but the revisions come with a lag. For the April-September 2022 period, the cap is $9.92/mmbtu for difficult fields like KG-D6 block operated by RIL, the highest level ever. Expectations are that the ceiling will have to raised steeply further for October 2022-March 2023 period, given the spike in global prices of the commodity. Of the total gas consumed in the country, almost 50% is imported LNG.
“We are continuing our advocacy for removal of ceiling prices,” said Sanjay Roy, senior vice-president (exploration & production), RIL, in a post-result presentation to the analysts last evening. The price must move up, Roy said. “It is expected that based on higher energy prices across markets, this (gas price ceiling) will go further up.” As global gas prices continue to remain elevated, Roy attributed it to two factors -– the shift in European demand from Russian gas to LNG supplies and supply destruction. “A substantial amount of (traded gas) volume has been impacted,” Roy said.
Roy added the company’s MJ field in the KG basin will likely go on stream by the third quarter of this fiscal year. This should lead to further growth in EBITDA and value in the quarters to come and in the years to come, he said.
For the first quarter of the current fiscal, RIL’s gas exploration and production business did significantly better quarter on quarter, primarily driven by marginal growth in production in KG-D6 which was slightly over 19 million standard cubic meters (mscm). In KG-D6, the company’s realisation on a weighted average basis, was $9.72.
During the April-June period of the current fiscal, India imported 7,400 mmscm LNG valued at $3.4 billion. India’s net natural gas production during the period was 2,724 mmscm.
“The advocacy on aligning domestic prices to LNG prices seems to be justified from the lens of upstream producer. However, the government is also doing (by maintain the price ceiling) a balancing act as increase in gas prices also means that industries and consumers may switch over to polluting fuel thereby, negatively impacting the vision of improving share of gas in the primary fuel basket,” one analyst said.