India’s LNG imports fell 12.5% m/m after a strong Jan but we expect operating rates at PLNG to be more resilient like we do when India’s LNG macro turns even softer. New terminals will start-up and domestic gas production will rise. For now, though, the latter remains sluggish, including at ONGC, although realisations are more crucial. Here, we expect its gas prices to rise 9% from April noting that 8.2x FY19 P/E leaves risk reward favorable even if subsidies are uncertain. India’s gas production rose 2% m/m in February but aggregate momentum remains uninspiring trending 1.5% y/y lower like it did in the soft January. ONGC’s production rose as did output at RJ onshore, Reliance CBM and PM with KG-D6 output falling again. Indeed, Reliance shut yet another well in KG-D6 on low reservoir pressure with D1/D3 & MA now likely in terminal decline. We see little respite, therefore, before the new $6 bn KG-D6 developments lift output by 35mmscmd when they start-up from 2021.
Production may rise at ONGC too even if it misses its own target that calls for a ~90% rise in FY17-22E to 115mmscmd. Our bottom-up forecasts that build in 6m project delays, a 6m ramp-up and 7% base decline still suggests a 21% rise to 78mmscmd by FY21E. For now, though, it is still struggling at ~65mmscmd (like it has for 15 years) citing delays at WO-16, B-127 and S1/V. Nonetheless, all three wells at the S1/V project are now hooked up with onshore terminal commissioning in progress boding well for the NT.
Indeed, the deep-water 5.5mmscmd S1/V project qualifies for higher prices too where the $6.3 GCV ceiling is more than double the $2.9 it realizes at other fields. These are both likely to be revised up from April too after the six monthly reset with our models building a $0.2/mmbtu or 9% rise for the latter to $3.1 GCV helping EPS by 2%.