The price of natural gas from domestic fields would drop by 18% to $4.24/mBtu from October 1. Till now, the price is $5.18/mBtu.
The price would be valid for the next six months. The price of domestic natural gas is decided based on a formula approved by Modi-government in October last year, which is linked to global indices.
The fall in prices is negative for upstream company like ONGC, OIL, RIL but stock price has already factored in, brokerage firm Emkay Global said in a note.
“Don’t see much correction from here on the said news. However city gas companies like IGL and Gujarat Gas would be beneficiary but its pass on model so if they do not pass full benefit than we could expect margin expansion in 3QFY16,” it added.
Recently, India’s largest oil and gas explorer ONGC had said that it is a challenge to develop deepwater gas projects at current prices. However, Dinesh K Sarraf, chairman and managing director of the government-owned firm, also made the point that oil and gas prices are cyclical and the lower price scenario would not stay forever.
On August 13, ONGC had said that it would spent about $6-7 billion to take out hydrocarbon from one of its much-touted block – KG-DWN-98/2 – in the east coast. The first gas production from the offshore deepwater block is expected in 2018, while crude oil output is envisaged in 2019.