28 June 2013 10:27 [Source: ICIS news]
SINGAPORE (ICIS)--Oil and Natural Gas Corp (ONGC) and Reliance Industries Ltd (RIL) are expected to generate strong revenues from the Indian government’s decision to hike domestic natural gas prices, US’ ratings firm Moody’s said on Friday.
On 27 June, India approved a formula that effectively doubled natural gas prices to $8.40/MMbtu (€6.47/MMbtu) starting 1 April 2014, Moody’s said in a statement.
Moody's expects ONGC's revenues to increase by $1.5bn-$2.0bn and RIL's revenues to increase by $300m-$500m in the fiscal year ending March 2015.
ONGC and RIL reported revenues of $29bn and $73bn, respectively, in the fiscal year ending March 2013, it said.
“Increase in revenue can be higher over the next few years as production of domestic gas increases from new discoveries with every billion cubic meter of gas produced will result in incremental revenue of $150m,” Moody’s added.
The government’s approval of the new pricing formula will help reduce India’s reliance on imported crude oil and natural gas as it provides incentive for further domestic exploration and production, said Vikas Halan, Moody's vice president and senior analyst.
"The new pricing formula tries to balance the need to incentivize production and the need to provide consumers with affordable gas. Even with the higher prices, it is more profitable for the domestic gas producers to sell gas in the international markets, which they are not allowed to do," Halan said.
($1 = €0.77)
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