| The increase in the price of natural gas is expected to push up profits of explorers by as much as Rs 10,000 crore, oil companies said today, and will also incentivize exploration activity, both by domestic as well as international oil companies. State-run ONGC is expected to see its profits go up by as much as Rs 8,000 crore, while Oil India may see its net rise by Rs 10,000 crore, the companies said on Friday. "We should see this increase provided other things remain the same and there are no conditions attached," said Aloke Banerjee, director-finance, ONGC. The company gains about Rs 2,000 crore for every $1 per mmBtu increase in gas prices, he added. According to a report by ratings agency Moody's, Reliance Industries, India's largest energy explorer and producer, should see a $300-500 million (Rs 1,770-2,950 crore) increase in revenue by 2015. The Cabinet Committee on Economic Affairs had yesterday approved an increase in the price of natural gas from $4.2 per mmBtu to 8.4 mmBtu. The hike, the first in three years, will be effective April 1, 2014. While the move may help solve, to an extent, India's acute power woes by inviting foreign investment into the sector and thus improving production, it may become unpopular with consumers, who may have to bear a portion of the increase in prices. Finance Minister P. Chidambaram, at a media briefing today, said the government has only fixed the prices in scenarios where the gas is the output, and not when gas is the input, such as power and fertilizers, in an attempt to allay fears of a surge in power bills. Gas currently accounts for around 10 per cent of India's total energy needs, while coal, at 56 per cent, meets the bulk of India's burgeoning energy requirements. India is the world's fourth-biggest importer of fuel. "This announcement is credit positive for the oil and gas companies that produce and sell gas domestically u nder production sharing contracts with the Government of India," the Moody's report said. Every billion cubic meter of gas produced will result in incremental revenue of $150 million, it added. Even though upstream companies will see their coffers swell, downstream companies such as GAIL will take a hit on their profits. Of course, this is considering the fact that the price of gas, and therefore the procurement price, will increase proportionally. However, the Finance Minister today said that the government will look at fixing the input costs for certain sectors, thus limiting the impact. GAIL India, the country's largest state-owned natural gas processing and distribution company, expects a hit of Rs 1,300 crore annually on pre-tax profits on account of higher costs in its liquefied petroleum gas and petrochemicals businesses. "We have a solid case for withdrawal of subsidy burden now. We are already taking up the case with the ministry," GAIL's fin ance director P.K. Jain told Reuters. GAIL bore subsidy costs of about Rs 2,700 crore in 2012-13 as part of the government's scheme to compensate state oil retailers for selling petroleum products below costs. Shares of explorers such as ONGC, Oil India and RIL surged in early trade today on the news. ONGC shares soared as much as 8 per cent, while RIL saw its shares rise by 5 per cent. With inputs from agencies  via Business - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNG_ikOPqprcpBzqFAQCa6WjKbz_ig&url=http://profit.ndtv.com/news/economy/article-gas-price-hike-how-ongc-ril-stand-to-gain-323837 | |||
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