ONGC, OIL to gain from natural gas price hike | business | Hindustan Times
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ONGC, OIL to gain from natural gas price hike

business Updated: Jun 29, 2013 01:16 IST

State-owned Oil and Natural GasCorp (ONGC) will add about R8,000 crore to its profits annually from near doubling of natural gas prices from next fiscal.

Oil India Ltd (OIL), the second largest state explorer, expects to rake in R250 crore on every dollar increase in gas price.

The government on Thursday approved raising gas price to about $8 per million British thermal unit from current $4.2 to attract more investment in oil and gas hunt so that production is raised and imports cut.

The company produces some 60 million standard cubic meters per day of gas.

“We gain about R2,000 crore from every dollar per mmBtu increase in gas price,” ONGC director (finance) AK Banerjee said. ONGC had reported a net profit of R20,926 crore in 2012-13 fiscal.

OIL director (finance) TK Ananth Kumar said every US dollar per mmBtu increase in gas price adds R400 crore to the company’s topline and R250 crore to its bottomline (profit).

“We should add R1,600 crore more to the topline and about R1,000 crore to the bottomline at the new prices,” he said. Earnings per share will rise by R16 per share.

“Besides improving profitability, it will also encourage more investments in India’s oil and gas sector. It will encourage companies to become much more aggressive in exploring for new gas,” Kumar added.

India’s state-run gas company GAIL India Ltd expects a hit of R1,300-crore ($218 million) annually on pre-tax profits on account of higher costs in its liquefied petroleum gas (LPG) and petrochemicals businesses, its finance head said.

On Thursday, the Indian government approved a gas price hike for the first time in three years. Indicative pricing suggests domestic gas could rise to around $8.4 per mmBtu from April 1, 2014, compared $4.2 per mmBtu currently.

“We have a solid case for withdrawal of subsidy burden now. We are already taking up the case with the ministry,” GAIL’s Finance Director P.K. Jain said. REUTERS