Dear Sir/Madam,
The Indian cabinet committee on economic affairs (CCEA) allows the end of existing administered pricing mechanism (APM) to align gas price at market determined rates for Reliance Industries Limited (RIL) from April 2014 onwards. Under the new regime the output price of natural gas may rise to $8.4/mmbtu from the current $4.2/mmbtu as per the formula suggested by the C, Rangarajan panel.
The CCEA allowed RIL to increase its gas prices from April 01, 2014 onwards in lieu of bank guarantees and that the guarantee only will be encashed if RIL are found guilty of hoarding gas or deliberately suppressing the production from the KG-D6 block. Earlier the GoI slapped a penalty of ~$1.8bn for missing the proposed production of the aforesaid block.
This move proves beneficial for RIL only in the long-term. As their current production is almost at the lowest levels and only the revival in the dipping production coupled with this increased price hike can bring cheers to the books. RIL mentioned in their AGM they are taking all the necessary measures to revive their entire oil & gas portfolio which is positive sign for the company itself. Their current production was dipping to ~10mmscmd from the peak~ 60mmscmd. For the Indian oil & gas sector as a whole it is pretty positive as the increase in the gas prices would result in the viability of some projects by way of better realizations.
Regards,
Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020