Now Moody’s says gas cost cut will impact investment

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New Delhi – Another tellurian ratings group Moody’s has pronounced a pointy cut in healthy gas prices told by a Indian supervision will not usually impact a state-run Oil and Natural as Corp (ONGC) a most, though also daunt new scrutiny investments and fuel imports.

“The gas cost rebate is credit disastrous for upstream producers ONGC and Oil India Ltd. since it will reduce their revenues and money flows, that are already disappearing from low oil prices,” an essay by Moody’s Credit Outlook pronounced on Monday.

“The gas cost rebate will have a biggest effect, in comprehensive terms, on ONGC, a country’s largest writer of healthy gas,” it said, adding that it approaching ONGC’s revenues to decrease by around $300 million and for Oil India Ltd by usually around $33 million.

Representative image. ReutersRepresentative image. Reuters

Representative image. Reuters

Earlier, Standard Poor’s pronounced a 18-percent cut in domestic prices of healthy gas from $4.66 per section to $3.82 per section for 6 months starting Oct 1 will daunt oil scrutiny and prolongation companies from committing new collateral expenditure.

Natural gas prices in India are set by holding a volume-weighted annual normal of that prevalent in a US, Britain, Canada and Russia. Prices are distributed on a trailing 12 month information with a loiter of one quarter.

“India relies on healthy gas imports to accommodate a appetite needs. Imports accounted for 36 percent of a sum healthy gas expenditure in India for mercantile 2015 and 39 percent for a 5 months between Apr 1 and Aug 30, 2015,” Moody’s said.

“Imports will continue to boost as low general gas prices kindle direct for healthy gas and low domestic prices daunt serve investments by upstream players to try and rise new gas reserves,” it said.

“When oil prices are low, upstream players can't economically furnish from formidable terrains such as low water, where costs are almost higher,” Moody’s added.

Standard Poor’s pronounced a government’s devise to kindle private zone appearance and move clarity in gas pricing with formula-driven pricing was good intended. But descending oil prices over a past one year has brought doubt over a viability of scrutiny projects.

The ratings group pronounced India should benchmark a healthy gas prices to identical gas-deficient nations instead of regulating rates prevalent in gas-surplus areas like a US and Canada.

“The regulation for pricing domestic gas considers prices in gas-surplus geographies such as a US and Canada, that have grown gas travel infrastructure,” it said, adding this was not a correct resource given India’s gas prolongation necessity and gas ride infrastructure.

The group reason a identical perspective that uninformed commitments by private oil ad gas companies will sojourn uncertain, given that several scrutiny firms globally had scaled behind their spending and put new projects on reason amid low hydrocarbon prices.