Cut in gas prices positive for users but could dent profits of producers_ icra _ et energyworld calculate fuel cost trip

New Delhi: The recent reduction in gas prices is positive for user industries but it could dent the profits of upstream producers and weaken the project economies of new discoveries, research firm ICRA today said. Following the implementation of the modified Rangarajan committee formula, the price of domestic gas has reduced to US$2.50/mmbtu (GCV basis) for the six month period from Oct 1, 2016 to Mar 31, 2017 which is a 18% reduction from the gas price of US$3.06/mmbtu applicable for the period Apr 1, 2016 to Sep 30, 2016 and has almost halved from the time the modified Rangarajan formula was implemented (Nov 1, 2014). With the latest cut, the domestic price is now well below the average cost of production for many producers which has led the industry to seek a floor price for the modified Rangarajan formula from


the government of India.

“At such low gas prices, the upstream producers will be hit the most as gas production will turn loss making for most fields. Cost of gas for trip mapquest Whether the government accedes to the request of the domestic producers remains to be seen; however considering that the GoI wants to build an increasingly gas based economy, the issue of such low prices making exploration and production unviable even for benign geologies would have to be addressed on priority in order to incentivise domestic production and balance the interest of Upstream producers with consumers,” K Ravichandran, Senior Vice-President and Co-Head, Corporate Ratings, ICRA said. However the downward revision in domestic gas prices is positive for the user industries.

Calculate estimated gas cost trip With downward revision in the domestic gas price, overall cost of domestic gas based power generation is estimated at Rs 3.2/kwh for a standard power plant, which reflects a decline of about 9% over that with gas at earlier delivered cost. Cost of gas for a trip In case domestic gas availability were to remain at the current level for the power sector, decline in the gas price would lead to savings of 1.3 paisa/kwh for the distribution utilities on all-India basis at delivered gas cost (i.e. Gas prices canada per gallon at US$3.8/mmbtu) and at INR/USD rate of 66. For the Fertilizer sector, the lowering of the domestic gas prices is expected to reduce the pooled prices to US$6.1-6.2/mmbtu (NCV basis) during H2 FY2017 which should lead to subsidy savings of around Rs 7-8 billion for the Government for H2 FY2017 (assuming the currency to remain stable).

According to Ravichandran, “Lower subsidy for the Urea industry would in turn lead to lower working capital borrowings for the companies and enable them reduce their interest cost. Calculate how much gas it will cost Further, lower pooled gas prices would improve the competitiveness of the revamped urea capacities who are entitled to receive variable cost (energy cost, electricity and water cost primarily) and a uniform per metric tonne incentive of Rs 2,300/MT for production beyond cut-off quantity but their realisations are subjected to a cap of the import parity price plus other incidental charges.” For the City Gas Distribution sector, there is a likelihood of a cut of about Rs 2/kg in CNG prices and about Rs 1.5/scm in PNG (domestic) prices though CGD players may retain some of the contribution margin. Cheapest gas prices in northern ireland Moreover, the competitive advantage of CNG and PNG (domestic) over alternative fuels will improve and this augurs well for new demand creation.

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