India’s domestic natural gas prices set to nearly halve to 10-year lows of $2
India’s domestic natural gas prices are set to nearly halve to 10Y lows of $2/mmbtu over the next year. SOE E&Ps will suffer and users like IGL, MGL & GAIL will benefit but perhaps these pre-deregulation levels will prompt the govt. to fix the gas price framework that it instituted soon after it took office in 2014. ONGC & OINL, where $1 adds ~15% to EPS, would have the most to gain from such a miracle.
Prices: APM prices rose after NDA government assumed office to $5.6/mmbtu NCV from the $4.2 they were at between 2010 and 2014 when they were linked to Reliance’s KG-D6 price but have been soft since. They fell 12.5%, e.g., in the last half-yearly reset in Oct19 to $3.6. And yet, they are set to fall another ~45% over the next two resets in Apr20and Oct20 to 10Y lows of $2/mmbtu. Sharply lower EU prices on softer LNG are largely to blame but prices are subdued in gas surplus US, Canada & Russia too.
