The recent reduction of gas prices by the central government would lead to state-owned Oil and Natural Gas Corporation (ONGC) lose Rs 1,460 crore revenue from its gas business, rating agency Moody’s said on Thursday. The decline is equal to 0.3% of ONGC’s expected consolidated revenue and around 2% of consolidated earnings before interest, tax, depreciation and amortisation for FY20.
On September 30, the government cut domestic natural gas prices by 12.5% to $3.23 per million British thermal units (mmBtu) — the first reduction in gas prices in the country since April 2017. Ceiling price for gas to be produced from difficult fields has also been cut 9.5% to $8.43/mmBtu. Terming the price reductions as “credit negative” for ONGC, Moody’s, however, said that it “will have a limited effect on ONGC’s metrics for FY20” since its gas business is small compared with its total upstream operations. In FY19, the gas business contributed 17% revenue to ONGC’s upstream business.
