Natural gas production in India remains a loss-making proposition for most fields after the government cut gas price by a steep 25 per cent, rating agencies said on Thursday.
The reduction in gas price to USD 1.79 per metric million British thermal unit (mmBtu) from USD 2.39 “is credit negative for upstream companies such as Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) as it will lower their revenue from gas sales”, Moody’s Investors Service said.
Both these companies are already grappling with low oil prices and a further reduction in natural gas prices will exacerbate their earnings decline, it said adding that gas sales account for around 18-19 per cent of the companies’upstream revenues.
