ONGC-OIL gas under-recoveries pegged at Rs 7,500 cr in FY21

With the government reducing the price of domestic natural gas to $1.79 per million British thermal units (mmBtu), analysts expect state-run gas producers Oil and Natural Gas Corporation (ONGC) and Oil India (OIL) to face losses of Rs 7,500 crore cumulatively in FY21 from their gas businesses. Under-recoveries from gas production in FY20 for ONGC-OIL were in the range of Rs 1,700 crore to Rs 2,000 crore, when average gas price was $3.5/mmBtu, India Ratings said on Thursday. The average gas output cost of ONGC — which produces about 80% of the domestic natural gas — is $3.7/mmBtu.

Gas sales account for around 18%-19% of the companies’ upstream revenues. Analysts at Moody’s estimate ONGC’s revenues and earnings before interest, tax, depreciation and amortisation (Ebitda) to decline by Rs 1,500 crore – Rs 1,600 crore on account of lower gas prices.