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ICICI Securities Report
A committee has been set up to suggest changes to the prevailing price formula under which gas price fell to 2/metric million British thermal unit, U.S. dollar in H2 FY21.
As per press reports, it may propose 1/mmbtu U.S. dollar discount to JKM spot liquefied natural gas as the floor price.
We are optimistic that a floor price would soon be introduced, at which Oil and Natural Gas Corporation Ltd. would make money (its average production cost is 3.7/mmbtu U.S. dollar).
Floor price may be 4.2/mmbtu U.S. dollar, which ONGC has asked for since FY17, or linked to JKM spot LNG.
Reports also suggest Government of India may gradually deregulate price of nomination acreage (administered price mechanism) gas over not more than six years.
This may be the roadmap for uniform market-determined price for all gas produced in India, which the oil minister has often talked of.
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