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Oil & Gas: Gas price cap formula could have been more lenient; Expect benefits in long term

Motilal Oswal | 16 Mar, 2016  | Follow Author | Add to my Favourites 
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- Post the diesel price deregulation and LPG DBTL implementation success, government has now embarked on E&P sector reforms.

- Cabinet Committee on Economic Affairs announced key E&P sector reforms: (1) replaced ‘NELP’ with ‘HELP’; (2) granted PSC extension for small/medium fields with higher taxes and (3) new gas price formula for yet-to-be-developed deep water wells.

- Our View: (1) While ‘HELP’ (Hydrocarbon Licensing and Exploration Policy) tries to minimize government interference, clarity on industry response will take time and benefits will only be in the long term, (2) PSC extension is positive but higher taxation impacts field economics and (3) new gas pricing is positive, but given the longgestation period of deep water projects, price cap could have been more lenient.

- Applicability of new price to RIL’s discoveries will be contingent on arbitration withdrawal/resolution while ONGC could commence KG-DWN-98/2 development.

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About Motilal Oswal

Motilal Oswal was founded in 1987 as a small sub-broking unit, with just two people running the show. Today it has a 2000 member team with a networth of Rs7 bn and market capitalization as of March 31, 2008 at Rs19 bn.


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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor accept any liability whatsoever arising from the use of any of the above contents.

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