Emkay Global Financial Services has come out with its report on oil and gas sector. According to the research firm, any increase in domestic prices would negative impact the downstream consuming sectors, predominantly power and fertilizer sectors.
Emkay Global Financial Services has come out with its report on oil and gas sector. According to the research firm, any increase in domestic prices would negatively impact the downstream consuming sectors, predominantly power and fertiliser sectors.
Rangarajan committee recommends price and production linked bidding and revenue sharing with the govt as against current practice based on cost recovery.
Recommends gas pricing based on average netback price of Indian LNG import at the wellhead of the exporting countries and weighted average price of US, UK and Japan markets
If gas pricing proposal implemented it would be positive for RIL in the medium-term. However, ONGC and OIL too would get benefited in the long run. Negative for GAIL Rangrajan committee has submitted its report to PMO. The recommendations are mainly focused on two aspects 1) Existing Production Sharing Contracts (PSC) and its structure 2) Gas pricing formula.
Some of the Key recommendation
1) On PSC
Impact on players/contractors - Negative
(ii) To boost the overall investment in E&P space; committee recommended increasing the tax holiday from 7 years to 10 years.
(iii) Bidding criteria in the proposed new system:
(a) Companies will be required to bid for the Government share of production, after royalty, as per the matrix provided. The bid has to be made separately for oil & gas cases.
(b) The production share for each combination of price-class and incremental productiontranche in the matrix would be biddable by the Contractor. The bid has to be progressive and incremental in terms of the Government take, i.e., the Government take will be in ascending order for corresponding increases in production and price. Thus, under the proposed system, Government take will be progressive with respect to both production and prices.
(c) Bidding in constant terms or fractional bidding will not be permitted.
Bid evaluation criteria (BEC):
(b) Government NPV will be calculated on benchmarked production profile.
(c) Highest oil & gas price of each band and US $ 140 / Bbl for oil and US $ 12 / MMBtu for gas (as the case may be) for the highest tranche will be used for calculating Government NPV.
(d) Company offering highest NPV @ 10% combined for oil and gas can be awarded highest score on the fiscal package in the process for award of the block.
Downstream sectors to take a hit
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
To read the full report click here
READ MORE ON Emkay Global Financial Services, Rangarajan committee, oil and gas sector, LNG, ONGC, OIL, GAIL, RIL, RIL, PMO, BEC, PSC
Set email alert for
ADS BY GOOGLE
video of the day
No one doubts India; rate cut lurking: Motilal Oswal