Earnings Feast: Gas price hike to fuel top line growth for RIL, ONGC

New Delhi: State-owned Oil and Natural Gas Corporation (ONGC) is likely to see a $3 billion (about Rs23,000 crore) rise in its annual earnings from the more than doubling of the price of natural gas it produces, while Reliance Industries (RIL) may get $1.5 billion (Rs11,500 crore) more in revenue, a report has said.

The government from April 1 increased the gas price paid to producers of oil and regulated fields from $2.9 per million British thermal units (mmBtu) to $6.10, a record high. For difficult fields, such as deepsea fields of Reliance, the price has gone up by 62 per cent to $9.92 per mmBtu. "A three-pronged deficit in oil markets (inventory, capex and spare capacity) combined with rising domestic gas production after nearly a decade of declines sets the stage for a super-cycle in profitability," Morgan Stanley said in a note.

Gas accounts for 58 per cent of domestic gas production for ONGC and every $1 per mmBtu change in gas price affects ONGC's earnings by 5-8 per cent. "We foresee $3 billion earnings increase in FY23 (April 2022 to March 2023) and, more importantly, improving ROCE to above 20 per cent after more than a decade," it said.