Fitch Ratings on Wednesday said natural gas prices in India remain unattractive towards drawing large investments despite liberal exploration terms and higher rates for difficult discoveries. In a report '2017 Outlook: Indian Oil & Gas', Fitch said India's petroleum product consumption will remain strong at around 5-6 per cent in 2017 but the profitability in the oil and gas exploration and production segment will remain weak.
“We believe gas prices remain unattractive towards drawing large investments despite a new hydrocarbon exploration licensing policy that eases regulations, and the government allowing higher gas prices for deep and ultra-deep water and difficult fields,” it said.
Fitch expected the operating environment to remain challenging for Indian upstream companies in 2017 at its oil- price assumption of $45 per barrel, and low natural-gas prices. Stating that it did not expect any major improvement in profitability at Oil India ltd and upstream operations of Reliance Industries ltd, it said that most domestic gas fields are likely to make losses in 2017.
“Without a change to the pricing mechanism, Fitch does not expect a significant improvement in gas prices. At the current gas price of $2.50 per million British thermal unit in India, OIl can only recover the cash costs of bringing the as to the surface, but not the production levies, taxes, and sunk costs,” the report said.