Cairn India will not be impacted by the hike in the price of domestically produced gas.
Compared to the new price, announced on October 18, of $5.61 a unit (gas is measured in million British thermal unit) for domestically produced gas to be applicable from November 1, Cairn already sells gas from its Ravva fields in the East Coast at about $5.6 a unit and the Barmer output at about $8 a unit.
According to Cairn, the price at which it sells its Barmer gas is based on what has been provided in the block production sharing contract.
Further, the Government has said the new rates will not be applicable where the production sharing contract provides a specific formula to set the price.
Cairn India, which is gearing up to almost double its output to 0.42 mscmd (million standard cubic metre a day), has approached the Ministry of Petroleum and Natural Gas for higher allocation of gas from its Rajasthan fields.
The Rajasthan joint venture of Cairn India and ONGC, which commenced sales from RJ-ON-90/1 Block in April 2013, has requested the Ministry for increasing allocation to 0.42 mscmd on firm basis and up to 0.6 mscmd on fallback basis.
As Cairn readies to release its second quarter numbers on Tuesday, analysts fear the steep decline in global crude prices will affect its performance.
The company sells crude oil to domestic refiners at 10-15 per cent discount to Brent.
According to the analysts, Cairn has been selling crude from its Barmer oilfields in Rajasthan at a discount of about 12 per cent.
The price at which Indian refiners bought crude from various sources during the July-September period averaged $101.71 a barrel. During the current quarter, till October 20, the Indian basket averaged $88.71/barrel, while Brent averaged $88.97.
During the first half of the current fiscal, Cairn India’s gross production, at 206,125 barrels, was 3 per cent lower than the previous year.
This, according to Cairn, was due to a planned shutdown at the Rajasthan facilities and suspension of gas sales at Ravva block.
Though the company maintained that this was partially offset by higher output in the Cambay block, analysts say it will have an impact on the numbers.