Domestic gas consumption, which had witnessing a slight moderation in 2020-21 due to the Covid-19 pandemic, is now expected to grow by 9-11 % in the current fiscal.
This growth would be driven by demand revival, post easing of lockdown measures, increasing offtake by City Gas Distribution entities, expansion in pipeline network, new LNG terminals and commissioning of new fertiliser plants.
ICRA said in a statement:
- Further, despite the increase in gas prices, the cost economics remain favourable for CNG and PNG (domestic) compared to alternate fuels, although the competitive intensity is higher in case of industrial fuels
Also, the upstream oil & gas industry has benefitted from increasing demand and crude oil prices touching multi-year highs in the current fiscal which translated into healthy profitability and cash flow generation for companies.
Oil prices are expected to remain elevated in the medium term owing to increasing demand and graded increments in the production and supply by OPEC+ which will continue to support the revenues and profitability of the upstream oil & gas companies.
The agency said:
- The domestic gas prices have also witnessed an increase and it is expected that the domestic gas prices will go up further in the next round of revision, which would also support the profitability of the oil & gas companies
The core gross refinery margins of refiners were weak in the initial few months of 2021-22 but have improved sharply with increasing demand amid limited supplies and permanent closure of refining capacities in high-cost locations.