(Bloomberg) -- India’s largest oil and gas producer will continue with its record investment plan despite a cut in domestic gas prices, which were reduced for the fourth consecutive time last week.
Oil and Natural Gas Corp. plans to invest about 300 billion rupees ($4.5 billion) in the year beginning April 1, including investment in its gas-rich Krishna-Godavari block off India’s east coast, ONGC’s Director for Finance A.K. Srinivasan said in a phone interview. It will spend as much as 293 billion rupees this financial year as part of its plan to boost oil and gas production.
“Gas prices are cyclic. Capex will continue,” Srinivasan said, adding that the company’s profit falls by about 24 billion rupees for every $1 cut in the gas price. “You can’t produce for one year and choke up and then continue again.”
The company has previously said it plans to invest $5 billion in its block in the Krishna-Godavari Basin. Its plans to spend 11 trillion rupees by 2030 to raise output is key to Prime Minister Narendra Modi’s target of cutting import dependence by 10 percent in the next six years. India, which imports most of its oil, will be the fastest-growing crude consumer in the world through 2040, according to the International Energy Agency.
On Friday, India cut the price of locally-produced natural gas by 18 percent for the six months beginning Oct. 1 to $2.5 per million British thermal units based on its gross heat value. It also reduced the ceiling price for natural gas extracted from difficult fields by 20 percent to $5.3 per million Btu.
“At such low gas prices, the upstream producers will be hit the most as gas production will turn loss making for most fields,” K. Ravichandran, senior vice president for corporate ratings at Mumbai-based credit assessor ICRA Ltd., said in a note on Monday.
ONGC’s shares rose 0.9 percent to 269.15 rupees at the close in Mumbai.
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