Oil and gas stocks under pressure; ONGC, Oil India tank over 5%

Shares of oil and gas companies are under pressure, falling by up to 7% on media reports that the government may allow the higher gas price only for incremental production over and above the current levels.

Oil and Natural Gas Corporation (ONGC), Oil India, Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL), Indian Oil Corporation (IOC) and Reliance Industries (RIL) are down between 2-7% on the Bombay Stock Exchange (BSE).

The S&P BSE oil and gas index, the largest loser among sectoral indices, is down nearly 4% compared to 0.46% decline in benchmark S&P BSE Sensex at 1245 hours.

The petroleum ministry has proposed that higher gas price as per the Rangarajan formula could be allowed only for incremental production over and above the current levels, as an alternative to applying the formula unconditionally from July 1, the Financial Express report suggests.

The new move could be a dampener for ONGC, which produces 60 million metric standard cubic metres per day (mmscmd) of gas; more than two-thirds of the country’s total production of the fuel, as there are little chances that the PSU would dramatically increase its production. The same applies to Oil India, another PSU gas producer.

Among the individual stocks, ONGC, the largest loser among the pack, has tanked 8% to Rs 409, its sharpest intra-day fall since August 2013 on BSE.

Oil India has plunged nearly 6% to Rs 565, followed by HPCL and BPCL 4% each at Rs 388 and Rs 570 respectively. IOC is down 3% at Rs 333 and RIL by 2.2% at Rs 1,043.