A fire incident at Oil & Natural Gas Corporation 's (ONGC) Uran gas processing plant has caused significant disruptions to gas supply in Mumbai, affecting Mahanagar Gas Limited's (MGL) operations. The incident, which occurred around 3 pm, has led to a series of adjustments in gas distribution priorities.

Fire Incident Details

The fire broke out at ONGC's Uran facility and was successfully extinguished after a two-hour battle. Fortunately, no injuries were reported during the incident. However, the aftermath has resulted in a temporary halt in gas supply to MGL's operations in Mumbai.

MGL's Response and Supply Prioritization

In response to the supply disruption, MGL has implemented a strategic approach to manage the limited gas availability:

1. Priority to Domestic PNG Consumers: MGL is giving top priority to maintaining uninterrupted service for domestic Piped Natural Gas (PNG) consumers.

2. CNG Station Impact: Compressed Natural Gas (CNG) stations may experience supply issues due to low pipeline pressure resulting from the disruption.

3. Advisory to Industrial and Commercial Customers: MGL has advised its industrial and commercial customers to switch to alternative fuels temporarily.

Expected Resolution

The full restoration of gas supplies is anticipated once ONGC resumes normal operations at the Uran facility. MGL is closely monitoring the situation and working with ONGC to minimize the impact on its customers.

This incident highlights the interconnectedness of India's energy infrastructure and the cascading effects that a single disruption can have on various sectors of the economy. It also underscores the importance of robust emergency response protocols in critical energy facilities.

As the situation develops, both ONGC and MGL are expected to provide further updates on the restoration of normal gas supply to the affected areas in Mumbai.

The Indian government's decision to increase the Goods and Services Tax (GST) on exploration services has raised concerns about its potential impact on major oil and gas companies. The GST rate for exploration services, including seismic surveys, geological analysis, and drilling operations, has been hiked from 12% to 18%, effective September 22.

Impact on ONGC

Oil & Natural Gas Corporation (ONGC), India's largest oil and gas exploration and production company, is expected to feel the effects of this tax increase:

• ONGC's exploration costs amount to ₹19,500.00 crore, representing 13% of its standalone revenue.
• The 6% GST hike is anticipated to raise ONGC's overall expenses by approximately 1%.
• This increase is expected to reduce ONGC's Earnings Per Share (EPS) by less than ₹0.70 per share.

Implications for Oil India

Oil India Limited, another major player in the Indian oil and gas sector, will also be affected by the GST rate change:

• Oil India's exploration costs stand at ₹1,980.00 crore, accounting for 9% of its revenue.
• The tax hike is likely to increase Oil India's expenses by about 0.5%.
• The company's standalone EPS is expected to decrease by 1.5% as a result of this change.

Market Reaction

The news of the GST hike has already had an impact on the stock market:

This GST rate increase comes at a time when oil and gas companies are already facing challenges in the global energy market. The additional tax burden on exploration services may potentially affect the companies' exploration and production activities, which are crucial for maintaining and increasing domestic oil and gas output.

While the immediate impact on earnings appears to be moderate, the long-term implications of increased exploration costs on India's energy security and the companies' future investment decisions remain to be seen. Investors and industry analysts will be closely monitoring how these companies adjust their strategies to mitigate the impact of higher exploration costs in the coming quarters.