News: Oilex investors eye high Cambay gas prices

Oilex (LON:OEX, ASX:OEX) is set to benefit from high gas prices as it brings the Cambay field in India into production.

Sundeep Bhandari, the company’s vice chairman, has revealed that gas produced at the field could “definitely” be sold for a price in excess of US$6 per thousand cubic feet (mcf) of gas.

A price in the range of US$8 to US$10 is most likely, according to Bhandari.

“It is a very good price anywhere in the world,” Bhandari said in an interview with IG Markets.
Indeed, at that level the Cambay gas price would represent a healthy premium to the reported prices for several other operations in India.

A national benchmark price of US$5.61 per million British Thermal Units, or mmBtu, of gas (1 mcf equals approximately 1.025 mmBtu) was brought in by the Indian government at the start of November.

Bhandari highlighted that India will continue to be a strong market for any domestic gas production, as the country is still heavily dependent upon imported liquefied natural gas supplies.

Earlier this week a gas sales agreement for gas produced by the Cambay-77H well was endorsed by the Indian government though the pricing was not disclosed.

The 77-H endorsement follows prior approvals for the sale of gas from the Cambay-73 and Bhandut-3 wells.

Oilex said on Monday that the agreements represented important milestones.

“Revenue from Cambay-77H will significantly move the India assets towards our 2015 goal of cash flow positive operations,” managing director Ron Miller said in a stock market statement.

Operationally, Oilex’s focus is currently on the planning of a programme of new drilling, which will aim to delivery additional gas supplies into a pipeline, located just seven kilometres from the field.

Oilex may also be positioned to take up new opportunities in India, where a new government is expected to make available many known but undeveloped gas fields.