ONGC and Reliance promise a material surge in domestic gas supplies over time but for now rising past the decade old plateau of 90mmscmd is still proving to be a challenge. Production slipped 0.8% m/m in May, eg., as 2.7% m/m lower output at ONGC offset gains at JVs. Oil India and CBM was flat.

Flagging gas production is unhelpful for ONGC but with every 1% impacting EPS by 0.2%, other factors matter more. In particular, higher oil prices bode well for its deregulated domestic JVs and petro-product segments and ONGC Videsh driving earnings higher even if realizations from domestic oil assets are capped at $50-55. With the stock also at 9.5x FY18 P/E when Brent averaged $57, valuations appear to adequately factor in risks of subsidies which we expect the OMCs to shoulder too in FY19E. Over time, we expect ONGC’s natural gas segment to do well too as gas prices rise 10% in 2HFY19E. Blended realizations could head even higher when the deep-water 5.5 mmscmd S1/V project, where it qualifies for prices that are more than twice that in its other fields, stabilizes later in FY19E $1/mmbtu- 9-10% for EPS.

Still, we expect PLNG to weather these challenges well helped by its low tariffs and LT contracts at Dahej and Kochi. Indeed, some 16mt of overall volumes appear secure.