* India to double price of natural gas from April 2014
* Shares in Indian energy companies rally
* ONGC, Oil India say decision to bolster profits
By Prashant Mehra
MUMBAI, June 28 (Reuters) - Shares of Indian oil and gascompanies rallied on Friday after the government approved adoubling in domestic gas prices from next April, signalling itsintent to make the country's troubled energy sector moreattractive for investment.
Shares in the largest state producer, Oil and Natural GasCorp, jumped 5.4 percent in early trade, whileReliance Industries, which operates the country'sbiggest gas block off the east coast along with BP Plc,rose 3.4 percent in a strong Mumbai market.
Indian state energy companies said the government's decisionlate on Thursday to approve a gas price hike for the first timein three years would boost their profits.
Indicative pricing suggests domestic gas could double toaround $8.4 per mmBtu from April 1, 2014.
"It is more than expected. We expected up to $6.7 (permmBtu). This is really positive. It will encourage us to investmore in exploration," TK Ananth Kumar, finance director atstate-run Oil India Ltd told Reuters.
The revised prices would put India roughly in line withIndonesia's $6-$9 per mmBtu, but were still short of typical LNGimport costs.
Demand for gas in Asia's third-largest economy far outstripsproduction, as India's desire to keep prices cheap for the powerand fertiliser industries deters investment in costly producingareas and in pipelines and terminals for more expensive LNG.
India, the world's fourth-largest energy consumer, uses coalfor nearly 56 percent of its energy needs, while oil accountsfor another 26 percent. It aims to double the proportion of gasin its energy mix to 20 percent by 2020.
The price increase is expected to be unpopular with votersahead of local and national elections in the next 12 months, butis key to easing acute power shortages in the country, wherecheap gas deters investment and keeps demand far above actualuse.
Shares in gas producers jumped on Friday on expectation of asharp increase in profitability.
ONGC expects to add about 80 billion rupees ($1.34 billion)in profits annually thanks to the increase in gas prices, itsfinance head said.
Oil India is likely to add about 10 billion rupees inprofits annually, Kumar said.
Billionaire Mukesh Ambani's Reliance, which has seen a slumpin gas output from its KG D6 gas fields, has said gas pricesneed to be increased in order to encourage further investment.
"We project upside of 39 percent for ONGC and 20 percent forReliance for our FY 2015 earnings estimates. At constantcurrency, we estimate the earnings upside at 26 percent for ONGCand 4 percent for Reliance," Morgan Stanley analysts said in anote on Friday.
BP (BP.)
