• How India’s gas companies benefit from halving of Spot LNG prices

    A sharp 50 percent decline in spot LNG prices to $14 per MMBtu is a clear positive for most Indian gas companies, according to brokerage firm CLSA

    Indian city gas distributors such as Indraprastha Gas Ltd. (IGL), Gujarat Gas Ltd., and Mahanagar Gas Ltd. (MGL) should see strong margins in the last quarter of the current fiscal due to the halving of spot LNG prices compared to that in December, according to the brokerage.

    High gas prices have hit the margins and earnings of the city gas companies in past quarters. As the gas companies resorted to price hikes following an increase in international gas prices, their volumes were hit due to a reduced price gap between CNG and piped natural gas and other fuels like diesel.

    CLSA mentioned that due to the decline in the prices, the demand for LNG has rebounded by 2-3 percent on a monthly basis. The brokerage expects that higher demand is likely to drive a volume recovery in the January-March quarter for gas distributors Gujarat State Petronet Ltd., Petronet, and GAIL.

    Also, a unified tariff is likely to be implemented within two weeks, CLSA said. The oil sector regulator, PNGRB, this month proposed to raise the average tariff across all pipelines for GAIL by 41 percent.

    CLSA said that the unified tariff could drive a 50 percent hike in GAIL’s integrated pipeline tariff which will boost its margins and profits.

    GAIL shares are trading 0.14 percent lower at Rs 110 and Petronet LNG shares are trading 0.54 percent lower at Rs 231.30. GSPL shares on the other hand are trading 1.57 percent higher at Rs 274.25.

    Shares of city gas companies like IGL, Gujarat Gas, and MGL are also trading lower by up to 2 percent.

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