Companies & Sectors
Low gas price a boon for GAIL, Petronet, Indraprastha Gas, Gujarat Gas
Low gas prices would help in supporting the LNG pooling mechanism, and therefore, offer an excellent opportunity for a revival in consumption growth from these sectors, says Religare Capital Markets in a research note
 
There is an unusually positive alignment in the fundamentals of gas companies across the natural gas value chain, which may benefit the players in the sector. These are low global natural gas prices, favourable government policies, a surge in liquefied natural gas (LNG) regassification capacities, and a more positive role for Petroleum and Natural Gas Regulatory Board (PNGRB)’s role as suggested by recent court verdicts. Religare Capital Markets Ltd says it find a strong rationale for long-term investment in the sector, which has stocks like GAIL, Petronet LNG, Indraprastha Gas (IGL), Gujarat State Petronet (GUJS) and Gujarat Gas (GGAS).
 
 
The Religare research note sees revival in gas demand from price-sensitive segments, support from government policies, better prospects for pipeline and LNG infrastructure and improving clarity on RNGRB's role as the main reasons behind its rationale.
 
"Spot LNG prices have declined to less than $4.5 per million British thermal units (mmbtu), making it viable for price sensitive segments such as power generation and industrial applications using liquid fuel. While these prices may not sustain, global oversupply in LNG will ensure it remains competitive against alternate fuels," the report says.
 
Traditionally, demand for natural gas in India has been primarily driven by the power and fertiliser sectors. Since these sectors are regulated by the government, gas consumption is not purely a function of free market principles and hence is extremely price sensitive –especially for power generation. Low gas prices would help in supporting the LNG pooling mechanism, and therefore, offer an excellent opportunity for a revival in consumption growth from these sectors, Religare added.
 
 
According to Religare, the crash in global gas prices presents one of the best opportunities for the government to bring gas-based power plants out of the woods. At an LNG price of $5 per mmBtu ($4.5 per mmBtu on 25% blending with domestic gas), power tariffs would work out to about Rs4 per unit. "While this is still above the average Rs3.5 per unit for domestic coal-based generation capacity, it makes the blended costs comfortable enough for state electricity boards (SEBs) to buy power from gas-based plants," it said.
 
The planned increase in LNG regasification capacities on the west coast by around 14mmtpa (or 49mmscmd) by FY2019 will remove bottlenecks in LNG import capacity. Domestic gas production might also improve by 10-15mmscmd by FY2019.
 
 
Religare says, "We expect around 25mmscmd (out of 40mmscmd) of incremental gas supplies to be absorbed by the power sector, as the government’s pooling policy strives to achieve average PLFs of 30% by FY2020 on a base of expanded power generation capacity of 38,000MW. In a way, we do not expect gas-based power generation capacities to just about survive on government support. This implies deficit in gas consumption would expand to staggering 130mmscmd levels for the power sector by FY2018. There can therefore, be only upsides to our gas consumption estimates, if prices continue to sustain at current levels."
 
According to Religare, some government-driven initiatives such as LNG price pooling for the power and fertiliser segments, pollution control drives through the diesel vehicle ban and the push for compressed natural gas (CNG) vehicles have led to further improvement in LNG demand. It says, "We expect most of these initiatives to continue well beyond FY17."
 
The research note sees better prospects for pipeline and LNG infrastructure over next few years. "Over 100 million metric standard cubic meter per day (mmscmd) of LNG regasification capacities are expected to be commissioned over five years. Since most of these would commission on viability from long-term contracts, they offer gas supply certainty," it said.
 
Religare says limiting PNGRB’s role to setting bid guidelines and ensuring fair play in current operations is the need of the hour. The Supreme Court verdict in favour of IGL has set the ball rolling for more investments in the city gas distribution (CGD) business across the country. A similar ruling on tariffs for GAIL’s pipelines – after being slashed by an average of 60% over the last four years due to the regulator’s heavy-handed intervention – will ensure a strong revival in investment sentiments for cross-country natural gas pipelines, the report added.

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COMMENTS

Ramesh Poapt

1 year ago

guess, gaze,gauge-gas game! gainer companies?

Real Estate : Shalimar Estates Director Arrested
Ram Raj Verma had moved an application for registration of the allotment of a showroom in a shopping mall to be constructed by Shalimar Estates Private Limited in Mohali (Punjab). The total price of the showroom was Rs36 lakh. The draw of lots in respect of the commercial unit was held on 2 February 2006. Mr Verma was allotted a showroom of category ‘C’, with super-built-up area of 400 square feet. The complainant opted for instalment payment plan and deposited a total of Rs23.31 lakh up to 28 May 2007 with the developer. The remaining amount was to be paid at the time of possession.
 
Though a period of two years expired in February 2008, there was no sign of any construction at the site. Mr Verma sent several letters regarding wanting possession of the showroom but there was no response. Mr Verma then filed a case in the consumer court.
 
The Punjab State Consumer Disputes Redressal Commission, on 21 November 2014, asked Shalimar Estates to refund Rs23.31 lakh deposited by the complainant and pay a compensation of Rs1 lakh for mental harassment. The Commission also asked the realtor to pay Rs10,000 as cost of litigation.The local police arrested Ineet Aggarwal, director of Shalimar Estates Private Limited, for not complying with the order of the Punjab State Consumer Disputes Redressal Commission issued in November 2014. The Commission sentenced the owner of the real estate company to three years in jail. 

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Real Estate : NCDRC Asks Fairdeal Construction To Return Rs93.52 Lakh to Buyer

R Santhanam (of Chennai) complained to NCDRC (National Consumer Disputes Redressal Commission) that Fairdeal Construction said that land was available in Thiruvanmiyur. The proprietor offered for sale 5,650sq ft of land, which included four floors with two flats each. Mr Santhanam agreed to purchase eight flats, each measuring 1,670sq ft, at Rs7,000 per sq ft. Mr Santhanam provided Rs93.52 lakh to Fairdeal Construction by cheque as advance payment. According to the terms of the agreement, if clearance was not obtained within four months, Mr Santhanam could cancel the purchase and Fairdeal would have to return the advance with 12% interest. The realtor did not get approval within five months nor did he start construction. Hence, Mr Santhanam complained to NCDRC. NCDRC said that Mr Santhanam had proved the allegations through documentary evidence. It directed the realtor to refund the advance amount with 12% interest and Rs10,000 as litigation costs. 

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