GAIL’s LNG gains
Indian Liquefied Natural Gas (LNG) importer, GAIL, has benefited from the revised contract with RasGas of Qatar, with a 60 per cent drop in price.
GAIL’s revised its contract from January 1, 2016, at US$5 per million British thermal unit (mmbtu) on Free On Board basis, 60 per cent lower year-on-year, said Japanese investment bank Nomura in a research report.
GAIL has also secured additional 300,000 metric tonne of RasGas LNG at more competitive prices than the existing contract.
“There is not much concern on gas marketing in the near term. With low demand for expensive RasGas LNG, GAIL was forced to sell (in the Indian market) gas at a loss in 2015, impacting earnings.
“Now with LNG prices benign, and demand strong, the likelihood of any marketing losses in the near term is low, in our view,” said Nomura in the report “Worst is over for GAIL”.
GAIL is also benefiting from the declining Liquefied Petroleum Gas (LPG) and improving prices of petrochemical products in the domestic market while weaker crude oil prices, it noted.
With recovery in earnings starting from coming quarters, Nomura forecasts a 79 per cent growth in GAIL’s earning per share in fiscal year 2017 and 30 per cent in FY18F.
GAIL’s earnings for FY16 are forecast to decline by 27 per cent compared to FY15’s 31 per cent drop when prices and marketing environments were challenging. fii-news.com
