India’s gas importers benefiting from easing prices: Nomura report

Singapore, June 10: India’s leading gas importers are benefiting from easing prices of liquefied natural gas (LNG) prices with promises of strong profits in the coming months, Japanese financial services firm Nomura has said in a report.

“After having performed weakest in the past year, GAIL looks set to stage a strong comeback,” Nomura said in its global market research report released on Thursday. GAIL is benefiting from lower natural gas price in the domestic market and imports, as well as the recent strength in the petrochemical product prices.

It has benefited from the revised LNG contract prices with RasGas of Qatar, according to the report, which estimates the price at $5 per million British thermal Unit (mmbtu), down 60% on the year.

Comparative spot LNG prices at $4-4.5/mmbtu are even lower. It also expects GAIL to renegotiate its LNG import contracts based on Henry Hub prices in the US.

Saying the worst is over for GAIL, the report forecast 79% increase in the company’s Earnings Per Share growth for fiscal year 2017 and 30% in 2018. It expects GAIL earnings to decline by 27% for this year, having recorded a steeper 55% decline in the first half of the year. GAIL saw its earnings drop by a sharp 31% in FY15, after having reported yearon-year growth on each year for the past decade.

The outlook also remain bright for Petronet LNG (PLNG). PLNG will also benefit from lower prices and continues to benefits from expansion at Dahej LNG import terminal which is being expanded to 17.5 million tonne (mt) capacity by 2019, up from 15 mt by end of this year.

“We expect that after 25% growth in FY16F, (as forecast), growth will be 22% in FY17F, before growing sharply by 47% in FY18F as benefits from the Dahej expansion feed through.

GAIL is benefiting from lower natural gas price in the domestic market and imports, as well as the recent strength in the petrochemical product prices