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LNG losses loom ahead: GAIL woos media and brokerages
Mar 22:   Ahead of the looming loss arising out of its LNG operations, GAIL is busy building up a consensus among stock brokerage houses and the media that it will be able to absorb the hit through higher profitability in its domestic operations.
8The company claims that the utilization of its Pata petrochemical plant -- whose capacity was doubled recently -- which stands at 70% now will be ramped up to 90%-100% in FY18/19.
8Gas transmission volumes will stand at around 108mmscmd in March 2017 v/s 103mmscmd in 3QFY17. Lead by higher fertilizer and industry demand, gas volumes are expected to up significantly in the coming years.
8Importantly, the gas major claims that the progress of the Vijaipur-Auraiya-Phulpur pipeline (VAPPL) and the massively ambitious Urja-Ganga project is on track and completion deadlines will be met.
8The CCEA approved postal tariff (as against zonal tariff) for the Jagadishpur-Haldia-Bokaro-Dhamra Natural Gas Pipeline. GAIL is in fact in favor of postal tariff for all its 14 pipeline networks.
8GAIL has appealed to the Delhi High Court against the Petroleum and Natural Gas Regulatory Board’s (PNGRB) attempt to fix tariff for pipelines. Recently, in response to an appeal by IGL, a GAIL affilaite, the Supreme Court (SC) announced a verdict that limited the PNGRB’s scope only to third-party gas transmission.
8While the PNGRB, in its final tariff order, may cut the tariff on the HVJ pipeline, GAIL claims that a postal tariff formula and the Supreme Court judgement will help stem losses from tariff cuts.
Comment: Even as there is a clarion call for reforms in gas infrastructure to shore up gas demand, GAIL seems be not just holding on but concentrating its monopoly grip on the sector. The call for separating its trading arm has been ignored by the government so far. Assisted by strong legal teams, the company has been pushing the legal system to consolidate its grip on the gas sector. Eventually GAIL's monopoly will yield more harm than benefit. And even as gas major launches an astute campaign to window dress the losses it is likely to face in its LNG operations, there is still a strong case for a full investigation into the decision making leading up to the acquisition of LNG capacity in US terminals.Click on Report
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