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GAIL in trouble over US LNG commitments-IV: Break even only if crude hovers at $ 63/bbl
Jun 06: Clearly GAIL's arbitrage play is going to be profitable only when the Brent price is at $ 63/bbl.
8If oil prices are lower, as they are likely to be as the recent price rally was found unsustainable because the basic fundamentals were unsupportive, GAIL will be staring at big losses.
8Then again, most of the commitments for the extra LNG that GAIL can sell in the Indian market will come without take or pay obligations.
8This is a big risk in India as the market is extremely price sensitive and furnace owners can switch back to fuel oil or other low cost fuels if the price advantage disappears.
8What is also to be kept in mind is that GAIL has for a very long time abused its position as a monopoly supplier of gas and there is not a single buyer who does not have a  litany of complaints against the gas buyer.
8The gas major cannot sustain enduring relationships and in times of trouble , there will be no one in the domestic market who will be willing to help it out.
8The only relationship that it has managed to sustain with a great amount of vigour is the one with its master, the government of India, that springs to its defence every time it is in some kind of trouble, be it supporting the company brass even after an enquiry blamed the management for the death of 22 people in a pipeline blast or when there was a cry from the regulator and the industry to dilute the gas major's vice like grip on the domestic gas market.
8It will be interesting to watch what the government will do to bail out the company from the corner that it seems to have maneuvered itself into this time around.
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