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The LNG portfolio business-III: Why is GAIL outgunned and outmaneuvered?
Jun 30: GAIL is an equity holder for 5.8 MMTPA of LNG out of the US and yet it seems to have missed the portfolio bus entirely.
8The 2017 data carried by this website will show that all the big names with equity LNG are already in the portfolio business, with contracts finalized well into the future.
8GAIL is not in the picture anywhere here, though it should have been. It had enough time to be in the list.
8Except for placing a small quantity of LNG on the long term basis, the Indian gas major has not been able to push its way through in this highly sophisticated and competitive market.
8The reason for it is the one-dimensional thinking by GAIL, that it would be able to garner sellers in Europe or somehow bring the LNG to India, either directly or via swap mechanism.
8The portfolio business is beyond GAIL's grasp. It is both out gunned and out maneuvered here.
8GAIL's idea is to float an international tender to swap or sell its LNG commitments, much the same way as it does when ordering for a spot cargo or its domestic pipeline contracts, and wait for someone to respond.
8The Indian gas major automatically assumes that the world will respond, but there is no reasonable response because more agile players have already tied up the business.
8It is too late for GAIL to learn the tricks of the trade either, as it requires a sophistication of approach and specialized manpower that the company lacks.
8The company has no option but to offload its US commitments into India at a huge discount.
8A hit of USD1/mmBtu could wipe out 22% of GAIL's EBIDTA.
8Everyone is now waiting to figure out what is going to be the exact level of discount -- as that will depend on the prevailing ex-ship LNG price in India -- and by how much will its profitability be eroded by the discount.
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