Moody’s: GAIL, Petronet to benefit most from surge in India’s LNG imports

Moody’s Investors Service says that the expected surge in imports of liquefied natural gas will benefit the country’s leading importer of the chilled gas, Petronet LNG (PLL) and dominant gas distributor, GAIL, the most, because of the increased usage of their gas infrastructure.

“India’s LNG imports should more than double to 24 million tonnes per annum by 2020 from 10.7 million tonnes in the financial year ended 31 March 2014, because of low and sustained LNG prices, rising industrial demand, and falling domestic gas production levels,” says Abhishek Tyagi, a Moody’s Vice President and Senior Analyst for the Public, Project and Infrastructure Finance Group.

“The stimulant effect on demand of lower LNG prices would be felt post 2017, because the fuel is mostly imported under long term contracts, which are generally linked to five-year average crude oil prices,” says Vikas Halan a Moody’s Vice President and Senior Credit Officer for the Corporate Finance Group.

Moody’s analysis is contained in its just-released report titled “India Infrastructure: India’s LNG Import Boom Is Credit Positive for GAIL, PLL,” and is co-authored by Halan and Tyagi.

Moody’s report says the demand for LNG in India would be even greater if it were more widely used by the power generation sector, which currently absorbs only 10% of bulk imports because of the fuel’s persistently high price relative to coal and domestic gas.

As for GAIL in particular, Moody’s report says that as the largest owner of gas pipelines in India, and given the company’s capacity utilization rate of 45%, Moody’s estimates that even a 5% increase in the company’s capacity utilization rate will result in profits increasing by about 10%.

On PLL, Moody’s report points out that the company’s regasification capacity which accounts for around 76% of India’s total installed capacity will continue to exhibit the largest market share for the foreseeable future, given the limited competition in the regasification sector.

Image: Petronet LNG