Fitch trims India’s gas consumption growth to 5% on high prices – Times of India

NEW DELHI: Fitch Scores on Tuesday minimize its India gas consumption outlook for the present fiscal to a progress of 5 per cent because the current spike in home gasoline costs and excessive LNG charges would gradual the shift to the environment-friendly gasoline. The federal government greater than doubled the worth of gasoline from home fields to $6.1 per million British thermal unit for the six-month interval starting April 1.
“We anticipate natural gas consumption in India to extend by 5 per cent in FY23 (FY22 estimate: 6.5 per cent), decrease from our earlier estimate for 7 per cent progress, because the current sharp enhance in home gasoline costs and excessive LNG costs – each spot and time period contracts linked to grease costs – would gradual the shift in the direction of pure gasoline, in our view,” the score company mentioned.
Domestic gas production meets roughly half of the present consumption whereas the remaining is imported within the type of liquefied pure gasoline (LNG).
Fitch mentioned state gasoline utility GAIL (India) Ltd’s earnings from its pure gasoline advertising phase are prone to enhance as a result of current rise in spot LNG costs to ranges a lot greater than the long-term contracted LNG from US.
“However sustained excessive LNG costs would gradual gas consumption progress in India,” it famous.
GAIL usually hedges most of its quantity and worth threat on near-term deliveries of US LNG to cut back volatility and generate constructive return. Its provide of LNG from the US is linked to Henry Hub (HH) costs, that are decrease than present spot LNG charges, that are buying and selling above $30 per million British thermal items (mmBtu).
“Nevertheless, the remaining unhedged quantity impacts the corporate’s profitability, growing earnings during times of excessive spot LNG costs and resulting in losses throughout instances of low spot costs,” it mentioned.
Relying on the spot LNG worth differential between Europe and Asia, GAIL has the choice to promote a number of the provides from US in Europe by way of vacation spot swaps. Spot costs in each Europe and Asia are excessive, pushed by efforts by the EU to cut back reliance on Russian imports and thus competing with Asian LNG importers.
Fitch lately revised its title switch facility (TTF) gasoline worth assumptions to $20 per mmBtu for 2022 and $10 in 2023, reflecting the influence of geopolitical dangers on demand and provide of hydrocarbons.
“GAIL’s regulated gasoline transmission phase, which accounts for round 40 per cent of its complete EBIT, generates steady returns as it’s not affected by volatility in crude oil and LNG costs. Nevertheless, slower progress in gasoline consumption would have an effect on the enlargement of gasoline transmission quantity and, in flip, the EBIT progress for this phase,” it mentioned.
The score company expects GAIL’s monetary profile to stay commensurate with its credit score profile of ‘BBB’ at the same time as stronger profitability in FY22 and FY23 are anticipated to result in a rise in shareholder returns.
GAIL lately mentioned it plans to purchase again as much as Rs 1,080 crore of shares in April 2022.

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