Gujarat Gas to prefer domestic suppliers for procurement of LNG

Last Updated: Tue, Jan 01, 2013 19:34 hrs

However, experts from the oil and gas industry feel that the move by company would not bring much relief in the present high price situation

City gas distribution major Gujarat Gas Company Ltd (GGCL) has decided to focus on domestic suppliers for procurement of LNG after its supply contract with BG gorup subsidiary, BG India Energy Solutions Private Limited (BGIES) expired last month. GGCL used to source re-gasified LNG (RLNG) from BGIES.

After British Gas Group sold its stake in GGCL in October, 2012, the company has decided to give preference to domestic suppliers. GGCL has PNG customer base of over 350,000 in three cities of Surat, Ankleshwar and Bharuch. It also has close to 200,000 CNG consumers.

"Our contract for RLNG supplies with BG gorup subsidiary, BGIES had expired in December 2012. This required us to look for other sources for 2013. We have developed a multi-source portfolio for RLNG supplies," Sugata Sircar, managing director, GGCL had told earlier.

"We are increasingly focusing on domestic supplies. Earlier too we have sourced RLNG from domestic suppliers including IOC," Sircar had stated.

However, the company continues to explore alternate available RLNG sources. BGIES is an BG group subsidiary engaged in LNG imports as well as gas aggregation.

Recently, Gujarat Gas had entered into an agreement with state-run Gujarat State Petroleum Corporation Ltd (GSPC) for purchase of 1.1 million standard cubic meters per day (mmscmd) of RLNG for the month of January.

However, experts from the oil and gas industry feel that the move by company would not bring much relief in the present high price situation.

"The move by the company would result in secured supplies from the domestic players. There is already pressure on margins due to high prices of imported spot LNG, which is influenced by international market conditions," said an analyst from Mumbai.

"Financially, GGCL is pretty healthy. But December quarter may see some pressure on margins. Even as rupee has appreciated against dollar, spot LNG prices have increased during this period. There will be some impact on company's margins for the period," said Deepak Pareek, research analyst with Prabhudas Lilladher. Currently, GGCL sources about 33 per cent of the company's gas requirements through RLNG.

"Once spot LNG prices cool after winter season, there will be signs of improvement in margins for the company. But that will be reflected in the second quarter (April-June) of 2013," added Pareek.

The international spot LNG prices have shown signs of strengthening post August. The spot LNG quoted in the range of US $ 13-14 per million metric British thermal unit (mmBtu) in July-August 2012. In November the prices touched US $ 19 per mmBtu.

UK's energy major, BG Group had sold its 65.12 per cent stake in GGCL to GSPC Distribution Networks, a subsidiary of GSPC for around Rs 2400 crore in October, 2012.

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