India's GAIL to continue spot LNG purchases over next few quarters.

India's state-owned gas transportation utility GAIL Ltd is likely to import two to three spot LNG cargoes a month from the next quarter and into the next financial year (April 2011-March 2012), analysts said.

     Spot volumes are likely to go up due to the cap on Reliance Industries'KG D6 volumes, the production stoppage at BG's Panna field and softening of gas prices with shale gas volumes in the US, equity analysts who track oil and gas companies said.

     During a presentation to analysts early this month GAIL had indicated that it would bring in two to three cargoes a month in the coming quarters and 24-25 cargoes over the April 2011-March 2012 period, Yogesh Patil analyst at Arihant Capital markets said.

     "I am not sure about that [two-three cargoes]. But at least one cargo a month in the coming quarters and next financial year is what they are looking at," said an industry source.

     Analysts said GAIL is not likely to face pipeline capacity constraints in transporting the additional volumes. This year, Indian LNG imports have been somewhat reduced due to downstream capacity constraints.

     GAIL can regasify some of the spot cargoes at Petronet LNG's Dahej terminal and some of them at Shell's Hazira terminal, both located in the western Indian state of Gujarat. The existing HVJ pipeline with a capacity of 57.3 million cubic meters/day can transfer R-LNG from Hazira terminal, Patil said.

     The Vijaipur-Dadri pipeline  expanding from 20 to 80 million cubic meters/day  and the Dadri-Bawana-Nangal pipeline  31 million cubic meters/day  are partially commissioned, allowing for some additional gas flow north of Vijaipur; but completion is now expected by April 2011.

     The Dahej-Vijaipur phase 2  expansion from 24 to 78 million cubic meters/day  will also be completed in April 2011, Pradeep Mirchandani of JP Morgan wrote in a report dated August 11.

     "We have taken two to three cargoes a month into account for next three to six months for our share price analysis as we feel spot demand may change once the Panna field comes back to production and KG D6 starts ramping up from the current 60 million cubic meters/day, an analyst who tracks oil and gas
companies for a domestic brokerage firm said.
    
     OUTLOOK FOR PETRONET LNG

     Stock markets re-rated Petronet LNG stock in the last month mainly on hopes of higher regasification fee income, analysts said.
 
     Petronet is looking at some short-term supply contracts, of around three years, as well as the regasification fee on spot cargoes, which should give them higher profitability, Patil said.

     Petronet's stock jumped from Rupees 82.25 ($1.75)/share a month ago to Rupees 119.55/share on August 23, hitting a 52-week high, and is currently trading at Rupees 118.80/share on the Bombay Stock Exchange.

     Apart from Petronet's LNG spot imports, the markets have also accounted for regasification volumes from GAIL.

     "We have assumed 500,000 mt/year of spot volume for the remaining quarters of 2010-2011 compared with an earlier estimate of zero, Maulik Patel of Equirus Securities said in a research report released August 24.

     Patel also hinted at Petronet adding 1-2 million mt/year of LNG volumes with the proposed joint venture with Gujarat State Petroleum Corp. to build two additional storage tanks at the Dahej terminal.

     GSPC is keen to enter into spot and long-term LNG contracts to meet the burgeoning requirement of its downstream operations, but limitations on LNG import capacity have hampered its efforts, Patel said.

     Though the GSPC-Petronet JV is yet to be finalized, Patel said such a move would ensure additional volumes of 1-2 million mt/year.

     Additional storage is also important for Petronet LNG as there was a report early this year of a GSPC cargo being diverted to Shell's Hazira terminal as Petronet could not accommodate the spot cargo, analysts pointed
out.

Source : platts.com