India's imports of liquefied natural gas (LNG) are set to more than double over the next five years to 24 million tonnes per annum by 2020 from 10.7 million tonnes in the financial year ended March 2014 and this surge in imports will benefit LNG importer Petronet LNG Limited and dominant gas distributor GAIL (India) Limited the most owing to the increased usage of their gas infrastructure, research and ratings agency Moody’s has said in a report.
"India's LNG imports should more than double to 24 MTPC by 2020 because of low and sustained LNG prices, rising industrial demand and falling domestic gas production levels," said Abhishek Tyagi, Moody's Vice President and Senior Analyst for the Public, Project and Infrastructure Finance Group who co-authored the report along with Vikas Halan, Senior Credit Officer for the Corporate 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, Halan said in the just-released report titled "India Infrastructure: India's LNG Import Boom Is Credit Positive for GAIL, PLL".
According to the report, the demand for LNG in India would be greater if it were more widely used by the power generation sector which currently absorbs only 10% of the bulk imports because of the fuel's persistently high price relative to coal and domestic gas.
Moody's report also said that as the largest owner of gas pipelines in India and given the company's capacity utilization rate of 45%, even a 5% increase in GAIL (India)’s capacity utilization rate will result in profits increasing by about 10%.
The report also pointed out that PLL’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.