GAIL - Gazprom Supply Constraints To Persist Over The Next 12 Months: ICICI Securities

ICICI Securities Report

We met the senior management of GAIL India Ltd. for an update on business and the outlook ahead. Key takeaways:

Gazprom’s gas supply to GAIL as a part of long term 2.4 million tonnes per annum liquefied natural gas contract was paused from May 2022 and has not been reinstated. GAIL has tried to mitigate this shortfall of 8-9 million metric standard cubic metre per day by cutting down supplies to fertiliser and power sectors and also reducing utilisation of its own Pata Petrochemical plant (in Uttar Pradesh) to less than 40%.

There are still some customer contracts that it had to fulfill due to supply or pay obligation (to the extent of 1- 1.5 mmscmd) which it had done via spot LNG.

Going forward, some additional volumes from domestic sources (Reliance Industries Ltd., Oil and Natural Gas Corporation Ltd., Cairn) will help improve overall transmission volumes.

But for rest of FY23E and H1 FY24E, the shortfall is likely to persist and hence, we see transmission volumes persisting between 108- 109 mmscmd in the near term.

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