Profit at GAIL (India) Ltd GAIL.NS will be hit as it rations gas sales after supplies are cut under its long-term deal with a former unit of Russian energy giant Gazprom amid high spot prices, its head of finance Rakesh Kumar Jain said on Thursday.
GAIL, India’s largest gas distributor and operator of pipelines, imports 14 million tonnes per annum (mtpa) of liquefied natural gas (LNG) under various long term deals. Of this about 2.5 mtpa, or up to 39 LNG cargoes, were to be supplied this year by Gazprom Marketing and Trading Singapore (GMTS), now a unit of Gazprom Germania.
Since the end of May, GMTS has missed delivery of 8 LNG cargoes to GAIL and is not certain about future supplies as it is securing the fuel for Europe, Jain said in an analyst call. He said GMTS has not declared force majeure, but “they are not scheduling (LNG cargoes supplies) at the moment.
“Profitability certainly will be hit if the situation remains as it is today…There is a challenge in this quarter,” he said, adding GAIL’s gas marketing and transmission business will be hit due to lower supplies.
GAIL has cut supplies to fertiliser and industrial clients besides reducing operations at its petrochemical plant at Pata, northern India, by over 50% to avoid purchase of costly spot LNG, Jain said, confirming a Reuters report.
The state-run firm is also advancing delivery of some of its overseas LNG cargoes through time swaps and has chartered ships to bring in some of its U.S. LNG that it was planning to trade.
GAIL has deals to import 5.8mtpa LNG from the US.
Jain said GAIL is also scouting for long term LNG deals to secure supplies, although its previous tender for a 10-year 0.75mtpa deal failed.
The company agreed a 20-year deal with Russia’s Gazprom in 2012 for annual purchases of an average 2.5 million tonnes of LNG. Supplies under the contract began in 2018. GMTS had signed the deal on behalf of Gazprom. At the time, Gazprom Germania was a unit of the Russian state firm.
However, following Western sanctions against Russia over its invasion of Ukraine, Gazprom gave up ownership of Gazprom Germania in early April without explanation and placed parts of it under Russian sanctions.
(Source: Reuters)
GAIL Q1 net profit rises 51% to Rs 21.57 bilion on marketing margin boost
August 5, 2022: GAIL (India) Ltd, the nation’s largest gas utility, on Thursday reported a 51 per cent jump in its June quarter net profit on the back of bumper margins from gas marketing.
GAIL posted a consolidated net profit of Rs 3,250.95 crore, or Rs 7.34 per share, in April-June compared to Rs 21.5715 billion, or Rs 4.81 a share, net profit in the same period a year back, the company said in a regulatory filing.
Sequentially, the profit was lower than Rs 34.7377 billion net earnings in the January-March quarter. The rise in year-on-year profit for the nation’s largest gas transporter and seller was on the back of bumper earnings from natural gas marketing.
The firm reported a pre-tax profit of Rs 23.1791 billion from natural gas marketing in the first quarter of the current fiscal, as compared to Rs 4.4984 billion pre-tax profit a year back and Rs 19.7623 billion in the preceding quarter.
The margin on gas marketing made up for a 12.5 per cent decline in earnings from the gas transportation business and a 74 per cent drop in petrochemicals earnings.
Turnover more than doubled to Rs 380.3330 billion in the April-June quarter, from Rs 177.02.43 billion a year back, the filing showed. GAIL said the earnings per share have been adjusted on account of a buyback of 1.28 per cent shares by the company.
Last month, the board of directors of the company had recommended the issue of one bonus share for two existing equity shares. Later in a press statement, GAIL said standalone net profit rose 91 per cent to Rs 29.15 billion in Q1 FY23 (April 2022 to March 2023 fiscal) as against Rs 15.30 billion in the corresponding quarter of last fiscal.
“The positive results were mainly on account of increased gas marketing and transmission volumes, better marketing spread and higher product prices,” it said. Manoj Jain, Chairman & Managing Director, GAIL, said the company has successfully registered a healthy growth in the overall performance despite turbulent times in the gas business.
GAIL has incurred a capital expenditure of about Rs 19.75 billion during the quarter mainly on pipelines, petrochemicals and equity contribution to joint ventures, he said. GAIL has commissioned the 533-kilometre Bokaro (in Jharkhand) to Angul (in Odisha) pipeline section of the Jagdishpur-Haldia & Bokaro-Dhamra natural gas pipeline (JHBDPL) during the quarter.
With this, 1,642 kilometres of JHBDPL, popularly known as Pradhan Mantri Urja Ganga, has been commissioned while the remaining sections are expected to be completed by June 2023, Jain said.
The pipeline travels from Uttar Pradesh to West Bengal with spur lines to Jharkhand and Odisha.
He further added that to provide a thrust to the government’s focused initiatives to increase the share of natural gas in the primary energy basket, the company has approved the setting up of a Small Scale LNG (SSLNG) plant on a pilot basis and orders for two small-scale liquefaction skids has been placed.
This will help in providing natural gas to areas not connected to the main pipeline, facilitate LNG as transport fuel and help monetize stranded/isolated upstream gas assets, the statement added.