1. Gas stocks jump as RasGas may modify Petronet SPA

Gas stocks jump as RasGas may modify Petronet SPA

Shares of gas distribution companies jumped on Friday, with Petronet LNG rising 6.5% and GAIL (India) advancing 10.5%, amid a spike in trading volume after Qatar-based RasGas Company agreed to modify sales and purchase agreement (SPA) with Petronet.

By: | Mumbai | Published: November 21, 2015 12:07 AM

Shares of gas distribution companies jumped on Friday, with Petronet LNG rising 6.5% and GAIL (India) advancing 10.5%, amid a spike in trading volume after Qatar-based RasGas Company agreed to modify sales and purchase agreement (SPA) with Petronet.

Shares of Petronet LNG ended at R220.10, up R14 or 6.79%, from the previous close.

More than 63.13 lakh shares exchanged hands on the BSE and NSE, up 5.58 times the 30-day average volume of 11.31 lakh shares. The stock has risen 22% in the last two months.

GAIL ended at R348.80 per share, up R31.90 or 10.07%, with more than an 11-fold jump in trading volume. The scrip has yielded 20% returns in the last two months.

Analysts said contract re-negotiation may provide significant earnings impetus to GAIL and remove the key overhang for Petronet. India lifted 30% less volume till July this year under the long-term Qatar LNG deal.

According to reports, Qatar’s second largest LNG producer agreed to modify long-term contract with LNG to spot buys. Contracts would now be linked at three months of Brent instead of 12 months, which would help lower cost of gas from $7 per million British thermal units (mmBtu) from $12.5 per mmBtu.

Qatar has reportedly agreed not to levy any pay liability for 2015 lower offtake, which was estimated at $1.5 billion. Petronet has a 25-year deal with Qatar’s RasGas to buy 7.5 million tonne of LNG annually.

However, Indian state-owned gas distribution companies have been under stress as LNG procured via long-term contract turned out to be expensive than spot buys after a steep decline in global crude oil prices.

Shares of Indraprastha Gas – the state-owned natural gas distribution company owned by BPCL and GAIL – advanced nearly 4%, while shares of Gujarat Gas rose 6%.

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