Gas stocks jump as RasGas may modify Petronet SPA

By: | 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 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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