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India’s LNG imports to double by 2020 – Moody’s

India’s LNG imports should more than double to 24 million tonnes per annum by 2020 from 10.7 million tonnes in FY2014, Moody’s investor service said, adding that this will benefit GAIL and Petronet NG the most.

“The expected surge in imports of liquefied natural gas (LNG) will benefit the country’s leading LNG importer, Petronet LNG Limited and dominant gas distributor, GAIL (India) Limited the most, because of the increased usage of their gas infrastructure.”

While falling domestic gas production will be one reason, other reasons for the jump in LNG imports into India will be low and sustained LNG prices, rising industrial demand, and falling domestic gas production levels, said Abhishek Tyagi, a Moody’s Vice President and Senior Analyst for the Public, Project and Infrastructure Finance Group.

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Moody’s report says the demand for LNG in India would be even greater if it were more widely used by the power generation sector, which currently absorbs only 10% of bulk imports because of the fuel’s persistently high price relative to coal and domestic gas.

LNG is liquified natural gas. India consumes about 100 mln tonnes of petroleum products a year. It was expected that with generation from new blocks such as those in Krishna Godavari basin, India would be able to generate about 20 mln tonnes of natural gas by now.

However, the expectations have been largely misplaced as the expected spike in production failed to materialize. This has led to continued reliance on foreign natural gas shipped as LNG.

“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,” says Vikas Halan a Moody’s Vice President and Senior Credit Officer for the Corporate Finance Group.

As for GAIL in particular, Moody’s report says that as the largest owner of gas pipelines in India, and given the company’s capacity utilization rate of 45%, Moody’s estimates that even a 5% increase in the company’s capacity utilization rate will result in profits increasing by about 10%.

On Petronet, Moody’s report points out that the company’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.

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