Gujarat Gas, the Gujarat based natural gas transporter has outperformed stock markets by a wide margin and is currently trading just 10% below its 52- week high even in the current difficult times. This is despite stagnation in its FY08 financial performance and a fall in the natural gas volumes it sold. The prevalent regulatory scenario is constricting the company in laying pipelines or sourcing more natural gas - the two most important factors needed for its future growth. The natural gas volumes for the company, which grew at a cumulative annual growth rate of 19.8% between ‘04 and ‘07, dropped by 8.9% in ‘08 to 1,089 million metric standard cubic metres (mmscm). This was due to the government’s decision to vest the marketing rights of the natural gas produced by Panna-Mukta-Tapti (PMT) fields with Gail effective 1 April ‘08. With its parent British Gas holding a 30% stake in PMT, it continues to be the largest source of natural gas for Gujarat Gas, accounting for over three-fourths of the gas it sold in ‘08. At present, the company is unable to source natural gas from domestic sources due to the shortage of gas and regulatory restrictions on the end use wherever it is available. For example, new gas from RIL’s KG basin is earmarked firstly for the fertiliser industry and secondly, for power industry and is unavailable for even RIL for its captive consumption. As a result, Gujarat Gas has been importing LNG on spot basis - a costly alternative - to cater to its customers, which are predominantly industrial retail units.
The only way of securing a slice in the increasing domestic availability of natural gas is to set up new city gas distribution (CGD) projects, as around 5 mmscmd of natural gas is earmarked for this purpose. However, setting up CGD projects needs permission from Petroleum and Natural Gas Regulatory Board (PNGRB). Gujarat Gas has obtained PNGRB’s permission to continue operating its existing CGD networks in Ankleshwar, Bharuch and Surat and has applied for areas in Kachchh and Bhavnagar.As the things stand, the company is constrained by the availability of natural gas in its existing areas and the geographical expansion will depend on regulatory approvals. Till such time it is able to secure natural gas supplies, the company’s growth prospects appear limited.
The only way of securing a slice in the increasing domestic availability of natural gas is to set up new city gas distribution (CGD) projects, as around 5 mmscmd of natural gas is earmarked for this purpose. However, setting up CGD projects needs permission from Petroleum and Natural Gas Regulatory Board (PNGRB). Gujarat Gas has obtained PNGRB’s permission to continue operating its existing CGD networks in Ankleshwar, Bharuch and Surat and has applied for areas in Kachchh and Bhavnagar.As the things stand, the company is constrained by the availability of natural gas in its existing areas and the geographical expansion will depend on regulatory approvals. Till such time it is able to secure natural gas supplies, the company’s growth prospects appear limited.
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