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ICICI Securities Report
We expect markedly stronger prospects for Indian gas companies in FY24E, helped by-
rising domestic supplies,
moderate liquefied natural gas costs,
probability of resumption of liquid fuel price hikes by oil marketing companies and
stronger prices of industrial fuel alternatives (propane, FO, naphtha).
The combination of more affordable gas prices and therefore, a stronger margin environment as well as the potential to drive gas demand higher is a material positive for demand over FY24-25E.
We see ~20 million metric standard cubic metre per day of additional gas supply from domestic sources over FY24-25E, with management guidance for both Oil and Natural Gas Corporation Ltd. and Reliance Industries Ltd. (sources of this supply) suggesting the plateau period for these new fields at two-three years.
Given an estimated requirement of ~35 mmscmd of spot LNG in FY24E (extrapolating from current year), these additional domestic volumes will switch gas priced @$20- 25/metric million British thermal unit with $12/mmbtu gas to the extent of ~60%, a huge change for Indian sourcing mix and margin profiles.
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