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India Gas Supply Hit: West Asia Conflict Sparks Fears
13 Mar
Summary
- Daily sales volumes may drop up to 10% due to West Asia conflict.
- Higher input costs are expected to be passed to consumers.
- Sector credit profile remains resilient despite potential volume moderation.
India's city gas distribution (CGD) sector anticipates daily sales volumes to decrease by 8-10% due to supply disruptions stemming from the West Asia conflict. This moderation is expected to continue until geopolitical stability is restored.
Companies are likely to pass on higher input costs to consumers, which should support profitability. The sector's reliance on domestic natural gas for 60% of its needs, with imports comprising the remaining 40%, is a key factor. A force majeure declared by QatarEnergy has intensified supply disruptions.
The compressed natural gas (CNG) and piped natural gas for households (PNG-D) segments, which constitute 70% of sales, are less affected as they primarily use domestic gas. Conversely, the industrial and commercial piped natural gas (PNG I&C) segment, accounting for 30% of volumes, is more vulnerable due to its higher dependence on imported liquefied natural gas (LNG).
Gas traders are seeking alternative sources, but global market constraints and elevated spot prices, which have risen to $19-20 per MMBtu from $10-11 per MMBtu in February, present challenges. Despite potential near-term moderation in operating cash accruals, the CGD sector's credit profile is expected to stay robust, backed by healthy balance sheets and substantial liquidity buffers.
