Reliance Industries Limited (RIL) has begun talks with Shell India and Petronet LNG to import liquefied natural gas (LNG) from global markets, barely a week after it began gas production from its Krishna-Godavari basin.
RIL requires gas for its own use at its power and petrochemical plants. However, with the government not allowing the company to use the gas for its own use in the first phase — up to 40 million standard cubic metres(mmscm) — RIL is now looking at alternative options.
RIL, which recently commissioned its new refinery, requires additional gas, both as fuel and feedstock.
It is estimated that RIL would require almost eight shiploads of LNG over the next shipments. RIL is in talks with both Shell and Petronet as they are the only two companies that have infrastructure to gasify the liquefied gas.
The government has drawn up a list of customers for RIL as per the utilization policy. Preference has been given to fuel-starved fertiliser plants and power plants, which have been using expensive liquid fuel like naphtha as a fuel and feedstock.
RIL, which is seeking to replace its liquid fuel consumption with green natural gas, had sought government’s permission to use some of the gas it produces for its captive use at its own plants.
It is expected the government may give RIL some gas for its use at the petrochemical and power plants in the second phase around December when the gas would be scaled up to 80 mmscmd.
However, till then RIL wants to bank on imported LNG to captive fuel and loss purposes, in order to save cost. Replacement of gas for fuel and loss purposes is likely to result in boosting of RIL’s refining margins by around US$ 1.5-2.0 per barrel.
Similarly, it augers well for GSPL as well as it would be transmitting the additional transportation volumes.
We maintain ACCUMULATE on RIL with target price of Rs1,839 and NEUTRAL on GSPL.