Domestic natural gas companies are bracing for a weak June quarter (Q1FY27) as lower LNG imports and higher gas procurement costs triggered by the West Asia conflict weigh on earnings.
Total domestic natural gas consumption during the first two months of Q1FY27 fell more than 10% year-on-year and 13% compared with February levels to about 170 mmscmd (million standard cubic metres per day), according to the latest data from the Petroleum Planning & Analysis Cell (PPAC).
The decline reflected lower LNG imports and weaker domestic natural gas production, each of them account for nearly half of India's gas consumption. Imports were hit by the shutdown of Qatar's LNG plant, although some supplies were sourced from the spot market at higher prices. Before the disruption, India imported about 40 mmscmd from the Qatar facility.
Earnings hit
The disruption is expected to weigh on the Q1FY27 earnings of GAIL (India) Ltd, Petronet LNG Ltd (PLNG) and city gas distribution (CGD) companies.
Nomura Global Markets Research expects GAIL's Ebitda to decline 25% year-on-year in Q1FY27. The hit could have been steeper but for higher LPG production, as directed by the government, and a roughly 33% increase in LPG realizations.
Nomura also expects PLNG's Ebitda to decline 10% year-on-year due to lower processing volumes at its Dahej and Kochi terminals.
To reduce the impact of future supply disruptions, PLNG is building three new LNG storage tanks at an investment of ₹3,600 crore, the management said during its Q4 earnings call. It also plans to add another three to four tanks at Dahej after board approval, although no immediate timeline has been announced.
Margin pressure
CGD companies such as Indraprastha Gas Ltd (IGL) and Mahanagar Gas Ltd (MGL) may report higher sales volumes, but margins are likely to come under pressure because of elevated gas procurement costs and rupee depreciation.
JM Financial estimates MGL's Ebitda will fall 48%, largely due to higher gas input costs. IGL is expected to fare relatively better, with a 28% decline, supported by CNG price hikes and lower operating costs.
Gujarat Energy Ltd, formed through the merger of Gujarat State Petroleum Corp. (GSPC), Gujarat State Petronet Ltd and GSPC Energy with Gujarat Gas Ltd, effective 1 May, is expected to report a sequential Ebitda increase of about 3%.
The company is projected to post a 44% increase in sales volumes, led by nearly doubling of industrial sales.
Long-term tailwind
Despite near-term pressure, the structural outlook for CGD companies remains favourable.
The migration of households from LPG to piped natural gas (PNG), increasing adoption of CNG by automobile users, and industrial customers switching from propane and LPG to PNG continue to drive volume growth. These trends should support earnings once gas supplies normalize.
Meanwhile, shares of PLNG, IGL and MGL are trading 8-14% below their 27 February levels—before the West Asia conflict broke out—while GAIL is marginally higher by 2.3%.
Investors will closely monitor gas prices and the resumption of LNG supplies for further cues.