With the 22-25 percent decline in the prices of LNG since January this year, and an expected 5-7 percent increase in consumption of piped natural gas (PNG) and CNG should drive up the operating profit margins of city gas distribution companies in FY20, says a report. The spot LNG prices are likely to be in the range of USD 6.5-7 per mmBtu in the first half of fiscal 2020, rating agency Crisil Research said. The operating profit margins of city gas distribution companies likely to go up by 2.50-3 percent in the first half of fiscal 2020, Crisil said.
“If the LNG price holds at USD 7 per mmBtu, it would mean a positive impact on LNG demand, especially from price- sensitive sectors. Also, the National Green Tribunal's recent decision to shut down coal gassifiers in Morbi and Wankaner ceramic clusters in Gujarat would drive LNG demand in the region,” it said. Also, the ban on polluting fuels in northern states, too, would whet appetite for LNG, it said.
“We expect spot LNG prices to remain low going forward given a slow improvement in demand from China and an increase in supply of LNG with expected new liquefaction terminals,” Crisil Research Director Rahul Prithiani said. The agency further noted that the improvement in margins for city gas distribution entities would be more pronounced with higher share of industrial consumers of PNG.