Informist, Tuesday, Jul 5, 2022

By Sunil Raghu

AHMEDABAD - Gujarat Gas Ltd may see a massive fall in natural gas sales volumes in August as the ceramic tile-making units of Morbi will proceed on a month-long production holiday, sources in the state government told Informist.

The tile makers of Morbi collectively decided last week to proceed on a month-long production holiday from Aug 10, to get rid of inventory that has piled up owing to higher prices and fall in demand over the last six months, K.G. Kundariya of Morbi Vitrified Tiles Association said. The Morbi tile makers last did this five years ago.

Of the total gas volume that Gujarat Gas sells, the Morbi ceramic units account for nearly 65-70%. Any fall in demand from the Morbi units hits earnings and margins of the state government-controlled company. In May, Gujarat Gas had on an average supplied 5.2 mscmd to ceramic units in Morbi and nearly 8 mscmd of gas in March 2021.

"Gujarat Gas currently supplies nearly 4.2 mscmd of gas to units in Morbi. This is now estimated to fall to around 1.5 mscmd in August as units would work 10 days in that month," a senior state government official said.

In March, Gujarat Gas had announced a cut in gas supply to its industrial customers to 80% of the contracted volume, as it was finding it difficult to buy liquefied natural gas due to global supply side challenges and a massive rise in LNG prices fuelled by the Russia-Ukraine war.

This had also seen several ceramic units switch to using liquefied petroleum gas or propane, further reducing demand for natural gas from Gujarat Gas. LPG costs are generally 10% lower and tile makers also get a set off against 5% GST levied on LPG.

Kundariya said the tile makers may have been able to keep their furnaces running at lower capacity, if gas prices were "substantially" lower. With global LNG prices on the rise, it would now be difficult for Gujarat Gas to oblige tile makers for now.

"The situation does not look good for Gujarat Gas as prices of LNG globally have jumped from around $34 per mbtu to $40 per mbtu in last three weeks," another state official said. "The good thing for Gujarat Gas would be that tile makers are convinced that they may not extend their production holiday beyond a month."

The shares of Gujarat Gas ended down almost 3% at 431.60 rupees on the National Stock Exchange.  End

$1 = 79.37 rupees

Edited by Michael Correya

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2022. All rights reserved.