PNGRB has notified finalised regulations for city gas distribution (CGD) networks regarding common carrier. Key highlights include: a) open access will be implemented in geographical areas (GAs) where marketing exclusivity has ended; b) capacity in open access shall be at least 20% of capacity of the CGD network and compression capacity or the maximum quantity of gas that has flowed in the CGD network or through compressors even for a period of one day in the past, whichever is higher, c) CNG or L-CNG stations run by dealers and franchises of authorised entities shall not be considered as third party shipper for the purpose of allowing access.
Valuation & Outlook
CNG stations run by OMCs not being treated as third party is a big relief in the medium term for CGD companies; mainly IGL and MGL. We may witness some competition in the long term but it will not have any material impact on financials. Given the run-up in stock prices, we have a HOLD rating on IGL and MGL. Gujarat Gas has relatively lower contribution of CNG to total volumes and industrial PNG segment will support its long term volume growth. We have a BUY rating on Gujarat Gas. Although Gail will gain from unified tariff structure, we have a HOLD rating on the stock due to subdued performance from gas trading segment due to high prices, US LNG volumes and volatility in petchem segment.
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_OilGas_SectorUpdate_Dec20.pdf