GAIL India saw a nearly threefold jump (295%) in its net profit during the April-June period from the last quarter of 2016-17
However, on year-on-year basis, company’s net profit increased by 21 per cent when calculated after adjusting one-time gain of Rs 489 crore from stake sale in Mahanagar Gas Ltd in the first quarter of 2016-17.
The company said the growth has been led by better performance of gas transmission and LHC segment, better price realisation in LHC segment and decrease in cost of production and finance cost.
During the quarter, the company registered growth in physical performance in LHC Sales, Natural Gas Transmission & LPG Transmission by 16, 4 and 26% respectively as compared to corresponding period of the previous year.
Gail India is seeking renegotiation of LNG procurement contracts that it had signed with US suppliers before the global energy market started its descent in the middle of 2014.
Global LNG prices have come down drastically from their June 2014 highs in tandem with the oil prices, necessitating a review of the contract that were signed in 2011.
GAIL, India’s biggest gas transporter, has deals to buy 5.8 million tonnes of US LNG per annum for 20 years.
It wants to renegotiate the 2011 sales and purchase agreement (SPA) with Cheniere Energy for import of 182.5 trillion British thermal units of LNG (equivalent to approximately 3.5 million tonnes) annually, with yearly fixed fees of USD 548 million and a term of 20 years.
GAIL had agreed to pay Cheniere a price of USD 3 per million British thermal unit (mmBtu) plus 115 per cent of the final settlement price for the New York Mercantile Exchange Henry Hub natural gas futures contract for the month in which the relevant cargo is scheduled.
Also, 15 per cent of the fixed portion of the contract sales price will be subject to annual adjustment for inflation.
The source said GAIL wants the fixed portion to be lowered to bring down landed cost of LNG to around USD 7-8 per mmBtu as against the present USD 9.7.
LNG in the spot or current market is available for less than USD 6 per mmBtu.
US supplies are scheduled to begin from the next year.
Cheniere, currently the only US company exporting LNG, is reportedly not in favour of reopening the signed contracts as it expects the signed ‘take-or-pay’ agreements to be honoured.