Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India: Energy: Gas
Equity Research
Regulation of gas marketing margin uncertain and still far away
Oil ministry has asked PNGRB to determine marketing margin on
natural gas for end users; no clarity/timeline for implementation
While the oil ministry has asked the gas regulator (PNGRB) to determine
the amount of marketing margin chargeable from end users by natural gas
marketers, there is no clarity on its implementation, in our view. We note
that PNGRB is acting under Section 11(j) of the PNGRB Act, wherein it has
to perform special assignments by the ministry and report back with its
findings. We believe there is no clarity on the extent and timeline of
implementation of the margin calculation that PNGRB will determine.
Key Section 11(f) of Act not applicable, as gas is not “notified”;
PNGRB likely needs separate approval for implementation
We note that determination of gas marketing margin is not under the more
powerful Section 11(f) of PNGRB Act wherein regulator can monitor prices
and take measures to prevent restrictive trade practices for “notified”
petroleum products and natural gas. However, we find neither domestic
nor imported natural gas is “notified” for the purpose of the PNGRB Act by
the ministry yet. Hence, we believe the regulator will likely need separate
approval to regulate or fix marketing margins, as the government has
entrusted it only with determination of marketing margins as of now.
PNGRB collecting preliminary margin data; intention mainly to
create framework rather than curb profits of marketers
While PNGRB issued a public notice on 14 Feb 2012 to collect preliminary
data from marketers selling gas to end consumers, based on our
interactions with regulators/ministry officials, we believe the ministry is
trying primarily to ensure that the returns of gas marketers are
commensurate with the risks they undertake, and not to curb current
margins. Contrary to market reaction, the core idea is to come up with a
framework for margins in a market with multiple gas pricing, in our view.
Petronet LNG (Buy) remains our top pick in Indian gas
PLNG is the best gas play in India, in our view, due to robust LNG volumes
from domestic gas S-D mismatch, low-cost operations from incumbent regas
terminals and timely expansions. We expect FY12E-16E EBITDA CAGR
of 18% and ROE of 19-32% over same period. Though PLNG is unlikely to
be affected by margin regulations, we expect its mark-up on spot volumes
to fall to US¢20-30/mmBtu medium term and to US¢10/ mmBtu long term.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India: Energy: Gas
Equity Research
Regulation of gas marketing margin uncertain and still far away
Oil ministry has asked PNGRB to determine marketing margin on
natural gas for end users; no clarity/timeline for implementation
While the oil ministry has asked the gas regulator (PNGRB) to determine
the amount of marketing margin chargeable from end users by natural gas
marketers, there is no clarity on its implementation, in our view. We note
that PNGRB is acting under Section 11(j) of the PNGRB Act, wherein it has
to perform special assignments by the ministry and report back with its
findings. We believe there is no clarity on the extent and timeline of
implementation of the margin calculation that PNGRB will determine.
Key Section 11(f) of Act not applicable, as gas is not “notified”;
PNGRB likely needs separate approval for implementation
We note that determination of gas marketing margin is not under the more
powerful Section 11(f) of PNGRB Act wherein regulator can monitor prices
and take measures to prevent restrictive trade practices for “notified”
petroleum products and natural gas. However, we find neither domestic
nor imported natural gas is “notified” for the purpose of the PNGRB Act by
the ministry yet. Hence, we believe the regulator will likely need separate
approval to regulate or fix marketing margins, as the government has
entrusted it only with determination of marketing margins as of now.
PNGRB collecting preliminary margin data; intention mainly to
create framework rather than curb profits of marketers
While PNGRB issued a public notice on 14 Feb 2012 to collect preliminary
data from marketers selling gas to end consumers, based on our
interactions with regulators/ministry officials, we believe the ministry is
trying primarily to ensure that the returns of gas marketers are
commensurate with the risks they undertake, and not to curb current
margins. Contrary to market reaction, the core idea is to come up with a
framework for margins in a market with multiple gas pricing, in our view.
Petronet LNG (Buy) remains our top pick in Indian gas
PLNG is the best gas play in India, in our view, due to robust LNG volumes
from domestic gas S-D mismatch, low-cost operations from incumbent regas
terminals and timely expansions. We expect FY12E-16E EBITDA CAGR
of 18% and ROE of 19-32% over same period. Though PLNG is unlikely to
be affected by margin regulations, we expect its mark-up on spot volumes
to fall to US¢20-30/mmBtu medium term and to US¢10/ mmBtu long term.
No comments:
Post a Comment