GAIL expects gas demand to pick up soon

NEW DELHI: State-run GAIL, whose natural gas sales have dropped 30% since the lockdown began, expects demand for the fuel to pick up soon as fertiliser plants increase production ahead of the sowing season and electricity generation expands to meet increasing air-conditioning needs with rising temperature, said a senior executive.

“Demand for gas will only rise from hereon, although only gradually,” said an executive, who did not want to be identified. The demand expansion would happen despite an extension of lockdown, he said, explaining the demand recovery would come mainly from fertiliser and power plants, two biggest consumers of gas in the country.

GAIL and its customers are also seeking to cautiously manage their cash flows to avoid any future financial turbulence due to economic uncertainties induced by the lockdown. “Most of our customers are paying on time but some, mainly small customers, have sought an extended payment period. We too have requested our suppliers for making payments with some delay. This is just to balance our cash flow,” said the executive.

For GAIL, the biggest demand hit came from city gas companies that mainly supply to small industries and compressed natural gas (CNG) vehicles. CNG vehicles receive cheap domestic gas supply and as they went off the roads during lockdown, domestic production of gas too had to be reduced.

“Luckily for us, fertiliser and power customers are still taking about 90% of the committed volume while many in other sectors or smaller industries are shut,” said the executive. Plants will have to increase production now so that fertiliser reaches farmers in sufficient quantities ahead of the sowing season that begins in May, he said.

Lack of transport facilities has hurt evacuation of output from fertiliser plants during lockdown, cutting production, but some easing is now on the cards.

The government has extended the nationwide lockdown until May 3 but part easing for some areas may be considered in a week. The farm sector is likely to get a softer treatment as the sowing season is approaching and any obstruction in the agriculture cycle can hurt national food production.

Power demand may also pick up on increased home air-conditioning demand with the onset of summer. This may boost fuel demand from gas-fired power plants as well. Domestic and imported natural gas are currently available at record-low rates, an inducement for gas-based power plants to increase utilisation.

Source Article

Lois C. Ferrara

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