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Gas transmitter GAIL (India) shot up 24 per cent last week. Three factors helped. One, the new exploration regime draft, released last Monday, raised expectations of increase in gas production in the country. In particular, the proposal to allow pricing and marketing freedom for gas is a key positive. Higher production should boost GAIL’s sagging transmission volumes and pipeline utilisation. Next, the proposed public issue of Mumbai-based city gas distributor Mahanagar Gas, in which GAIL holds nearly half the stake, should unlock value for the latter.
Finally, reports on Friday that Qatar’s RasGas may modify the contract with Petronet LNG and export gas at market-linked rates also helped the GAIL stock. Rates linked to market prices will cut the cost of Petronet’s gas imports. Cheaper imports should mean more supplies and higher transmission volumes for GAIL.
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