GAIL eyes new geographies to scale up international trade
A diversified supply base, the lure of fat margin, and the confidence earned with some recent overseas deals have boosted ambition at state-run GAIL, which is now preparing to up its game in the international trade. “We are transforming from a domestic to an international player,” said Gajendra Singh, director (marketing) at GAIL, citing the company’s 15 million tonne of liquefied natural gas (LNG) portfolio, its eight rank globally in handling gas volume, and a supply base ranging from Qatar to Russia, Australia and the US.
GAIL’s gas marketing portfolio, including the locallyproduced gas, is set to expand to 97 million metric standard cubic meter a day (mmscmd) in 2018-19 from 86 mmscmd in 2017-18, aided by overseas LNG supply. Of the 97 mmscmd, locally-produced gas comprises about 51mmscmd. Nearly a quarter of the balance 46 mmscmd of LNG supply has been tied up for sale to international customers with the remainder planned to be shipped to India. “Our focus is now to reach new geographies.
A diverse supply base enables us today to serve customers in diverse regions,” said Singh, adding that the shift would help mitigate risk that comes with total dependence on the domestic market. GAIL is also contemplating setting up an office in Europe to be close to customers—it already has offices in Singapore and Houston. It is planning to beef up its LNG trading desk, sharpen its hedging tools, and build a team of analysts to develop better insight into the international LNG market.
“There is a scope for much better margins in the international market. There are risks too,” he said, adding that once the company makes a name for itself in the international market, more business opportunity and better terms may come its way. After doing some free on board deals for its US gas, GAIL recently did its maiden ex ship (DES) deal with a customer in Europe, which means delivering gas to the customer’s port and is more profitable, Singh said. It aims to similarly tap the Latin American market.
Just two years ago, GAIL faced big uncertainties as oil rates had collapsed and its long-term LNG contracts in which gas prices are linked to crude had begun looking unviable. Customers were refusing supplies and GAIL didn’t know what to do. Its US LNG contract, linked to Henry Hub price index, too felt like a liability as spot rates had crashed, and there were no back-to back contracts with customers. As the delivery schedule approached, GAIL hurriedly undertook some time and destination swaps, not all of which were very profitable.