Valuation comfort for gas companies despite headwinds

Demand for gas was down 1.2 per cent ‘year-on-year (Y-0-Y) in August and down 1 percent Y-0-Y in Q2FY26TD (Jul-Aug’25).

- DEVANGSHU DATTA

Asian spot LNG prices remained elevated at $11/mmbtu or 17 percent of Brent (compared to historical average of 12 percent of Brent), due to EU demand.

This is a concern for all gas companies, particularly city gas distributors (CGDs) like Gujarat Gas (with 20-30 per cent dependency on spot LNG) and it could impact volumes for Petronet LNG, GAIL and Gujarat State Petronet. There’s likely to be moderation in spot LNG prices in the medium to long term, as 4050 percent addition in global LNG supply capacity will occur over the next 3-5 years starting H2 of CY26. There are long-term structural reasons to expect steady gas volume growth. The policy targets the rising share of gas in India’s energy mix (from 6 percent in 2025 to 15 percent by 2030). There’s low CNG and PNG penetration and there will be a drop in imported LNG prices.