Oil & Gas – Future to be fuelled by Gas

BSE Oil & Gas index has underperformed the benchmark indices over the last 6-8 months driven by subdued performance by PSU oil companies and RIL. However, amidst the same, Gas Transmission and Distribution (T&D) companies have delivered strong performance with gains being witnessed in GSPL, Gail, Gujarat Gas and Indraprastha Gas. Going ahead, with the doubling of the gas supplies, good times for gas T&D companies, viz. GAIL, GSPL and Gujarat Gas are likely continue. India is likely to see strong demand for natural gas driven by key sectors such as power, fertilizers, petrochemicals/refineries and city gas distribution. In order to leverage on the increasing gas demand-supply equation, GAIL and GSPL have significant network expansion plans on the anvil. Thus, network expansion, stable regulated returns and strong earnings visibility are likely to drive the performance of the transmission companies. Similarly, improving gas supplies will help the gas distribution companies on account of volume growth. Moreover, given the uncertainty and ad-hocism associated with investment in oil stocks, gas companies are set to outperform going ahead.

By Mr. Deepak Pareek, Sr. Research Analyst,Oil & Gas, Angel Broking