Bright gas trading future for Gujarat Gas
Gujarat Gas looks set to become the biggest beneficiary of its merger with parent GPSC and pipeline company GSPL.
One of the stand-out benefits will be no double taxation between Gujarat Gas and GSPC’s gas trading business. On August 30 (2024), GSPC, Gujarat State Petronet (GSPL) and Gujarat Gas announced that their boards had "today approved the restructuring scheme among the group entities."
By August 2025, they are expected to merge GSPL and GSPC into Gujarat Gas after mandatory approvals, a move welcomed by industry watchers. "It is a well-thought-out merger," says an analyst.
"And aims to create the second largest integrated gas company after GAIL; Gujarat Gas will become the only gas retailer with the expertise and direct access to global LNG sourcing and regasification tie-ups." In 2022-23, GSPC registered a record gas trading business of Rs27,698.31cr ($3.3bn).
"The benefits are immense for us," admits a Gujarat Gas source. Before the merger, Gujarat Gas sourced all its gas from GSPC but, bizarrely, had to pay the parent company a commission.
"But now the middleman (GSPC) will be eliminated," he stresses. "Gujarat Gas profitability will increase because its gas procurement costs will come down."
Most notably, Gujarat Gas and GSPC will no longer face double taxation on gas sale transactions with each other. "This will be a big saving for Gujarat Gas," we hear.
"What's more, Gujarat Gas will get GSPC’s 15-year expertise in sourcing LNG." GSPC's journey into the world of gas trading began in 2008-9 when it received its first spot cargo, sourced by Mitsui.
By June 30 (2024), GSPC had procured more than 400 cargoes, according to the merger announcement. "This merger comes when gas consumption in India is on the rise," a former Gujarat Gas official tells us.
After the merger, Gujarat Gas will also hold 50% of north Gujarat gas retailer Sabarmati Gas, where BPCL holds the remaining 50%. Not only that, it will also enter the upstream E&P business, with access to all GSPC blocks.
"Over the past seven to ten years, GSPC has exited many money-guzzling and loss-making blocks," says a GSPC source. "No major CAPEX is foreseen at any of its blocks in the near future."