PNGRB slashes GAIL's KG D6 pipeline tariff by 80% - Angel Broking

Oil and gas regulator PNGRB has slashed KG D6 pipeline tariff of GAIL by 80% to Rs. 5.56/mmbtu with retrospective effect from November 2008. The pipeline has a rated capacity of 16mmscmd and the volumes carried in FY2012 and FY2013 were 14.7mmscmd and 7.3mmscmd, respectively. The revision in tariff is due to lower depreciation charged by GAIL on this pipeline which PNGRB has disapproved. The contribution from KG D6 pipeline to GAIL's total volumes is not significant given GAIL's average run-rate of 115-120mmscmd. Moreover, declining gas production from KG D6 basin is likely to have lower impact on its prospective tariff for FY2014 and FY2015.

We await management targets on the financial impact of the tariff-cut. Until then, we maintain our Neutral rating on GAIL.

Source : Equity Bulls

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