Petronet LNG shares plunge 12%; GAIL, GSPL, MGL, Gujarat Gas drop up to 6%; here's why

Shares of Petronet LNG Ltd, GAIL (India) Ltd, Gujarat State Petronet Ltd and city gas distributors such as Mahanagar Gas Ltd (MGL), Indraprastha Gas Ltd (IGL) and Gujarat Gas Ltd fell up to 12 per cent in Wednesday’s trade as the shutdown of LNG production at QatarEnergy and disruptions in the Strait of Hormuz weighed on investor sentiment.

Analysts noted that all of Qatar’s LNG supplies pass through the Strait of Hormuz. Besides, India faces elevated risk of LPG and LNG as almost 100 per cent of India’s imported LPG is derived from the Strait of Hormuz and almost 50 per cent of India’s LNG imports flow through the narrow strip.

"In addition, it has been reported that Qatar has ceased LNG production at its mega Ras Laffan facility owing to drone attacks on its facilities. This is one of the world’s largest LNG export facilities, with capacity of 77mtpa (15 per cent of global capacity, 100 per cent of Qatar’s capacity)," Nomura said.

Petronet LNG plunged 11.69 per cent to Rs 273. The company has an existing LNG contract of 7.5 mmtpa with QatarEnergy. GAIL fell 6.08 per cent to Rs 155.05 and has an LNG supply contract of 1 mmtpa with the supplier.

Gujarat State Petroleum Corporation, the parent of Gujarat State Petronet and Gujarat Gas, also has an existing LNG contract of 1 mmtpa with QatarEnergy. Gujarat State Petronet declined 5.53 per cent to Rs 282.95.

MGL, Gujarat Gas and IGL declined up to 8 per cent.

With almost 20 per cent of the world’s oil supplies and 50 per cent of India’s imports, currently at 2.6mbpd, the Strait of Hormuz remains a key choke point for global and India oil supplies and poses potential risk to oil prices during geopolitical tensions in the Middle East. 

"The importance of this narrow 33 km pass cannot be overstated, as almost entire crude oil from Kuwait, Qatar, and Bahrain flow through it, while 85 per cent of Iraq, 43 per cent of Iran, 59 per ecnt of the UAE, and 21 per cent of Saudi’s crude oil has to pass through the narrow passage (after utilising their alternate pipelines to full capacities). In addition, 100 per cent of Qatar’s LNG flows through Strait of Hormuz," Nomura said.