GAIL and BPCL Finalize RS. 63,000 Crore Deal for Propane Supply

GAIL (India) Ltd., a state-run entity, has recently entered into a substantial 15-year agreement with Bharat Petroleum Corp. Ltd. (BPCL). This momentous deal, valued at an impressive RS. 63,000 crores, revolves around the supply of propane for a new petrochemical facility in Usar, Maharashtra. Under this agreement, GAIL will procure a substantial 600 thousand metric tonnes per annum (KTPA) of propane from BPCL's LPG import unit located in Uran. Moreover, BPCL's LPG import unit, which currently boasts a capacity of 1 million metric tonnes per annum (MMTPA), is gearing up for expansion to accommodate 3 MMTPA of propane and butane imports.

The primary focus of this collaboration is GAIL's upcoming propane dehydrogenation unit in Usar, which is poised to be a significant milestone for India as it marks the nation's first facility of its kind. This groundbreaking unit is expected to commence operations in 2025 and will operate with a nameplate capacity of 500 KTPA. What makes this venture even more exciting is its seamless integration of propylene production into a polypropylene plant of equal capacity.

This strategic move by GAIL aligns with the rising demand for polypropylene, which is projected to reach a substantial 6.3 million tonnes by 2025, as per GAIL's statement. The company has recognized the opportunity presented by the growing demand and is committed to positioning itself effectively within this evolving market landscape. In its annual report for the fiscal year 2023, GAIL emphasized that new business initiatives constitute a central element of its strategic vision to enhance profitability and expand its market reach.

In a preceding development, earlier in the year, India's largest gas firm made a significant move by acquiring JBF Petrochemicals Ltd, a private-sector chemical company, through bankruptcy proceedings. This acquisition led to the renaming of the company as GAIL Mangalore Petrochemicals Ltd, signifying GAIL's assertive approach in expanding its presence in the petrochemical industry.

When examining GAIL's recent financial performance, it is apparent that the company continues to demonstrate resilience and growth. For the quarter ending in September, GAIL reported revenue from operations amounting to RS. 31,823 crores. This figure, while slightly reduced in comparison to the previous quarter, highlights the company's consistent financial strength. Notably, GAIL's net profit experienced a remarkable sequential growth of 70%, reaching RS. 2,405 crores in the second quarter of the fiscal year 2024.

Sandeep Kumar Gupta, Chairman and Managing Director of GAIL, acknowledged that the performance during the quarter had certain constraints, primarily due to lower realizations in polymers and LPG. Nevertheless, he expressed optimism that these challenges would improve as the business moves forward. Additionally, he revealed that the company had invested substantially in capital expenditures, totaling around RS. 4,853 crores in the first half of the fiscal year. These investments were primarily directed towards essential areas such as pipelines, petrochemicals, and equity in joint ventures, reaffirming GAIL's commitment to infrastructure development and business growth.

On the stock market front, for the day's trading session, GAIL's shares on the Bombay Stock Exchange (BSE) concluded at RS. 117.70 per share, marking a modest decline of 1.55% from the previous closing price. In contrast, BPCL's stock demonstrated a positive trajectory by rising 2.21%, closing at RS. 356.90 per share. These market movements reflect the investor sentiment and market response to the developments and strategic collaborations involving these two prominent energy and petrochemical companies.