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3 Stocks Poised to Gain From India's $60B Investment in Gas

Jewel Saha

Globally, we can see a transition in the energy space, with increasing emphasis on the usage of clean energy source. India’s investment of $60 billion in developing its natural gas supply and distribution infrastructure is in sync with the global pledge to cut emissions. This investment will help in the development of national gas grid and import terminals by 2024 and more than double the share of natural gas in the country's energy base to 15% by 2030 from the current level of 6.2%.

The natural gas infrastructure spending will assist in building gas pipeline and terminal infrastructure that is close to or in advanced stages of completion. The aim of the extensive infrastructure is to connect the entire country with natural gas services.

Infrastructure Holds Key

Per International Energy Agency (“IEA”), natural gas supplies 22% of the energy used worldwide but the usage of the commodity in India as a source of fuel and per capita consumption of natural gas is quite low compared with international standards. The lack of proper transmission and distribution pipelines created a bottleneck in the expansion of natural gas networks In India.

With the gradual installation of new infrastructure, global oil and gas majors like Exxon Mobil XOM, BP Plc. BP and TOTAL S.A. TOT — which have already invested in natural gas markets in India — will enjoy the benefits of improving demand for the commodity therein.

Benefits of Early Investment

BP Plc, which expects India to be the world’s largest growth market for energy by mid-2020s, has entered into a joint venture with Reliance Industries to explore opportunities in the market. BP officials believe that close to 100 trillion cubic feet of natural gas resources are yet to be found underground in India. The company currently has a Zacks Rank #3 (Hold). You can see complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

TOTAL ventured into the natural gas market in India through the acquisition of a 37.4% stake of Adani Gas Ltd. for $600 million. TOTAL will benefit from Adani’s existing presence in the market in India and use its global experience in liquefied natural gas (LNG) trading for the benefit of local  customers.

Exxon Mobil has signed a preliminary agreement with Indian Oil Corporation to explore new models of delivering cost-effective natural gas in India. The company inked a deal to supply LNG to Petronet LNG Ltd., which is India's biggest gas importer.

These companies will surely enjoy the benefits from the investments made in India. Royal Dutch Shell RDS.A is also likely to be enticed to invest more in the natural gas business in India, which is on the verge of touching new highs.

Global Scenario

Per IEA, the demand for natural gas increased 4.6% year over year in 2018. Gas demand in the coming five years is set to be driven by Asia Pacific and expected to account for almost 60% of the total consumption increase by 2024. China and India will be the major contributors toward the increasing demand in this region.

Some of oil and gas majors have decided to focus more on U.S shale, and lower focus on international oil and gas assets. However, rising demand and improving infrastructure make Asia Pacific a suitable place for oil majors to explore and invest in the near future.

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