Expect declining trend in LNG prices: Petronet

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show »

Balyan also feels that LNG prices would come down further and expects to see a declining trend in prices for the long as well as short-term.

Here is the edited transcript of the interview on CNBC-TV18.

Q: On August 31 GAIL signed an LNG Supply Pact with Spain's Gas Natural Fenosa (GNF) and it was a sizable amount. GNF will ensure a total supply of 3 bcm of LNG to GAIL over the next three years. That's a good bit of business coming your way. Does it increase your revenue forecast for the current and next year?

A: I think this is a good contract which GAIL has signed with Gas Natural and most of the gas is likely to come at our Dahej terminal. It would ensure that our capacity utilisation would be pretty good actually. We had been operating at around 100% capacity otherwise also. For the long-term I think we will have an assured supply.

Also while we are expanding our capacity at Dahej and we hope by 2013-14 when our second jetty would be operational we might be able to go beyond the 10 million tonne capacity with the existing facility. I think in the long-term this would help us move higher volumes and that would mean good returns for Petronet.

Q: In which terminal are you expecting this cargo to come at, will it be Dahej, Kochi or could it go to Dabhole as well?

A: I think the larger volumes should come at Dahej. Some volumes can certainly go to Dabhole which GAIL is trying to commission but, it is going to take time from the capacity point of view, from through put and from connectivity point of view I think larger volumes will certainly come to Dahej.

Q: We have seen a substantial drop in LNG prices and there are reports that since the prices are down to USD 10-10.5, capacity utilization has actually improved over Q1. What are you currently operating at in terms of the quarter to date average?

A: In the last month we have operated over 100% capacity. I think from the volumes and demand-supply point of view we are very happy with the present situation. As far as pricing is concerned, we have seen the spot prices coming down sharply from USD 15-16 mmBtu to almost about USD 10.5-11, which is good. In my opinion, they should come down further.

It should come to something around pre-Fukushima level, that was about USD 9.5-10. But in the long-term contracts we are not seeing such similar sharp declining trend. We believe that a similar trend should come. But I think from the capacities that are built up for LNG supply of the world, the availability of LNG and from the demand point of view also I think we should see some declining trend in the prices for long-term and short-term as well.