Prices moving in sync with int'l mkts: Petronet LNG

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

He said prices are now moving towards an international global market.

According to Gupta, since Naphta have become cheaper, LNG  prices have come down to USD 11-12 versus USD 18 earlier.

Here is a verbatim transcript of the exclusive interview with P Das Gupta on CNBC-TV18. Also watch the accompanying video.

Q: There has been a lot of excitement in the stock over the last 20 days; your stock has appreciated almost 35%. How is business shaping up right now in this adverse environment, there is of course talk about how LNG cost is likely to increase in the month of January?

A: Even before this downturn happened we collectively accounted for only 50% of gas demand including supplies to domestic suppliers, like Bombay High and ONGC. Demand from consumers has gone down but it has not gone down below the collective capacities of the suppliers. So, this has not really affected us meaning that we were not supplying what we could have sold and we continue to supply and operate at full capacity.

Q: You are locked in a contract for large part of your LNG supplies. How are the margins panning out over there in the first half and how are they likely to pan out in the second half of the current year?

A: As for the long-term contracts, we have supplies locked in by a formula, which certainly does not reflect the contemporary market prices. But consumers are exposed to the exchange rate fluctuations, which in the recent times have gone up by 25%. This currently would account for almost 60% of our turnover. The balance is what we are importing at contemporary prices. We have worked in an environment, where there is 50% gap in demand and supply and there continues to be shortage. Therefore we are passing the contemporary price, when I say contemporary prices I don’t mean making undue profits- contemporary prices are the international prices, which are transparently available.

Q: On the other hand you also faced competition from cheap naphtha?

A: Exactly, today the situation is that the consumer will move towards the alternative fuel, which is the cheapest one. Since naphtha has become cheaper, producers of LNG have now brought down the prices as far as their exports to India. It has come down from an all time high of USD 18-19 to almost USD 11-12. The last cargo that we imported was close to USD 12.5-13. So, truly now we are moving towards an international global market.

So, you are right naphtha is cheap and therefore LNG price will also come down. And which is reflected in the fact that prices have come down in this current quarter which ends in December, we have imported three cargos and all sold to naphtha consumers.