LNG prices may remain low for 5-6 years: Petronet LNG

Speaking about Dahej, he said that, there is a ramp up going on due to capacity expansion to 15 million tonne.

Tariff increase is a yearly phenomenon and would happen in January 2018, he said.

Mundra terminal is getting ready by end of this year and it is in Gujarat, we thought there could be some synergy with Dahej and Mundra. That is why Petronet is looking into the terminal, said Garg.

No concrete decision has been taken yet, yes we are looking into it, he confirmed.

Kochi terminal may see a ramp up in 2019, he said.

In the next five-six years LNG prices are likely to remain low and India being a major consumer of energy and gas, we will take advantage of this low price gas in India, he further mentioned.

Below is the verbatim transcript of the interview.

Anuj: What are your thoughts on what is happening because the street believes that maybe we are overoptimistic on the kind of volumes that companies like yours may generate and things are slowing down, would you agree with that?

A: Sometimes we cannot compare the volumes increase of decrease in a month or two. The overall fundamentals are good and if we see the overall growth, whatever is happening in gas in the country, it is on an increasing trend. If we compare only month-on-month, there may be some reason in that particular month, maybe some industries are down, especially fertiliser plants, and there could be some of that reason. Not important for us to look into fundamentals, we have to see the real demand and not go into month-on-month comparison. This is my view.

Latha: Therefore if you can take out this month-on-month erratic numbers and tell us what is the annual runrate likely to be in terms of volumes?

A: The way the total gas demand in the country and specifically if I talk about RLNG – as I mentioned earlier also that overall LNG consumption in the country during 2016 have been 19 million tonne and we had seen over the years that there have been growth and growth is happening and I think that growth momentum would continue. There may be some small reasons for some depletion somewhere but overall there is an increase in the overall demand of the gas in the country.

Latha: Would it be closer to 5 percent, would it be closer to 10 percent, would it be even better?

A: If we see overall last year growth, it is closer to 10 percent but we will have to see what numbers pan out in future.

Reema: Last quarter, the Dahej utilisation dropped below 100 percent, has there been any pick up in that in the quarter that we are currently in?

A: I think the utilisation of Dahej, I will not say dropped below 100 percent but the reason – because we had increased the capacity of Dahej to 15 million tonne in October 2016, so there is a ramp up which is going on. Ramp up generally takes a little time to reach the level which is expected so we have the capacity now and I think the demand is also growing and it would continue to grow. The capacity utilisation of Dahej would be an optimum.

Anuj: What kind of volumes would happen from Dahej at peak if you could give us some numbers?

A: I think Dahej terminal is 15 million tonne and we are quite hopeful that the terminal would operate at its capacity and sometime depending on the demand, could be a bit more. So this is our expectation from Dahej terminal.

Latha: What kind of a tariff hike are you expecting?

A: Tariff is generally fixed and it is every year it depends on the inflation, the way it is happening and cost increase is happening, accordingly the tariff increase will happen. It is an yearly phenomenon that would happen in January 2018.

Reema: There were certain reports which suggested that Petronet LNG could pick up a 25 percent stake in Gujarat State Petroleum Corporation’s (GSPC) LNG import terminal, is there any truth to that?

A: As an LNG business owner in the country and we own the maximum capacity in the country and definitely the company looks into the opportunity of investment in LNG business, this is one of the opportunities. Mundra terminal is getting ready by the end of this year and it is in Gujarat so we thought there could be some synergy with Dahej and Mundra. That is why Petronet is looking into the terminal.

There is no concrete decision that has been taken yet, yes, we are looking into it.

Latha: As you lay down office at Petronet LNG, I guess your dream would have been that perhaps even the Kochi pipeline should have been through and you could have used that big asset that you put in during your time. Give us a timeline, when do you think that gets over?

A: Kochi pipeline going from Kochi to Mangalore is under construction. As per the information that we have the schedule of completion is likely maybe by the end of 2018 and if that happens, definitely the Kochi fortune will be better and the Kochi terminal utilisation would improve.

That is what we are expecting. In 2019 we can see a ramp up at Kochi also.

Latha: You are an industry veteran and you are going to see in the coming years gas prices drop as Australia becomes even bigger supplier of gas, just draw for us how you see India using this cheap gas in the next two-five years. Do you see something coming up very quickly in the eastern coast of India? Do you see Ratnagiri regasification plant coming up any time soon? How will be India’s gas map two years down the line?

A: The way the government policy and government actions are there making India a gas economy and increasing the consumption from 6 percent to 15 percent under the basket of the gas and actions are there like laying pipeline especially Ganga pipeline going up to the east coast of India and more terminals are coming on the east coast of India, today the country’s major consumption is in the north and west and the way the pipelines plans are there and terminals are coming, the consumption is going to improve.

In the next two-three years, energy prices are likely to remain low maybe longer years, maybe five-six years and India being a major consumer of energy, we need more and more gas and we will take advantage of this low priced gas in India.

I think only one particular sector that is power sector – generally the major gas is consumed. In India there is issue for that especially because of coal availability is there and coal is cheaper than the natural gas when it is imported. So that is where we need some kind of reforms or action otherwise India is poised for a good consumption of natural gas in the country.