Expect volumes to pick up going ahead: Petronet LNG

In an interview to CNBC-TV18, RK Garg, CFO, Petronet LNG spoke about the latest happenings in his company and sector.

Below is the verbatim transcript of RK Garg's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: We were not quite prepared for this kind of a fall in total income, what were the volumes you did?A: Last quarter ending December 2015, we had some issue under our long-term contract and because of high pricing, the volume under the long-term contract was not picked up by the consumers. By the end of December 2015, we had agreed with revised pricing structure with the long-term supplier that is Qatar and because of that reason there have been a low volume in October-December quarter but we could make up some volume by buying spot or by providing more relief services to others. So that was one reason.Latha: We were aware that RasGas volumes itself fell by about 60 percent year-on-year (Y-o-Y). What I want to know is exactly how much you did by way of volume because of the fall and therefore what would be a normalised volume be for the current quarter?A: In the last quarter as compared to the previous quarter, the volumes have reduced -- generally we use the trillion btu terms where we had 63 trillion btus which was there in the last quarter and this quarter it was only 38 trillion btus. But these are the aberrations especially that had happened in the last quarter and market was expecting that we will come to some agreement and that happens by the end of December. So going forward, now we are buying 7.5 million tonne on an annual quantity from Qatar plus one million tonne we added last December, we are offtaking the entire volume and January onwards that offtake has been very regular.Sonia: What would the rate be? This time you did about 38 trillion btu, going ahead in FY17 what will you do in terms of volumes?

A: That is why I mentioned that it will be full volume. It is 8.5 million tonne long-term volume. So these numbers are not that important, what is important is how much capacity we are using of Dahej terminal. In spite of that volume, we use Dahej terminal over its nameplate capacity in the December quarter and we expect that we continue to debate and we will do better than that going forward.Sonia: The capacity utilisation for Dahej was 108 percent, which is great but it is still less than what you did in September quarter, which was about 121 percent. So what will the average capacity utilisation be and do you expect it to be around this 100 percent mark itself?A: Market is good. Demand in the country for gas is good and more and more volumes are going to the traditional sector like power and fertiliser and we have in the country as of now the constraint of capacity in terms of -- because we are only two-three terminals, which can operate and only two terminals can operate in the country for 12 months in a year. Because of that reason, we expect that our Dahej terminal would provide the maximum volume to the consumer and we expect that utilisation should be better.Latha: I wanted to know the latest on the renegotiation with Australia ExxonMobil, will you get similar rates that you got from Qatar?A: It is not important about rate. What is important is if the market can afford. Marketing is very important. Yet we have time. These volumes will start sometime by the end of this year and we will see how the market will behave. Let us see how the market takes it.Latha: What maybe the average gas price selling in India, the market price, for a better part of 2016?A: Crude prices at present are quite low. Since the crude prices are low, expectation of the market is that LNG price should also be low and as you know that current spot prices is closed to USD 5.5, though you are comparing the crude prices, we expect that whenever there is an equivalent crude price in terms of caloric value, we can get better value to consumers, they will replace liquid with the gas. So exact number is not that important. What is important is the correlation with the crude prices prevailing. So we believe that crude would continue to be in the range that is expected and not much variation would happen and LNG price will also remain low because a lot of liquefaction capacities are getting built and we expect LNG prices would remain benign and consumer will be getting benefit of that.Sonia: Can you give us some progress on the Kochi pipeline and what is the expectation? Utilisation is still very low at 7 percent expectedly but going ahead what is the progress?A: Kochi pipeline, we have an issue and currently we are using minimum capacity. One thing is that during this next financial year, we expect to increase our volume but it is not sufficient for the Kochi terminal to give an advantage to the consumer, pipeline is must and important and serious discussion is going on at least connecting Kochi terminal with the Mangalore market, which is through Kerala and we hope to see positive results soon. Let us hope for the best.