Petronet LNG’s Dahej unit to be functional by July ’08


P Dasgupta, CEO & MD, Petronet LNG has informed that the company’s Dahej facility will be up and running by July 2008. The total volume will be 10 million by December 2008, he added. The short-term volume growth would be 8.5 million, he estimated. The regassification tariffs will go up to 72 cents per mmbtu from current 67 cents per mmbtu, Dasgupta informed. The company is looking at a 25 - 30% CAGR growth over the next 3 years, Dasgupta said.

Excerpts of CNBC-TV18’s exclusive interview with P Dasgupta:

Q: Could you start off by telling us what do you see as an average volume growth moving into the next financial year? What are re-gassification tariffs currently standing at and how are they expected to pan out?

A: As far as the volume is concerned, our expansion of the Dahej would be progressively coming in place form July 2008. By December 2008 we should be able to process in term of capacity almost 10 million metric tonnes of LNG. Our long-term supply from Rasgas, the third 2.5 million metric tonnes trenches, commences from mid 2009. So therefore, in between for almost a year, we have to get other short-term LNG, which we are very hopeful of doing.

Now, how much we would be going up to beyond 6.5mn that we are doing, 6.5 is more certain because the 1.5mn extra is committed to Ratnagiri. I think we should be able to ramp up to around 8.5 mn or 9 mn maybe by short-term contracts. That’s for volume.

As for re-gassification rates, when we fix the rates it is fixed on the method called reverse below knee. By that method, we are entitled to raise our tariff by 5% every year, which will commence in January. We are currently at 67 cents mmbut and that would increase by 5 cents by January.

Q: But recent LNG deals have been struck at fairly high prices, especially the one’s struck by Petro China. How do you see that impacting your realization in the next two years?

A: The Petro China deal that you are referring to is for a very specific LNG receiving terminal which is in Shanghai. The 1 million metric tonne which Shanghai is buying, Shanghai is world’s richest city and its really under vehicular pollution and therefore, this deal of 1 million metric tonne, which I don’t think is a base load quantity for China and much less it cannot become a benchmark for India is a base load quantity. What we are looking for is actually and a base load quantity is when we have a deficit that everything we buy becomes a base load. So regardless of what may China may have done, I think the LNG producers know what India can observe and at what price India would accept.

We have already set a benchmark vis-à-vis Krishna-Godavari gas. I don’t think these things are going to influence supplies to India i.e. LNG sourcing for India. I firmly believe that these producers in Australia or in the Gulf, they don’t have much of choice in terms of market.

Q: But what is the kind of OPMs you are looking at in the next 12 months, in fact in the 24 months, considering that gas supplies would also be increasing?

A: We would have to take a call that with added volume, to what extent we might be able to pass on the economy of scale to the consumers. Much would depend on the balancing act that we have to do vis-à-vis the LNG price. But I think essentially what we expect is another 25% growth in FY08-FY09. FY09 is another 2.5 mn, which is another 25% growth in terms of volume. While these volumes go up, we would have to take a call on the effective or the rate that we charge for the re-gassification, to what extent that we could pass on the economies or scale.

Q: Could you give us an quick update on what happened to Kochi Terminal and how that would that act on the revenue once the volumes are up and running on that?

A: We are in the final stages of awarding the EPC for Kochi and we believe that we are one of the bidders for the buyers for the Gorgon LNG. We expect that if everything goes well, which means the last thing is that we have to settle with Gorgon as the price, we should be signing up the Gorgon SPA latest by June 2008.

In any case, Gorgon or other source, we are committed to setting up the terminal and we would be awarding the EPC by December 31 2007. We have received all approvals and sanctions to set up this terminal. Next month we should sign up the concession agreement with the Kochi Port Trust authorities.

So the project is on, there are no two opinions about it. We utilize enough LNG to be had by the time this project gets completed which is in mid 2011.

Moneycontrol.com, November 26, 2007