Petronet LNG to maintain FY09 volume growth at 78 tn BTU


P Dasgupta, MD & CEO, Petronet LNG, said they will maintain the volume growth going ahead. A new expansion in place by the third quarter i.e. by December 31 will add more than double the capacity up to almost 12.5 million metric tonne.

Excerpts from CNBC-TV18's exclusive interview with P Dasgupta:

Q: Could you break up this quarter in terms of volume growth you have seen and what is it that you envisage in terms of supply from various sources in the coming few quarters?

A: Volume-wise it was the same as Q1 of last year, which was almost 78 trillion British Thermal Units (btu) of gas sold. Therefore, you see the turnover at Rs 1,645 crore. It’s marginally higher than last year's Rs 1,551 crore. The volume was also marginally higher by half a trillion cubic meters of gas.

Q: What's the outlook for the future? Can you maintain this kind of volume growth?

A: We would be able to maintain but this would be more or less the same level for the first three quarters including the one, which we have finished and second and the third quarter respectively. We will get our expansion in place by the third quarter i.e. by December 31. This is going to add more than double the capacity up to almost 12.5 million metric tonne. Accordingly one of the agendas, which we had on the board today, was to give an inprinciple approval for another 3.5 million metric tonne Liquefied Natural Gas or LNG which we are trying to close and against which, we should see supply come in from August.

Q: How are pricing contracts working out? What about availability of gas? We hear disturbing reports of gas not being available on a spot basis very easily. How is the pricing scenario panning out, especially from RasGas itself which went from January?
A: That apart, our existing contracts which is going to be index to crude, it would not move in tandem with the kind of pricing that one sees in the spot market today. But the silver lining is that from June this year until March next year, some 47 million metric tonne of new capacities are getting added including 16.5 million metric tonne coming from RasGas, in addition to Sakhalin which is 10 million metric tonne - commissioning is on.

We strongly believe that this temporary setback that we had was again due to an aberration in Japan. They have one of the world’s largest nuclear power plants called Tokyo Electric Power Co (TEPCO). So Japan has been trying to supplement this short fall by utilizing their gas power plants to the maximum and therefore this additional demand. But that is also going down now because TEPCO is progressively coming back into production.

Q: What's your estimate in terms of the cost of that you will pay for the gas? What was the average last year and what will be the average in FY09 and what is the likely average in FY10?

A: The average last year was around USD 4.5 and average this year would continue to be around that figure of less than USD 5 considering all the contracts that we have. If one can get a long-term contract now, they are not as these spot cargo prices at USD 17-18 as they are far below. They are 50% of the current spot cargo rate.

Q: Do you expect to maintain margins?

A: Yes, we expect to maintain margins and the one I am talking about - the new 3.5 million metric tonne is not a spot cargo contract. The 3.5 million metric tonne contract, is a long-term contract for 10 years and the prices are going to be very competitive.