Whatever's been going on in international market in the gas sector is good for India: MD & CEO
In an interview with ET Now, Prabhat Singh, MD & CEO, Petronet LNG, give his views on LNG's demand outlook. Excerpts:
India’s LNG imports have risen by 18% in November. What according to you is the outlook on demand and whether this is scalable beyond this 18% uptick mark?
Prabhat Singh: I think whatever has been going on in the international market in the gas sector is really very nice for India. The prices have been pretty low as compared to whatever they were there in the previous years. Since last year, we have done some 14-point something million tonnes and this year we are going to exceed 18 million tonnes. So there is a jump of nearly around 20% which is going to be there. The outlook is going to be good although in the recent time as of now when I am talking the LNG prices for spot have gone higher. But I feel that going forward there will be prices which will come back to whatever we were expecting and LNG off-take would even be a shade higher as far as what we are considering. It should be somewhere around 18-20 million tonnes and that is what I am looking at. I think 2017 is going to be a good year, a stable year and good business for Petronet LNG.
The demand is not a problem. When you say that 2017 will be a good year what are the kind of key numbers that we are talking about and would that mean that imports into India continue at the same pace that they have continued?
Prabhat Singh: Yes, I would say that they may be a shade better. Reason is that whatever the government is doing in the power sector there is some PSDF fund which has been brought in and there is some additional LNG which is being picked by the power sector. Overall, going forward the CGDs are picking up and the small scale LNG which I have been talking about is, I am pretty bullish on that although it will take nearly one and a half to two years to really show its impact on ground but it will start inching up within 2017 itself because on an average, if you really see, if everything goes well it takes around eight to 10 months time to really put things on ground and we already have nearly the LNG as fuel - is about to be declared in the automotive sector as well. So we are looking at conversions of buses, conversion of trucks and that will add a shade higher in terms of bringing in more LNG into the sector. Since the prices are low and like you said demand has never been an issue here, it is more of the prices which have been actually an issue. So, if the prices remain low and which have to be because there are a lot of liquefaction terminals which are coming on line, there are already nearly some 10 million tonnes of liquefaction which is already line and nearly 100-120 million tonnes of LNG additional is going to be into the market in the next two, two and a half years time, which is over and above the 240 million tonnes.
There is no taking away from the fact that LNG has got a huge demand and potential, but tell us what is the chart for you then at Petronet LNG. Are you looking at foraying into retail side from just being a B2B company and if that were to take place would you have dedicated fuel pumps or would you tie up with the existing ones?
Prabhat Singh: What we have been canvassing for is that internationally LNG in heavy duty long distance trucks has been happening on a large scale and in India if you really see nearly 200,000 trucks come every year new on the ground and which means nearly 5 million tonnes of LNG. So even if we are able to cut out say a million tonne out of that, 20% of the business there, we are looking at a 1 million tonne of LNG and 1 million tonne of LNG if you look in terms of the retail outlets etc. around 350 retail outlets on a thumb rule basis need to be there and some 350 trucks need to be there to be able to supply the LNG to the different outlets etc. and some around the unloading facilities for trucks need to be around 12 to 15. So effectively it is all well very reachable and we are already in touch with the oil marketing companies and PAN India we would be looking at putting this on ground starting with from Kerala because we are looking at our Kochi plant which is really underperforming in terms of capacity utilisation because pipelines are not there so we are looking at right from Kochi to Mangalore as a sector we will pick up first to go into the retail outlet system. Already Kerala government has given us an shown us land at four to five locations which we are in negotiation with and then we will look at the Mumbai-Delhi Sector. Then we look at the Mundra-Ahmedabad sector so these are few sectors which we will pick up initially to showcase and run pilot projects so that we are able to establish on ground that this is something which is very much workable which is happening across the globe. It is high time we did it because nearly 20 million tonnes of diesel goes into the sector and that when we want to replace overall I am saying the consumption which is already happening but what we are targeting now is we are saying that okay we will not really try and replace what is already existing because that business is already happening by the oil marketing companies. They are already having the retail outlets for them, they are already having the repairs and service centres planned up for that so it is the additional market which we are planning up and if that happens 5 million tonnes of market in the trucks and nearly 1-1.5 million tonnes of market in additional buses. So if you really add up this anywhere between 5 to 7 million tonnes of market is there for the taking which theoretically can be taken up even as low as nearly two years time. So if we move very quickly we can do it in two years time, if we really move slightly slowly it may happen in three to four years time.
Your stock, except the last couple of days, is trading at close to 52-week highs. There is strong institutional interest I believe the earnings momentum is fairly okay. Talk to us about how would these numbers look like for 2017 a small slice into the earnings for 2017?
Prabhat Singh: Earnings, I would say, what we have just commissioned our expansion from 10 to 15 million tonnes and I am happy to share this with you that it is running at nearly full capacity even today. So it is very rare that a plant is being commission it starts running at 100% capacity and I do not see any reason that it should go down because there is a lot of demand which is there, the consistent demand which is going to be running there no new terminals as such are coming up in 2017 if you really see. Mundra may come up but the pipeline connectivity isnt there so it may take some more time before it comes up and Ennore etc is still far away. So our terminals are going to be working absolutely fine and at Kochi also we are now moving into like I said this small scale work and bunkering facilities and cooling etc. so all that action is also happening. Pipeline work has already started there no doubt that it would take merely around one and a half to two years to really completely get commissioned etc. but whatever Kochi is doing, Kochi BPCL refinery is expanding so rather than 5% to 7% utilisation there we would be going slightly higher there also. Projections are that in the next one year time BPCL refinery may start picking up from 0.6 million cubic metres a day to nearly anywhere between around 1.5 to 2 million cubic metres a day. So we are moving into a region where this last quarter in Kochi also we had made operating profits there so overall I am feeling that since prices of gas are low, volumes of gas in the market are high naturally gas is going to flow into the country where it has a demand sync and the moment it flows into the country it has to pass through the gas terminals and (12:02) the gas terminals which are being used so we see whatever revenues are coming into Petronet and they are now showing today like out of the 70 million cubic meters of gas which is being imported which is nearly 50% of the quantity today Petronet LNG is doing nearly 80% out of that and that should continue even in 2017 and therefore the revenues are going to be stable at this point in time if not they go higher.
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