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Petronet to invest Rs 400 crore next fiscal- Kochi utilization seen dipping in Q4

New Delhi: Petronet LNG Ltd (PLL), the country’s largest importer of natural gas, plans to invest Rs 400 crore next financial year (2018-2019) double than Rs 200 crore spent in the current fiscal, company executives told analysts in a recent conference call.

The executive said that a significant amount of capex to be spent in FY19 will go towards the expansion of Dahej terminal to 17.5 Million Tonne (MT) from 15 MT currently and one-fourth of it would we towards setting up a storage tank which will improve ease of operations for scheduling of ships.

The Dahej terminal, the expansion of which is expected to be completed by June-July 2019, processed its highest ever quantity of 215 Trillion British Thermal Units (tbtu) of LNG and operated at around 113 per cent of its name plate capacity in the quarter ended December 2017.

The executive, talking about the status of Kochi-Mangaluru pipeline, said that for the coming year volumes will not increase unless the pipeline is completed. They said that physical work on 4-5 stretches has already commenced, with welding on 140-150 Kilometer (Km), from a total of 450 Km, is already completed and the pipeline till Mangaluru is expected to be completed by first quarter of 2019. 

“GAIL has been telling us that by March 2019, we will have a pipeline coming in. So, for the coming year, we should not see more volumes till the pipeline is completed. What we see is that there will be three major consumers in the Mangalore region. One is the refinery, MRPL; another is OMPL, another subsidiary of ONGC. And the third is the Mangalore Chemicals & Fertilizers. And our understanding is that among these three, we can have an incremental volume of more than 1 million tons per annum,” a company executive said.

Replying to a question on the possibility of capacity utilization of Kochi terminal going down to 10-11 per cent from the average of 14-15 per cent due to cut in demand from Fertilisers and Chemicals Travancore (FACT), executives said: “FACT has been a prudent consumer. Whenever it comes, we believe it also has the potential to off-take about 0.25 MT. But it does not come on regular basis. So, there are switch on and switch off,” the Petronet executive said. He added that it is a fair assumption to make that capacity utilization in Kochi will go down in the current quarter. 

Petronet plans to launch around 20 LNG fuel stations on a 4,000-km route running from Delhi to Thiruvananthapuram as part of its larger plan being worked upon with oil marketing companies and state roadways of Rajasthan, Gujarat and Kerala. The company expects around 2 lakh trucks that join the fleet every year could run on LNG as it would bring nearly 30-40 per cent price advantage compared to other fuels.

Asked when does the company expect a revenue stream to flow from the use of LNG as a transport fuel, the executive said: “It will still take at least a year to start having any significant vehicles on the road, network of dispensing stations and vehicle manufacturing. So, I believe it will not be before 2019-2020 that we will be able to demonstrate some (volume) numbers on this.”

PLL has also begun preliminary studies to construct 2-3 Million Tonne Per Annum (MMTPA) floating LNG unit in collaboration with Sojitz, Mitsubishi and a Sri Lankan state-owned company in the South-western part of Colombo with an approximate investment of $250-$300 million.

Also, the company is in commercial talks with Bangladesh for setting up a 7.5 Million Tonne land-based LNG terminal.

Equity research firm Kotak securities said in a report it expects Petronet’s earnings to grow at a Compounded Annual Growth Rate (CAGR) of 14 per cent over the next three years on the back of completion of Kochi-Mangalore pipeline, Dahej expansion, tariff escalation as per contract and the launch of 20 LNG fuel stations across the country.

Petronet’s total income recorded an increase of 23 per cent to Rs 7,798 crore for the quarter ended December 2017. The natural gas importer’s net profit in the third quarter of 2017-2018 increased by 33 per cent to Rs 529 crore as compared to the corresponding period a year ago.