Petronet doubles imports as demand rises

Petronet LNG, India's biggest liquefied natural gas importer, said it has committed to buy 24 spot cargoes in the year ending March 2008, doubling imports from a year earlier as demand rises.

Petronet has signed a contract for 12 shipments from one producer for delivery starting in June, Managing Director Prosad Dasgupta said, declining to identify the supplier. Contracts for a further 12 will be signed by mid-April, he said. The supplies will come from Qatar, Oman, Algeria and Egypt. The increased imports may make state-controlled Petronet the world's largest buyer of spot cargoes. A $414 million pipeline from the company's 5 million metric tonne-a-year terminal in Dahej to India's largest gas-fired power plant in Dabhol may be completed by June.

"We will start supplies to Dabhol once the pipeline is ready for transporting the gas,'' Dasgupta, based in New Delhi, said today. Petronet's stock has almost tripled since an initial share sale in 2004, helped by increased sales. The company will import 13 spot cargoes in the year ending March 2007, Dasgupta said.

Petronet may boost spot cargo purchases to as many as 40, equal to 2.25 million tonnes, if the company gets permission to process the fuel at a rival terminal operated by Royal Dutch Shell, Dasgupta said last month.

Cargoes of LNG, or natural gas chilled to liquid form for supply by ship, typically average 55,000 tonnes. The company booked five spot cargoes for delivery in April and May, Dasgupta said. The supplies will come from Oman, Algeria and Qatar.

A shortage of LNG in West Asia prompted Petronet to tap supplies from as far as Algeria and Egypt. Tankers from North Africa take tankers twice as much time to reach India, compared with transport from Qatar. Global demand for LNG is rising because of environmental concerns over the use of coal and oil.

The power plant at Dabhol will help ease blackouts across India, where output from aging fields has failed to keep pace with demand growth.

Gail India and NTPC, owners of Dabhol, may pay Petronet about $5.83 per million British thermal units for gas supplies, about half the price of naphtha, an alternate fuel currently being used at the power station, Dasgupta said.

"My prices are very competitive," he said. The price of gas for Dabhol is an average of the cost of contracted LNG imports from Qatar and the price of shipments from the spot market, according to Dasgupta.

Dabhol, started by Enron Corp in 1996, has never worked at more than a third of capacity because of the US company's collapse, disputes over power prices and a lack of gas for the furnaces.

Supplies from Qatar, under long-term contracts, cost about$3.54 per million British thermal units after paying customs duty and charges, he said. Japan paid as much as $20 for spot cargoes in 2006, Alexis Aik, a consultant at FACTS Global Energy had said earlier.

Petronet's increased LNG sales may boost net income by 46 per cent to about Rs 285 crore for the year ending March, said Ballabh Modani, an oil & gas analyst with Mumbai-based Batlivala & Karani Securities. Profit may reach Rs 301 crore next financial year, he said.

Profit may rise by another Rs 500 million for the year ending March 2008 if the government allows Petronet to charge Dabhol a margin of 20-30 cent per million British thermal units on gas sales, Modani said.

"It is unclear if the government will allow Petronet to make marketing margins on gas sales to Dabhol," Modani said. The government wants Dabhol, now called Ratnagiri Gas & Power Company, to supply power at a lower price to Maharashtra state.

Petronet, which is spending Rs 1600 crore to double Dahej's capacity by December 2008, is controlled by Bharat Petroleum Corp, Oil & Natural Gas Corp, Gail India and Indian Oil Corp.

The state companies together hold 50 per cent. A new terminal in Kochi on the east coast will be completed by 2010 at a cost of Rs 2,050 crore, according to Petronet's annual report for year ended March 2006.

The power ministry estimates that India must add 70,000 MW of generating capacity to its existing 120,000 MW to cope with surging demand. Inadequate power supply and transportation bottlenecks cut two percentage points from economic growth every year, according to the finance ministry.