Petronet LNG, the joint venture company formed to import liquefied natural gas and set up LNG terminals, has seen its profit more than double in the quarter ending June. And, the share price has doubled in a year. A K Balyan, managing director and chief executive officer, tells Ajay Modi the company is bullish on the business and expanding to have 25 million tonnes of capacity by 2015 from the current 10 mt. Edited excerpts:
Is there a feeling that domestic gas finds have not come up as they were expected to and, consequently, there is a constraint situation?
It is difficult to say that right now. The government has been taking initiatives to identify, carve out and award more blocks in prospective areas and called for speedy exploration. It would take a few years to to get a fair assessment about the prospect for such blocks. I will not say that there is no hope of finding more gas. Offshore areas have shown prospects and ONGC, RIL and GSPC are working on it. As on date and based on the results so far, very large volumes aren’t expected to flow.
So, it is certain the gap between demand and supply is widening sharply?
Yes. A few months earlier, we’d taken an analysis in the presence of various experts. The present consumption of 170 mscmd (million standard cubic metres a day) is growing sharply and expected to be 380-400 mscmd by 2015-16. On the supply side, 130-140 mscmd is being produced and it is expected to touch 200 mscmd by 2015-16. So, from the present shortage of 30-40 mscmd, it is set to grow to 180-200 mscmd.
What is the way out?
To explore aggressively and produce whatever we can. Also, we should bring gas from outside. There is no other way but to bridge the gap, because we cannot lag in industrialisation and growth. We now need to plan for larger quantities of import. There are two modes of import -- a transnational pipeline or through LNG imports. There have been several proposals on transnational pipelines but nothing concrete has happened. LNG imports have been on for several years and this area has to grow. The challenge here is to get and contract a better price for the country and ensure domestic infrastructure for marketing.
What expansion plan has Petronet chalked to import more gas?
We are working to remain leader in the LNG business. Our Dahej terminal has performed at over 100 per cent capacity; we have decided to expand capacity from 10 million tonnes to 15 mt, at an investment of $350-400 million. Work at the Kochi terminal is at an advanced stage and we hope to commission it by next calendar year-end. A proposal for a third terminal along the east coast has also been approved. We are looking of a suitable location, maybe in Andhra Pradesh or Orissa. This is likely to have a capacity of five mt, with provision for future growth. If we decide on the site by year-end, it will take 40 months to commission. This is in line with the expectation that more gas needs to come to this country.
How do you plan to tie up for gas required to feed the Dahej capacity expansion?
We are in discussion with Qatar for long-term supply of two-three mt of gas. We have moved ahead and hope to conclude a fresh contract for additional quantity in the next couple of months. For Kochi, 1.5 mt of long-term supplies have been tied up with Exxon Mobil and more is possible from the same project, which we are negotiating. We have signed heads of agreement with Gazprom for supply of 2.5 mt and we are negotiating price and scheduling. This can be brought to any of the terminals.
What is the status of Petronet’s plan to enter the power sector?
The detailed feasibility report is complete. Currently, the power sector is fraught with prive volatility and the regulatory mechanism is strict. There is a huge power shortage; yet, projects are not coming. In merit order of dispatch, cheaper power is taken first and power generated by regassified LNG will be costlier and, therefore, taken last. We are working on making it affordable to the consumer. We are in discussion with the Gujarat state government, with whom we have a memorandum of understanding, that they will buy power at a cost-plus basis. We are also in discussion with PTC for evacuating power from Dahej. Once we will have 30-35 per cent firm power purchase agreements in place, we will go to our Board for a final investment decision.