Global spot LNG prices have come back to affordable levels: Petronet LNG

The company is India's largest LNG importer and is aiming for more long-term deals in the next 10 to 15 years, says it CEO

Global spot liquefied natural gas (LNG) are affordable again after rallying to unprecedented highs, said A K Singh, the top executive of Petronet LNG on Friday.

Singh, who is managing director and chief executive officer, told Business Standard the sudden spurt in spot LNG prices had little impact on the company which has more long-term contracts linked to crude oil. He was speaking after the company announced its third quarter results. 

“The price of spot Liquefied Natural Gas (LNG) had increased to exorbitant levels which has never been seen in the past, but we are finding that from future prices being indicated from April onwards are coming in the affordable range of around $ 5 to $ 6 per million British thermal units. We think that LNG prices in the international market will stabilise in near future, maybe a month or two, and definitely that will improve the utilisations of all the LNG terminals in India,” he said.

Asked if the prices affected Petronet’s consumers, Singh said, “Some effect was there but we have a lot of long-term contracts which were not impacted with these prices since they are mostly linked with the crude prices. Only some spot and short-term contracts were impacted in January, but now it has normalised.”

Petronet LNG is in the business of re-gasifying LNG at its import terminals for Indian consumers. It is India’s largest LNG importer and a joint venture of public sector undertaking companies.

Petronet LNG operates two regasification terminals in the country. The company’s flagship 17.5 million tonne per annum (mtpa) terminal in Dahej, Gujarat, meets around 40 per cent of the total gas demand of the country. Singh said that the Dahej terminal operated at 97.3 per cent of its nameplate capacity and Petronet LNG plans to expand its capacity to 22.5 mtpa.

The other terminal is of 5 mpta in Kochi which has had a rough start in the absence of pipeline networks that were delayed. The lack of consumers pulled down the capacity utilisation. There has been some relief with the long-awaited commissioning of Kochi-Mangalore pipeline for this project. It is expected that the Kochi terminal’s capacity utilisation will rise to 30 per cent later in 2021.

But the actual utilisation of this project will happen once more pipeline network is in place. According to Singh, the Mangalore line has been completed and all the consumers in that sector (Kochi to Mangalore sector) will be supplied gas gradually. However, one major portion of the pipeline network that connects the terminal to Bangalore and the national gas grid is expected to be completed in a year.

“We expect that very soon the line will be connected to Bangalore and once that is connected, then we expect capacity utilisation at our Kochi terminal to jump to 80 or 100 per cent,” he said.

Commenting on more long-term contracts that Petronet LNG is looking to forge, Singh said, “It is expected that gas consumption is going to increase substantially and Petronet LNG will play a major role in the form of importing more LNG and developing terminals. Nowadays, the conventional long-term deal which used to be 25 years is no more existing in the international market. People are talking about five to ten years deals for longer terms. There are a lot of flexibilities even if the long-term deal is being offered by the supplier. We are looking for capitalising such opportunities to get the best deal for our country.”