Petronet LNG, India’s biggest importer of liquefied natural gas (LNG), is aiming to add Rs 25,000 crore to its top-line in the next three years by selling cheaper gas to consumers currently using liquid fuels such as naptha and fuel oil, according to Prabhat Singh, managing director & CEO. Petronet reported the highest ever turnover of Rs 39,501 crore in FY15, up 5% year-on-year, while net profit was reported at R883 crore up 24% year-on-year.
According to Petronet, when the global crude prices hover around $50/barrel, there would an arbitrage of around $6/barrel between gas and liquid fuels (By that reckoning, the current Brent crude price of $32/barrel allows imported gas to be even cheaper). However, the price dynamics could vary from one consumer to other depending on the distance from the gas grid, he said.
Analysts who FE spoke to, however, expressed doubts about the feasibility of gas sourced from overseas being cheaper than naphtha and fuel oil. Currently, price for fuel oil is hovering around $5/mBtu, while that for naphtha is $9/mBtu. On the other hand, the landed cost of LNG is around $7-7.5/mBtu, which could cost upto $9-10/mBtu at the customer point, given the re-gasification and transportation charges.
“It is not easy to convert liquid fuel consumers to gas. Meanwhile, the refineries are also expanding. In order to do this, LNG must be cheaper than fuel oil and naptha, which is not at the current scenario,” said a Mumbai-based analyst.
At present, nearly 190 million tonnes of liquid fuels are consumed in India annually. Of this, about 70 million tonnes is diesel. “If we take even 10% of this market,” Singh said, “it’s enough to add an extra R25,000 crore to topline in three years.” He added the company would scrutinise the option of forming joint venture with its promoter companies (BPCL and IOC), while going ahead in this business.
Petronet is in discussions with the government authorities of Andaman and Nicobar to meet the energy demands of the island. It may set up a gas-based 30 mw power plant and terminal to supply fuel to the island.
Analysts say that Petronet’s target is ambitious, even considering the fact that the overall gas volumes for the company could grow by 20% in FY17 and a further 35% in FY18. India’s gas demand is likely to rise by more than 40% to 167 mmscmd in FY18 compared with 118 mmscmd in FY15.