India to see huge jump in LNG demand if prices stabilize: Petronet CEO

India is expected to see a huge jump in its demand for LNG as weaker prices prompt a recovery, after demand slumped in the last financial year reflecting the impact of the global pandemic and restricted supplies due to the Russia-Ukraine war, Akshay Kumar Singh CEO of Petronet LNG, India's largest LNG importer, said.

India's LNG demand stood at 20 million mt in FY 2022-23 that ended March 31, compared with 25 million mt in 2020-21 and 23.4 million mt in 2021-22, according to Petroleum and Product Analysis Cell, or PPAC, data.

India's gas demand is expected to be on the higher side until winter starts if the weakness in LNG prices continues, Singh said May 3 at a press conference sharing the results before the earnings call.

Demand would be supported by "big customers" such as Mangalore Refinery and Petrochemicals Ltd (MRPL) on a switch back to natural gas from liquid fuel, he said.

Platts, part of S&P Global Commodity Insights, assessed the JKM for June at $10.578/MMBtu on May 3 and the West India Marker at $10.225/MMBtu on the same day.

According to a company official who did not wish to be named, LNG prices are expected to range between $10-$11/MMBtu in the April-June quarter.

Meanwhile, the company is also hoping to tie in its long-term deal with RasGas in the current low-price environment.

Petronet LNG buys 8.5 million mt/year from RasGas via a long-term agreement and imports 1.44 million mt/year from ExxonMobil's Gorgon project in Australia under another term deal.

At its quarterly earnings call, Petronet Finance Director Vinod Kumar Mishra, said Petronet would complete the negotiation related to the extension of a long-term 8.5 million mt LNG supply contract by December 2023.

Regas volumes

Petronet operates two terminals -- Dahej terminal on India's west coast with capacity of 17.5 million mt/year and Kochi terminal on the southern coast that has a capacity of 5 million mt/year.

In Q4, Petronet processed 185 trillion Btu at both the terminals, up 10.8% from Q3 (October-December) but 2.6% down from the same quarter a year ago, as capacity utilization at the Dahej terminal tempered the impact of under-utilized capacity at Kochi.

However, the combined LNG processed at both the terminals stood at 752 trillion Btu in 2022-23 (April-March), down 11.2% from 2021-22, on lower imports amid higher LNG prices due to the Russia-Ukraine war.

Mishra noted that LNG volumes processed at the company's terminals had jumped on the quarter in Q4 due to the downward pressure on LNG prices.

Petronet's Dahej terminal processed 172 trillion Btu, or 4.7 Bcm, of LNG in Q4, up from 154 trillion Btu in Q3 but 3.4% lower compared with the same quarter a year ago.

Mishra said Dahej terminal's capacity utilization rose to 97% in April compared with 77% in the January-March quarter in line with the softening trend in global prices.

The Kochi terminal was underused with its capacity utilization at around 20% in Q4 as well as in FY 2022-23 due to an inadequate pipeline network in south India.

Mishra said Petronet would complete the negotiation related to the extension of a long-term 8.5 million mt LNG supply contract by December 2023.

Petronet's net profit stood at Rupees 32.4 billion ($396 million) in 2022-23, down 3.3% from 2021-22 due to an adjustment in foreign exchange volatility. However, the company recorded its highest turnover at Rupees 599 billion ($7.3 billion), up 39% on the year.

"The company was able to achieve robust financial results despite high LNG prices, owing to optimization of its operation," Singh said.