Indian Petronet's FY2021-22 LNG regas volume dips 5% as high prices bite

India's biggest LNG importer Petronet posted a 5.5% year-on-year drop in regasification volumes to 24 Bcm in financial year 2021-22 (April-March) amid the surge in global LNG prices in reflection of tightening supplies due to the Russia-Ukraine crisis, company officials said during the release of its quarterly results May 12.

Petronet, which has LNG terminals at both Dahej and Kochi on the west coast, said its Dahej terminal, with a nameplate capacity of 17.5 million mt/year, operated at 88% capacity in FY 2021-22 compared with 93% in FY 2020-21.

In the quarter ended March 31, Dahej terminal's regasification volumes stood at 5 Bcm, a 13.8% year-on-year drop. The terminal's fourth quarter volumes also fell 9.1% from the third-quarter ended Dec. 31, 2021.

Petronet's Kochi terminal operated at 21% of its 5 million mt/year capacity over January-March compared with 18% in the corresponding quarter a year ago.

The company processed a total 5.3 Bcm at both its terminals in Q4, down 14.5% year on year and 8.6% month on month.

"Our overall operations were impacted by high volatile global LNG prices," Petronet LNG's managing director A.K. Singh said.

Despite the drop, Singh said that capacity utilization at the Dahej terminal should hit full capacity once spot LNG prices retreated to long-term contractual levels.

Singh said Petronet expects LNG prices to average between $18/MMBtu and $19/MMBtu until June. The company's long-term LNG prices from suppliers like Qatar's RasGas is around $14-$14.50/MMBtu.

Long term contracts

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

As far as long-term contracts were concerned, Petronet said it was taking steps to extend its RasGas contract for Dahej.

"We have started negotiations with RasGas, a task force has been constituted and they are working on that," V.K. Mishra, finance director, said. "We have to ultimately finalize by December 2023 for the extension of the contract and we have already taken steps right now."

He added that the company may also attempt to increase volumes should it be offered a "good price".

In terms of scouting for or lining up new long-term contracts, Mishra said that it was not likely.

"It's not a very perfect environment for negotiating for a long-term contract because demand is so high and after the Russia-Ukraine crisis, European countries are after all the suppliers...that is in fact spoiling the market," he added.

The prospect of a significant disruption to Russian gas exports has kept global gas markets on edge, despite a continued softening of the wider supply and demand fundamentals impacted by a new record LNG deliveries in April, S&P Global Commodity Insights said earlier this month.

Much of the concern centers around Russia's demand for payment in Rubles, which was re-ignited on April 26 as Gazprom's contracts with Poland and Bulgaria were cancelled prematurely. While these contracts were due to expire later in 2022, the curtailment of flows will lead to a drop in regional supply felt across much of Eastern Europe with any additional contract cancellations potentially pushing markets materially higher, it said.

To meet domestic demand, Petronet LNG was also exploring the possibility of buying at least 1 million mt of additional LNG from the spot market for near-term delivery, Singh said.