Singapore — India's state-run Petronet is embarking on a major diversification drive to embrace new businesses -- such as bunkering, compressed biogas and renewable energy -- as it prepares for a changing energy landscape, but at the same time not diluting its focus on its core LNG portfolio.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
Company officials and analysts told S&P Global Platts that the new business plans are a part of its effort to broaden domestic business presence and expand its international footprint in a bid to spread the risk evenly at a time when energy transition is the catchphrase.
Petronet's diversification drive comes at a time when many other oil and gas firms in India are stepping up efforts to become integrated energy firms, while shedding their image of being known as oil and gas companies.
"A lot of other state-run companies are also diversifying to other forms of energy. It's a push by the government. Petronet is also joining the efforts but the new initiatives by Petronet will be small, to begin with, if you compare them with their LNG business," said Sumit Pokharna, vice president at Kotak Securities.
Petronet LNG Ltd. was formed in 1998 and operates LNG regasification facilities in the South Asian region. It is India's biggest LNG importer and caters to around 75% of the country's LNG requirement by supplying 70 million cu m/d of LNG collectively from its Dahej and Kochi terminals.
It owns 53% share of the country's existing regasification capacity, with a capacity of 17.5 million mt/year at its Dahej terminal and 5 million mt/year at its Kochi terminal.
Company officials said Petronet is diversifying to many other businesses across the LNG value chain, offering services like providing LNG as automotive fuel through its chain of LNG stations in collaboration with other state-run oil firms and city gas distribution companies, LNG supply for industrial usage through trucks, LNG supply to earth movers in the mining sector, compressed bio gas and LNG bunkering.
Petronet is also planning to have an ethane import facility at Dahej, an FSRU at Gopalpur on the east coast and foray into renewable energy. In addition, it plans to expand internationally and cater to LNG and related infrastructure in Sri Lanka, Maldives, Bangladesh, Myanmar and Mauritius.
Petronet is set to form a dedicated subsidiary catering to LNG bunkering and gassing-up and cooldown, or GUCD, facility at its Kochi Terminal to establish itself as a key player in the growing Asian gas bunkering market, company sources said.
The company is also at an advanced stage of discussion for going for an LNG bunker vessel which will be ready for service to anyone crossing the Indian Ocean.
Highlighting the vision to get into bunkering, company officials said that in 2015 the MV Kvitbjørn short sea cargo vessel was the first ship to transit between Asia and Europe fueled solely by LNG. During the milestone transit from China to Norway, the ship was fuelled at Petronet's terminal in Kochi.
"This milestone bunkering, which saw the MV Kvitbjørn fuelled directly from Petronet's Kochi terminal, was predicted to kickstart LNG bunkering in India. Since then, Petronet has been catering to sporadic demand," a company source said.
The strategic location of Kochi terminal is expected to spur bunkering activity in the region at competitive prices. With LNG-fueled tonnage set to increase in Asia in the coming months, Kochi LNG terminal is expected to provide a potentially valuable refueling point for East-West trade, company sources added.
"Moving to LNG bunkering is very logical for Petronet as they have a big LNG presence. But the company is evaluating its other upstream and overseas investment decisions carefully as spot gas prices are getting very competitive. The COVID-19 situation and other factors are forcing Petronet to move on some of their investment plans cautiously," Pokharna of Kotak Securities added.
Officials and analysts said that with India's LNG imports expected to reach as high as 50 million mt by 2030, more than double the current 22 million-23 million mt, this would provide one of the biggest opportunities to LNG producers expanding their capacities. Petronet can't afford to dilute its focus on LNG even if it diversifies into new businesses, sources added.
"The LNG opportunity is vast and will run for decades. That will remain the core for Petronet in the years to come," said one company official.
The commercial transportation sector and the city gas distribution network offer some of the best potential to help boost India's LNG consumption in coming years, company officials said.
India's gas consumption is split between locally produced gas and imported LNG. However, a large portion of the gas which is allowed to be marketed freely is re-gasified LNG. India's domestic gas output falls under the Administered Pricing Mechanism under which it's sold at a price set by the Petroleum Planning and Analysis Cell on a half-yearly basis.