Petronet in a bind with capacity expansion and lower offtake

ET Intelligence Group: Moderating gas consumption in the country amid growing installed re-gasification capacity are likely to weigh on the stock of PetronetNSE -0.73 % LNG, India’s largest re-gas terminal operator. With 4 per cent return since the beginning of 2019, the stock has underperformed the BSE Oil and Gas Index, which has gained 10 per cent.

The company is in the business of converting liquified natural gas into gaseous form and these conversion charges form its earnings.


India’s gas consumption fell by 1.6 per cent year-on-year to 161 million metric standard cubic metres per day (mmscmd) in April 2019, the lowest monthly growth in the past 12 months. Barring city gas distribution and petrochemicals verticals, major gas consuming sectors such as fertiliser, power and other industrial segments reported contraction in demand.


The company has attributed the recent volume weakness to refinery shutdowns. It expects higher utilisation of the Kochi terminal to drive up volumes in the current fiscal.

A significant recovery in gas offtake would, however, require policy push to start the stuck gas-based power projects in the country. Until that happens, volume growth in the medium term may not match the historical growth.

However, the project has missed several deadlines in the past. This pipeline is critical for higher volume offtake from the company’s Kochi terminal, which has been running at around 10 per cent of utilisation due to unavailability of the pipeline network.

Petronet is expanding the Dahej terminal capacity to 17.5 million metric tonnes per annum (mmtpa) from 15 mmtpa, and it is expected to completed by June 2019. Besides, it plans to put additional tanks at Dahej, which would increase th ..