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BW Businessworld

Not Just Hot Air

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The past two years have been particularly good for India’s largest liquefied natural gas (LNG) importing company — Petronet LNG. Operating in a space where demand far outstrips domestic supply, the company has been able to scale up its volume of spot and short-term supplies. These moved up from 29 cargos at its Dahej terminal in Gujarat in September 2010 to 42 in September 2011. What also helped boost Petronet’s margins were the low spot prices of LNG in global markets.

Besides, a combination of low domestic natural gas output and ever-increasing demand from companies helped Petronet LNG maintain an over 100 per cent utilisation of its Dahej terminal since 2011.

So, it comes as no surprise that Petronet has notched up an average four-year sales growth of 37.71 per cent. “We revisited our vision two years ago and there was an overwhelming consensus that Petronet LNG has the inherent strength to become and remain a leader in the LNG business,” says A.K. Balyan, CEO and MD, Petronet.

Eyeing the future, the firm has been working on plans to commission its second terminal at Kochi, along with expansion of the Dahej terminal. It also aims to set up a terminal at Gangavaram in Andhra Pradesh. With the additional capacity, the company expects to be able to handle 25 million tonnes of LNG by 2020.

Another important goalpost for 2020 is to bring in 15 per cent of the firm’s earnings through diversified activities. “We have plans to diversify into power production, coastal small-scale LNG distribution, supplying LNG by road and downstream projects based on LNG by 2020,” says Balyan.

Petronet is well placed to take advantage of India’s growing appetite for natural gas. India is the world’s sixth largest LNG importer and the share of natural gas in its energy basket is set to increase from 8 per cent in 2011 to 20 per cent by 2025, according to a 2008 McKinsey report. “Although a marginal increase is expected in domestic gas production, demand will grow much faster... the only option open is to get gas in the form of LNG,” says Balyan.

The company is now looking at markets like Mozambique and Nigeria. The US and Canada are also on its list given their shale gas reserves. “Huge gas availability can only be good news for India,” says Balyan.

(This story was published in BW | Businessworld Issue Dated 20-05-2013)