Petronet LNG Q4 a letdown amid diversification, competition risks

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₹1,104 crore in Q4 on revenue of close to ₹13,800 crore. Natural gas prices have declined to less than one-third from a peak of $9.3 per mmbtu (Henry-Hub) in August 2022. Petronet’s Dahej plant achieved capacity utilization of 97% in Q4, up from 77% a year ago and the highest in the last ten quarters.

Across two terminals in Dahej and Kochi, Petronet’s total regassification capacity is 22.5 mtpa, accounting for more than half of the total domestic capacity. Almost half of India’s natural gas demand is being met through imports necessitating LNG terminals. Yet, consumption is constrained largely because of unavailability of pipelines for transporting the gas from these terminals to consumption center and infrastructure for city gas distribution, etc.

Here, the government’s push to increase the share of natural gas in the total energy basket from the current 7% to 15% has the potential to boost the market size for Petronet. Despite a significant market potential, the company faces several short-term challenges. To begin with, it is undertaking expansion of Dahej plant, expected to be commissioned by end FY25.

However, western India is expected to see additional capacities coming online which may put pressure on the company to find buyers. On the other hand, its Kochi plant is running at capacity utilization of barely 22% due to the absence of pipeline for off-take of gas. This would continue to remain a challenge in FY25 since the commissioning of the associated pipeline is not expected before end of FY25.