Demand for LNG is high at the moment: Dir.(F &C)

In an interview with CNBC-TV18, Amitava Sengupta, Director (Finance & Commercial), Petronet LNG spoke about the demand-supply scenario. He said that demand for LNG is very strong at the moment. The domestic gas production is restricted to a certain number so, the demand for imported gas is very high.

Below is the verbatim transcript of Sengupta's interview with Latha Venkatesh and Sonia Shenoy of CNBC-TV18. Also watch the accompanying video

Q: Could you take us through the demand-supply scenario right now and what kind of regasification terrace are we likely to see in FY12?

A: The demand is quite strong, with the pipeline capacities now not being a constraint, the demand has gone up. The domestic gas production is also restricted to a certain number so, the demand for imported gas is very high. If you see Petronet, it has already booked almost close to its capacity. It has booked around 97% of its available capacity at Dahej.
So, there will be some more spot cargos which can be accommodated but not many of them. This quarter the volumes like the last quarter if the last financial year we have been at close to 10 million tonne of level. We expect this volume to continue in the future also.

Q: There has been a fall from expected levels of the gas output from the KG basin. How has that impacted your company, have you noticed therefore an increased demand and therefore perhaps some pricing power as well?

A: Both are true. Definitely, the domestic gas getting restricted has given some demand boost. But, with more the pipeline capacity is available the more demand will increase. Now this has happened. The combination of both has seen that the demand for imported gas has also gone up. Definitely, demand has gone up and there is no issue about it.

Q: The other factor that one assumes common sensically would be working in your favour is the heightened price of crude oil. Does that mean that your margins improve in the process or would your raw material in any case increase to that extent?

A: The way we do our business is we always type back to back. We donít gain much with this crude price going up. The term contracts which we have signed downstream with the consumers, they have definitely gained because we have done it six-seven months back and now the international prices have gone up. Though Petronet doesnít get any additional benefit.

Q: What about contracts that you are signing at this point in time for say the next 12 months or the next six months. Are you able to factor in a higher, does that willy-nilly imply higher margins or really you are also open to higher raw material prices?

A: We keep our margins at a reasonable level and we donít see such opportunities to increase our margins. On one hand we are not going to absorb any additional cost, the additional cost will definitely be passed on to the consumers but at the same time we also are not expecting a very high margin for us. We will have a reasonable rate of return for all these contracts.

Q: Letís talk about your EBITDA and ROEís. I am just reading from report that while you are still comfortable at 20% ROEís a CAGR of 28% over FY10 to FY14 in EBITDA could lead to maybe a 28% ROEís. You think those numbers are achievable?

A: I see no reason not to achieve that because the demand is strong, we have built in capacities and we have the first mover advantage. So, definitely these things will continue.

Q: What kind of guidance can you give for the bottom line also? If you expect say 28% CAGR in EBITDA what about the bottom line?

A: I would say we are in a very steady business and we are in utility business and we see our trend of growth maintained in future also.

Q: Are you already loaned up for the expansions in Kochi and Dahej. Anything you will have to raise by way of a capital or debt?

A: No. We have done our financial closures for up to Kochi expansion. Immediately, we donít require any big fresh loans. Though, a small Dahej, second JT may require something but not a big one.

Source: CNBC-TV18
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