For Petronet LNG, capacity utilization is critical

Capacity utilization at Petronet LNG’s major terminal in Dahej, Gujarat, took a hit during the March and June quarters, though it improved in the September quarter. It said that weak LNG import data during November is a matter of concern, which in turn could impact the December quarter performance of the company.

India’s LNG imports stood at 1.52 million tonnes in November, down 34% from a year ago and up 28% sequentially. Credit Suisse said in a report on December 5 that this was the lowest level of imports since 2017. The brokerage said the capacity utilization at Petronet LNG’s Dahej terminal declined to 66% in November from 95% in October. Since Dahej Terminal has most of its capacities under long-term and short-term take-or-pay contracts, such a sharp decline is surprising.

According to analysts, the fall in imports could be on account of higher LNG prices given the strong demand for gas in India. Needless to say, investors will keep an eye on signs of recovery in December.

Meanwhile, lower gas usage in November will raise concerns and could also mean that the December quarter capacity utilization could suffer. It may be recalled that Dahej terminal capacity utilization increased to 98% in the September quarter from 85% and 91% respectively in the previous two quarters.

Meanwhile, due to delays in completion of the Kochi to Bengaluru gas pipeline, Petronet’s Kochi terminal is underutilized. Expectations are high that the completion of the pipeline in the next two years could help increase the use of the terminal.

Petronet LNG is expanding its Dahej terminal capacity to 22.5 MMTPA (million tonnes per annum) in two phases from the current 17.5 MMTPA. This is positive for its growth prospects. However, analysts at Elara Securities India Pvt. “Given the constraints of LNG supply and new terminals coming up on the west coast, we are confident that Petronet LNG will find it difficult to run the expanded capacity at full utilization,” Ltd. said.