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LNG Prices Likely to Stabilise Near USD10/Mbtu: Petronet

  • High LNG prices worldwide do not reflect the demand supply mechanism, Dr A Balyan, chief executive officer and managing director, Petronet LNG said. Factors beyond the demand supply mechanism are contributing to it, he added."Pre-Japan crises, Fukushima problem and tsunami the prevailing rates for the Indian west coast supply were to the order of about USD 9.5-10/mbtu. After that they have been rising and had gone up to USD 15-16/mbtu," he told CNBC-TV18.They currently stand at USD14/ mbtu, but the reasonable price should be USD 9.5-USD10/ mbtu, he added. Balyan expects LNG prices to stabilize around USD10/mbtu.

  • Q: The LNG prices have shown a fairly firm trend, have you seen any flagging of demand at higher levels?

  • A: Worldwide, the prevailing LNG prices to our understanding are prevailing at higher prices. They do not reflect the demand supply kind of mechanism. There are other factors which are contributing to higher prices particularly for the Indian sub-continent.

  • We have Europe with low growth of just about 1%, prevailing prices are different than the Japan-Korea market very high prices. Many things that go beyond proper demand supply mechanisms are contributing to higher prices.

  • Q: You are saying that the effective price for the Indian customer is not what we normally get to see in the form of global prices?

  • A: If you remember pre-Japan crises; Fukushima problem and tsunami the prevailing rates for the Indian west coast supply were to the order of about USD 9.5-10. After that they have been rising and had gone up to USD 15-16. Now they are around USD 14, but they have not comeback to the normal scenario of about USD 10 or USD 9.5 which is more reasonable price that should be.

  • Q: The Dahej terminal wil be up and running soon and there is expectation that because of the demand scenario it will be a 100% operational capacity that it would run at. Give us a sense in terms of the demand supply deficit that we are seeing at this point in time what would be the additional capex that Petronet LNG would plan possibly in the next two years?

  • A: The Dahej terminal for us is an important terminal and the most priority according to the expansion plan of Dahej and the plan is to expand from 10 million tonne present capacity to 50 million tonne. We are on way to this project, our detail feasibility report is over and front end engineering is going on now.

  • The expansion is on a specific model. We have a firm commitment from two companies for some additional quantities about 2.5-3 million tonne capacity per annum to GAIL and about 1-1.25 million tonne to GSPC. These two companies are giving us some advance, which would perhaps take care of our equity, so it is on a different model.

  • It is a long-term commitment, volume commitment by us that would mean that our enhanced capacity is also committed for long-term, 20-25 years time. The model is that the two companies would forward some advance to us and we will see what can be funded through internal accruals. If there is some funding required we will have to raise some loans, but that would perhaps be evaluated in next one-two months time.

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