Petronet LNG Limited: history, ownership, mission, how it works & makes money

A Brief History of Petronet LNG Limited

Petronet LNG Limited, established in 1998, is one of the largest liquefied natural gas (LNG) importers in India. It operates the Dahej and Kochi terminals with a combined capacity of approximately 20 million tonnes per annum (MTPA).

In the financial year 2022-2023, Petronet LNG reported a revenue of ₹46,663 crores, reflecting a growth from ₹42,469 crores in the previous fiscal year. The net profit for the same period stood at ₹3,199 crores, an increase from ₹1,579 crores in 2021-2022.

The company operates under a Joint Venture Agreement among several public sector units, including ONGC, GAIL, and Indian Oil Corporation, with an equity participation of around 50% held by these entities.

Petronet LNG has made significant infrastructure investments. The Dahej terminal, operational since 2004, was initially designed with a capacity of 5 MTPA. In 2018, it was expanded to 10 MTPA, becoming one of the largest LNG regasification terminals in India.

Moreover, the Kochi terminal was commissioned in January 2014 with an initial capacity of 5 MTPA. However, the terminal faced operational challenges, achieving capacity utilization of only 25% as of 2023 due to lack of pipeline infrastructure.

As of the end of the fiscal year 2022-2023, Petronet LNG's total assets were valued at approximately ₹23,000 crores. The company's market capitalization as of October 2023 stands at around ₹48,000 crores.

The company has entered into long-term LNG supply contracts with international suppliers. These contracts include agreements with Qatar’s RasGas and Australia’s Gorgon project, ensuring supply stability and cost management for the domestic Indian market.

In response to the increasing demand for cleaner fuels in India, Petronet LNG is focusing on expanding its operational capabilities and infrastructure further. Recent developments include plans to explore additional terminals along India's coastline, aiming to enhance the distribution network for LNG across the nation.

Petronet LNG has also been actively involved in initiatives to support government policy on energy transition, emphasizing the role of LNG as a bridge fuel towards a greener economy.

The company's performance has been positively impacted by the global rise in LNG prices, with its sourcing strategy adapting to market conditions. In FY 2022-2023, the average price of LNG imported by Petronet was approximately USD 10 per MMBtu, up from USD 6.5 per MMBtu in the previous year.

A Who Owns Petronet LNG Limited

Petronet LNG Limited, a leading player in the LNG sector in India, operates primarily in the import and regasification of liquefied natural gas. As of October 2023, the ownership structure of Petronet LNG Limited is segmented between several major stakeholders, including government-owned entities and private players.

The largest shareholders are:

• GAIL (India) Limited: 12.5% ownership
• Indian Oil Corporation Limited: 10.0% ownership
• Bharat Petroleum Corporation Limited: 10.0% ownership
• Oil and Natural Gas Corporation Limited (ONGC): 12.5% ownership
• Government of India: 50.0% ownership (directly and indirectly through other state-owned corporations)
• Public and Private Investors: 5.0% ownership

As per the latest available data, Petronet LNG has a market capitalization of approximately INR 35,700 crores (around USD 4.3 billion). The company reported a total revenue of INR 30,000 crores for the fiscal year 2022-2023, with a net profit of INR 1,400 crores.

The ownership distribution reflects a significant influence from the Indian government and public sector undertakings, which aim to stabilize the country's energy supply chain. Furthermore, Petronet LNG's strategic partnerships with various international LNG suppliers bolster its operational capabilities and market position.

In terms of financial performance, the company has demonstrated resilience with an EBITDA margin of approximately 20% in its latest earnings report. This stability is crucial as the demand for natural gas in India continues to rise, in line with the government's push towards a cleaner energy mix.

Petronet LNG Limited Mission Statement

Petronet LNG Limited, established in 1998, is a leading player in India's natural gas sector, playing a crucial role in the country's energy security. The mission statement of the company emphasizes commitment to supply reliable and clean energy, promoting sustainable development. The core components of Petronet's mission include:

• To meet the energy demands of the nation through the import and regasification of liquefied natural gas (LNG).
• To create a sustainable and efficient supply chain for LNG.
• To ensure the highest levels of safety and environmental standards in all operations.
• To foster technological innovation and operational excellence.
• To contribute positively to the communities in which it operates.

Petronet LNG's strategic focus aligns with its mission to deliver energy with integrity, efficiency, and sustainability. The company is dedicated to reducing the carbon footprint through its clean energy solutions.

Financial Performance

For the fiscal year ended March 31, 2023, Petronet LNG reported significant financials:

Petronet LNG's gross profit margin for Q4 FY 2023 stood at approximately 24.4%, depicting strong operational efficiency. The company's return on equity (ROE) was reported at 14.2%, showcasing effective management in utilizing shareholders' equity.

LNG Infrastructure and Capacity

Petronet LNG operates the largest LNG terminal in India located at Dahej, with a regasification capacity of 17.5 million tonnes per annum (MTPA). Additionally, the upcoming terminal at Kochi adds another 5 million tonnes per annum, bringing the total capacity to 22.5 MTPA.

The significant expansion plans reflect the company's mission to enhance its supply chain capabilities and meet growing energy demands effectively.

Market Insights

The global LNG market has been expanding, with a projected growth rate of over 6% annually through 2030. This growth aligns with Petronet’s mission of pursuing opportunities in the LNG space, as India’s LNG imports increased by about 12% year-on-year in 2022.

As of July 2023, Petronet LNG holds a 30% market share in India’s LNG imports, solidifying its position as a leader in the sector.

Community Engagement

In alignment with its mission, Petronet actively participates in community welfare programs. The company has invested over INR 50 Crores in various CSR initiatives in FY 2023, focusing on education, health, and sustainable development.

The alignment of Petronet LNG's business operations with its mission statement is evident through its focus on creating a sustainable and more energy-efficient future for India. The company continues to explore innovative solutions and partnerships to strengthen its position in the global LNG market.

How Petronet LNG Limited Works

Petronet LNG Limited, a leading player in the liquefied natural gas (LNG) sector in India, is primarily engaged in the import and regasification of LNG. Established in 1998, the company has formed strategic partnerships with major global LNG suppliers, enhancing its supply chain capabilities.

The company operates a state-of-the-art LNG terminal at Dahej, Gujarat, with a total capacity of 1,200 Tera British thermal units per day (TBTU/D). A second terminal is located at Kochi, Kerala, with a capacity of 5 million tonnes per annum (MTPA).

Petronet's sourcing strategy includes long-term contracts and spot market purchases. As of 2023, it has long-term contracts with suppliers such as Qatar's RasGas, under which it is contracted to import 7.5 million tonnes annually.

Financial Performance

For the financial year ending March 2023, Petronet LNG reported revenues of approximately INR 41,076 crores (around USD 5.5 billion). The net profit for the same period stood at INR 2,023 crores (USD 270 million), reflecting a growth of 10% year-on-year.

The company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) for FY 2023 was approximately INR 3,500 crores (USD 470 million), providing a margin of around 8.5%.

Operational Efficiency

Petronet LNG’s operational efficiency is bolstered by its advanced regasification technologies. The Dahej terminal has a regasification capacity of 15 million tonnes per annum (MTPA). The Kochi terminal, though currently operating at under capacity due to pipeline constraints, has the potential to meet a demand of 5 MTPA.

As of October 2023, Petronet LNG’s capacity utilization at Dahej has been consistently above 90%.

Market Position and Trends

Petronet LNG commands a significant share of the Indian LNG market, contributing to more than 50% of the country’s LNG imports. It operates in a competitive landscape, with players like GAIL and Shell also in the market.

In 2023, global LNG prices fluctuated, with benchmark prices averaging around USD 12 per MMBtu, impacting Petronet's procurement costs and pricing strategies.

Key Partnerships and Contracts

Petronet has established significant partnerships that enhance its market position:

• Long-term contract with Qatar covering 7.5 MTPA
• Strategic alliances with global suppliers such as ExxonMobil and TotalEnergies
• Recent agreements for spot LNG purchases at favorable rates due to shifting global supply-demand dynamics.

Future Outlook

Petronet LNG is poised for growth in the coming years, leveraging increasing domestic natural gas demand driven by power generation and industrial usage. The company plans to expand its terminal capacity and invest in additional infrastructure, including pipelines and storage facilities. Analysts project an annual growth rate of 7-10% in the LNG market in India over the next decade.

As the natural gas landscape evolves with increased emphasis on cleaner energy sources, Petronet LNG is well-positioned to expand its role in India's energy mix.

How Petronet LNG Limited Makes Money

Petronet LNG Limited is a significant player in the liquefied natural gas (LNG) sector in India. It primarily generates revenue through the import, storage, and regasification of LNG. The company operates a large-scale receiving terminal at Dahej and a second terminal at Kochi.

Revenue Streams

• Regasification Services: Petronet earns substantial income from regasification services, charging customers a fee for converting LNG into natural gas. The regasification rate is currently around ₹50 per million British thermal units (mmbtu).
• Long-Term Contracts: The company has long-term agreements with global LNG suppliers. As of October 2023, Petronet has signed deals to import 11.5 million tonnes per annum (MTPA) of LNG from Qatar, Australia, and the United States.
• Trading Operations: Petronet also engages in trading LNG. In the fiscal year 2022-23, the company reported trading revenues of approximately ₹1,800 crore.

Financial Performance

In the fiscal year 2022-23, Petronet LNG Limited reported a total revenue of ₹36,500 crore, a significant increase from ₹29,500 crore in 2021-22. This growth can be attributed to rising demand for natural gas in India and increased imports of LNG.

Cost Structure

The company's cost structure primarily consists of the following:

• LNG Procurement Costs: In FY 2022-23, Petronet's LNG procurement costs were around ₹28,000 crore, reflecting the increase in global LNG prices.
• Operational Expenses: The operational costs, including maintenance of terminals and staff salaries, totaled about ₹3,500 crore.
• Regulatory and Compliance Costs: The company also incurs costs related to regulatory compliance and environmental safeguards, amounting to approximately ₹500 crore.

Market Position

Petronet holds a dominant market share in the Indian LNG sector, accounting for over 40% of the country's total LNG imports. The company has a strong capacity with terminals designed to handle a combined volume of 15 million tonnes annually.

Investment and Future Outlook

To bolster its market position, Petronet plans to invest around ₹6,000 crore in expanding its infrastructure and enhancing its regasification capacity by 5 million tonnes per annum by the end of 2025. This expansion is expected to cater to the increasing demand for LNG in the Indian market.

Key Financial Statistics

The growth trajectory and diversified revenue streams position Petronet LNG Limited as a crucial entity in enhancing India's energy security and addressing the rising demand for cleaner fuel sources.