Q1 profit jumps 58% to Rs 247.5 crore

 The company's net profit stood at Rs 247.50 crore in the April-June quarter as compared to Rs 156.60 crore net profit in the same period a year ago, Petronet Director (Finance) R K Garg told reporters here.

He said the net profit was higher because of a Rs 72.37 crore reversal of tax after the company won its case for <g data-gr-id="59">tax</g> holiday for port services. Under Income Tax Act, port and power plants are eligible for a holiday or exemption from payment of income tax on income in any 10 years of the first 15 years of operations.

Petronet, which operates at LNG import port at Dahej in Gujarat, decided to avail of the tax benefit for the port operations in last 10 years of the 15 year period. "Income Tax department had objected to it and we have now received a favourable ruling," he said.

The 10 million tonnes Dahej LNG import terminal operated at 98.6 <g data-gr-id="49">per cent</g> of the capacity while its 5 million tonnes Kochi terminal in Kerala operated at just 6 <g data-gr-id="50">per cent</g> because of lack of pipeline to take gas to customers.

Garg said Petronet's LNG buyers -- state-owned energy firms GAIL, IOC and BPCL -- took only 68 per cent of volumes under a long-term 7.5 million tonnes a year import contract with RasGas of Qatar.

This was because the landed price of RasGas LNG in India was about $12.5 per million British thermal unit as compared to the same gas being available from spot or current market at less than $8. This led to Petronet buying an equivalent amount of lesser volume from RasGas, Garg said.

Petronet buys LNG from RasGas on a take-or-pay contract - which essentially means that the company has to pay for 7.5 million tonnes of LNG every year even if it does not take all or some of it. The company <g data-gr-id="71">in-turn</g> has a similar take-or-pay contract with its off-takers - IOC, BPCL and GAIL. 

"The take-or-pay obligations, if any, would be determined after the close of calendar year as per the contractual provisions under the long-term contracts which are materially back to back," he said, implying that if Petronet had to pay RasGas any money for LNG not bought, it will charge the same from its <g data-gr-id="72">offtakers</g>. He refused to hazard a guess if the lower purchase from Qatar could lead to RasGas dragging it to an international arbitration.

"Anything is possible. In any contract, anything is possible. We are not in that stage that anything of that nature is there," he said when asked if an arbitration is a possibility. Petronet has a 25-year deal with Qatar’s RasGas to buy 7.5 million tonnes of LNG annually, beginning 2004.

GAIL, IOC and BPCL, which sell the imported fuel locally, have cut purchases of long-term supplies on low demand from industries including steel, fertiliser and power. “We are working together to mitigate concerns of <g data-gr-id="66">high</g> price of long-term LNG,” Garg said. He said Petronet imported a total of 125.4 trillion British thermal units of LNG in April-June quarter as compared to 138 TBtus in the year-ago period and 93 TBtus in January-March.

The April-June imports were made up of 67 TBtus of LNG shipments under long-term contract, 25 TBtus of spot purchases and 35 TBtus of service cargoes. The imports under <g data-gr-id="53">long term</g> contract in Q1 of last fiscal was 96 TBtus.

Garg defended the long-term contract with RasGas, saying “it was not in <g data-gr-id="57">best</g> interest of the company.” “Contract with Qatar is the best. For 11 years, the country has gained from the contract. It has helped develop LNG market in the country. Pricing under the contract has been advantageous for us. “Sudden drop in prices (internationally) has developed the current situation,” he said.

LNG from Qatar, on the long-term, was once considered the cheapest. The fuel costs $2.53 per mmBtu for the first five years, from 2004 to 2009. For the next five years, the price was linked to moving <g data-gr-id="62">average</g> of <g data-gr-id="63">crude</g> oil price of last 5 years and thereafter direct indexation with crude oil.