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Petronet LNG Ltd
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Ladies and gentlemen, good day, and welcome to the Q1 FY '23 Results Conference Call of Petronet LNG Limited hosted by Emkay Global Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Sabri Hazarika from Emkay Global Financial Services. Thank you, and over to you.
Yes. Good evening, everyone. On behalf of Emkay Global, I'm pleased to invite -- please to welcome you all to the Q1 FY '23 Post-earnings Conference Call of Petronet LNG Limited.
We have with us the senior management of Petronet LNG, led by Mr. Vinod Mishra, Director of Finance; Mr. Rakesh Chawla, Group General Manager and President Finance; Mr. Gyanendra Kumar Sharma, Chief General Manager and Vice President, Marketing; Mr. Debabrata Satpathy, General Manager, Finance and Accounts; Mr. Vivek Mittal, General Manager, Marketing; and Mr. Ashwani Agarwal, Manager Finance. So today's session would be a brief on the results by the management, followed by the question-and-answer round.
So without any further delay, now I request Mr. Mishra to come up with the opening remarks. Over to you, sir.
Thank you, Sabri. A very good afternoon to all of you. So I will start on later highlights. So this has been that our turnover has increased to INR 14,264 crore in this quarter as compared to INR 11,160 crores in the previous quarter and INR 8,598 crores in the corresponding quarter. So there is a growth of around 66% in turnover as compared to corresponding quarter and almost 28% as compared to the previous quarter.
And apart from that, I'll just give the highlight how has been the performance of our Dahej and Kochi tender. During the quarter, we have been able to achieve 196 TBTU in Dahej tender as compared to 194 TBTU in the corresponding quarter of the previous year and 178 TBTU in the previous quarter. So if you look at, there has been a better performance as compared to previous quarter and also as compared to corresponding quarter.
And total throughput in both the terminals has been -- taken together has been 208 TBTU as against 209 TBTU in the corresponding quarter and 190 TBTU in the previous quarter. And if you look at the profitability, PBT has been INR 937 crores in the current quarter as compared to INR 851 crores in the corresponding quarter and INR 984 crores the previous quarter. And PAT has been reported at INR 701 crores in this quarter as compared to INR 636 crores in the corresponding quarter and INR 750 crores in the previous quarter. So if you compare with the corresponding quarter, there has been growth of 10% in both PBT and PAT.
And further, if you look at the performance, operational performance has been excellent as compared to previous quarter. But due to a foreign exchange variation loss of INR 124 crores, it has been a little bit less than previous quarter, but as compared to corresponding quarter, it is far, far better. So basically, you know that the exchange rate was around INR 75.81 on 31st of March 2022 as compared to INR 78.91 in this 30th June 2022.
So there's a gap of INR 3.1. Because of that, there is a foreign exchange fluctuation of INR 134 crores, which is a [indiscernible]. So basically, this is the reason it is a little bit down, but otherwise, performance has been excellent. This excellent performance has been possible despite high LNG prices going to optimization in our operation.
Thank you very much. Now house is open for the questions.
[Operator Instructions] We have a first question from the line of Probal Sen from ICIC Securities.
Two questions. One was with [indiscernible] and GAIL in their con call mentioned that Gazprom is unable to actually deliver on their commitment of volumes from the 2.80 contract that they have for the import of LNG. Now obviously, a major -- some portion of that is obviously flowing through our terminals. So what mitigation options would we have if GAIL is unable to bring those volumes -- in terms of contractually how are we placed with respect to this, if these volumes don't actually come through, if GAIL is unable to sort of source any alternative sources?
So you're right that there has been some trouble in gas contract, but as far we are concerned, there is a contract for you to see, and they have built the case to the extent of 2.5 Mbps, so that is based on use or pay basis. So whatever volumes are there after agri in GDP, they will have to bring to that extent. Otherwise, we will use the [ B plots ]. So that way, we are secured to that extent. But it's -- overall, if you see, it's not a very good scenario that -- if somebody is defaulting. It's impacting the ultimate consumers because be a part our term, the customer is suffering because long term gas is priced at $14, $15. And if they go to the spot market, it's $43, $44. So it's a big difference. But definitely, it's not good for the country. But as far as we are concerned, there is a commitment of user base charges. So far, GAIL has been bringing cargo in time. There is not a default. So I think they have enough resources available apart from Gazprom, so maybe from U.S. portfolio, they were bringing cargoes. But we are secure because of our position as per contract of use or pay charges. So that said, we are secure.
Nice. And the second question was, sir, after 2 quarters of softness, we have seen third-party regas volumes have picked up back to sort of normalized -- near normalized levels of 94, 95 TBTUs.
What are you asking?
Sir, regasification services or third-party regas volumes are 94 TBTUs for this quarter, if I'm correct. Previous 2 quarters, they were at levels of 76, 78 also. Any color you would like to throw on what has driven this improvement?
In last quarter, it was little bit less. But now I think it has come -- so if you compare with the corresponding quarter, it is 99. We're still not to that level, but it's a normal level, it should have come. But in last quarter, definitely, it was less. Okay, now because if you look at the cover of [indiscernible], it was in operation fourth quarter. But right now, it is not working. So till October, it will be our terminal which will be busy. So maybe that will be the reason that...
It's every year like that.
It's every year, fourth quarter versus Q1 is always a difference.
Got it. So Q1 and Q2 would be better for us and then also...
Double its growth for this cost.
One last question, sir. Last couple of quarters, we haven't heard much in terms of the LNG retail opportunity, which you sort of were developing. Any further developments you've had in terms of the pilots you were running with IOCL? Anything you can share with us?
Retail, you are talking about LNG station you're talking?
Yes. LNG, yes. Yes.
Yes, they are going on as per the second line products, we are already depreciated with IOCL and the full LNG dispensing indication. And we are going ahead, and [indiscernible] is very likely to be installed shortly. And maybe in next 6 months, you'll see that it will be there. And 1 more station, we have, in fact, is the order for likely to be commissioned with somebody else, maybe on our own. But 4 stations are definitely coming up. But this year, it will be there. Maybe in the next 6 months, you will see these are in operation.
We have a next question from the line of Maulik Patel from Equirus.
Sir, a couple of questions. One is that the RasGas volume, which we are sourcing 8.5 million tonnes, if you look at the last 3 years on a calendar year basis, it's consistently below that number? So [indiscernible]...
Mr. Patel, your voice was breaking. You may go ahead now.
Afterwards, it's not something with the full 8.5 million tonnes of volume and probably supplying less?
No, no, no. It's not 8.5 million. It is 7.5 million tonnes. 1 million tones has been assigned to offtakers. Of course, that was part of the deal when we renegotiated the price with RasGas in 2015. And in that deal, it was agreed that we will take additional volume of 100 [ DPS ]. And that was to be assigned to offtakers subsequently. So accordingly, as per the deal, we have assigned those on [indiscernible] to offtakers. So we have, in our portfolio, 7.5 mmBtu now.
Okay. So additional 1 million is [indiscernible]...
Sir, your voice is breaking again. Yes.
Hello?
Yes, yes. Please continue.
Another key question is on that you talked -- past about the petchem project and the biogas. Can you throw some light in what stage we are right now for these 2 projects?
Yes. So first is petchem project. Petchem is -- we are, in fact, indicating to have a plant which is called PDH PP plant. So that plant, we are going to put up at the edge. But for that, we are still doing some visibility because we have already done DFR, and now we are in the process of getting DFR. So all these things will be analyzed. And if there is a return of at least 16%, 17% IRR, then only we will go in for this kind of project because there have been hemes crack in this particular product in the company. So I think unless until we -- until that we'll be having some good IRR, we will not undertake it. But DFR is still under focus. And perhaps we have to go in for some license selection process also while making DFR. So all those things are continuing. But right now, it is with the consultant for DFR preparation.
And second 1 is CBG. And CBG, of course, there has been a challenge because CBG, we thought will come in a big way, but right now, there has been certain handicaps which are preventing us from putting up those plants because when we tried to initiate the process to put up some 3, 4 plants, CBG plants in Haryana, we found that it is not possible for our government to allocate the land to us as per their policy. So they told us that they cannot give -- like give any land to us. So they have gone to assembly. Again, they have to pass this to amend that policy that only they can allot us some land for CBG. So in fact, that is a big problem that we are facing. So we could not proceed much, unless/until we have land, we cannot put up any CBG plant. So that is not progressing well, and unless/until the Haryana government takes some decision on policy matters.
Mr. Patel, does that answer your question?
Yes. I have just one last question, small question, if you allow me to. Sir, how do you assess the situation of LNG demand in the country with respect to the upcoming Reliance energy auction, which will be approximately 3 million to 4 million tonne of LNG demand that can be replaced. Your comments, sir?
Okay. I think if you look at the demand in the country, it's huge demand. But one thing is very clear that this demand is price sensitive. It's not possible to consume gas at $40 or $50. So while it's true that some gas is coming domestically, it's good, but even beyond that, there is huge appetite for consumption. But the price is a major problem because price, once it is down, there's enough scope for that gas which Reliance is going to build a supply gas pump for LNG need. Everything is possible, all LNG and this domestic gas can be consumed. But since LNG [indiscernible] is very high. So that is causing a major problem for us. But otherwise, as of now, it is not going to impact because long-term volumes are already there. It will continue like that. And in fact, we are also envisaging we have some long-term contracts in future if we get at a good price. But at the same time, we are focusing on increasing this quality RasGas contract which is expiring in 2028 to extend it beyond that. So all things are good.
But I think Reliance Gas, which you're talking about, as of now, it's not have any type business at all, anything it will do, it could have the case only this spot volume consumption, which is already less -- so right now, if you see, there's a glut of gas in the country. People who cover gas say [indiscernible] enough, they will get it because nobody can afford to buy LNG at the current spot prices.
[Operator Instructions]. We have a next question from the line of S. Ramesh from Nirmal Bang Equities.
Can you share the regasification margin you earned in this quarter?
Regas margins been brilliant. Regas revenue this quarter has been INR 537 crores -- INR 536 crores as compared to INR 463 crores in the previous quarter and as compared to INR 552 crores in the corresponding quarters.
Okay. Is there any inventory gain or trading gain in this quarter?
Yes, there has been inventory gain of INR 35 crores and a trading gain of INR 104 crores.
Okay. So can you explain why the other [indiscernible] has gone up so much other than the FX loss, which I presume are [indiscernible]?
Sorry, this inventory gain, if you look at, we just sold as compared to corresponding quarter, it is higher by INR 35 crores. But otherwise, if you look at standalone this quarter, it is INR 110 crores.
INR 10 crores was for 1Q.
[indiscernible] INR 75 crores in the corresponding quarter of previous year. I just told you INR 35 crores, which is higher as compared to corresponding quarter by INR 35 crores. It is INR 110 crores.
So can you explain why the other expenditure has gone up other than the impact of the FX loss?
This is INR 124 crores as we told you that foreign exchange now is there. And in depth, if you look at, it has been in total, including foreign exchange loss, INR 127 crores this quarter.
Okay. So if you look at the philosophical question about gas supply and what GAIL has mentioned in terms of reducing supplies to their contracted customers to the takeover fee, so when you say you are having use or pay obligations, can we have a situation where the offtakers ask you to restrict your volume through the remote use or pay, and wouldn't that imply some risk of reduction in volumes for you even under the current use or pay commit?
Growth compared with day to day what they have. We have use or pay contract for daily services. It is not concerned with their supply take-or-pay. The scheme is not to do with supply. They have commitment to their customers. Our commitment is through our offtakers to the extent they have booked capacity. And it very well conceptualized in the contract itself that if there is a shortfall in the committed quantity, then they will pay use or pay license. So we have to see both the context in isolation. We cannot correlate all these 2 things.
Okay, understood. So in terms of the utilization of Kochi and the linked pipelines to Mangalore and the Kochi-Mangalore pipeline, when do you see the linked pipeline infrastructure getting completed? And what is the time line now for increasing the capacity utilization of Kochi?
This is true that Mangalore has to be in place very shortly. But again, then we make sure that around 250 [indiscernible] Mangalore has been remaining. So there has been, in fact, problems with the farmers in the state. But now we have come to that there has been government leasing some agreement with the farmer that whatever line is to be is to be laid around the high. So it is not passing through the fees to farmers. So perhaps that will resolve the issue. But as far as the time line is concerned, it is at least 1 year. So GAIL is already in the process, and they are trying to complete it. And today's board meeting is on the health, and even CMD of GAIL has assured that they are doing it. And they are hopeful that they will complete in time.
We have our next question from the line of Vivekanand Subbaraman from AMBIT Capital.
So my first question is on the LNG trading subsidiary that you have set up. So can you help us understand the plan that you have here? And any update that you can provide on the gas sourcing that you are planning, given that you may have to sign a new contract before the RasGas contract expires. That's one.
Secondly, you were conducting studies -- prefeasibility studies on the FSRU terminal in Gopalpur. Can you give us an update on that? And also help us understand how much CapEx you will -- you are budgeting for the current and next year.
Okay. So first question is regarding this RasGas contract, which is expiring in 2028. So one thing is that already a task force has been formed, and this particular task force is assigned with the work of extending the contract beyond 2028. And this task force is led by none other than [indiscernible] Limited. And this task force consists of director level [indiscernible] from IOCL, GAIL, PPCL. So in fact, it's a high-level task force, which is already in talks with the RasGas management. And we have to conclude this oil agreement by December 2023. So we have time till to December 2023 to conclude all the negotiation for extension of the contract with RasGas. So that we are undertaking because we have already found [indiscernible].
Secondly, we are also [indiscernible] to have a contract for at least 1 million tonne on our own for various requirements, including smaller scale LNG and our other customers, who are there like one of them is [indiscernible]. So we are thinking of having either with RasGas, additional [indiscernible] or with some other supplier 1 [indiscernible] contract, apart from this 7.5 [indiscernible] contract over on this. So that is what we are thinking of and [indiscernible] to get the RasGas contract extended beyond 2028. So that is already in process.
The second thing we have talked about is Gopalpur. So of course, we are looking at [indiscernible] at Gopalpur. And we, in fact, have proceeded ahead and negotiations with Gopalpur Port have almost been concluded. And in fact, we have got some assurance from government [indiscernible] because the Gopalpur Port has some lease for that port through 2036. So beyond that, also our [indiscernible]. So we have got some actual incentive from government of Odisha that our terminal will continue even after the Gopalpur trust may or may not be extended, the lease for the Gopalpur port.
So that kind of things are happening. And we, in fact, have negotiated many of the parts with -- many of contractual issues with the Gopalpur port. And in fact, we are now looking forward to have some kind of agreement -- a definitive agreement [indiscernible] so that we can provide each other and drive through ahead in this direction. Overall CapEx which is likely to happen, and this will be around INR 1,500 crores, INR 2,000 crores in between maybe INR 1,700 crores, I think. So that is the CapEx, but OpEx will be very high because, again, we have to do some -- we have to arrange a shift for these [indiscernible]. So that is, again, a challenge we have to see where from we can get that shift so that we can have some facility for regasification on that. So this is all what is going on, but we are very serious about this story. And perhaps in next few months, you will see some progress that we are already undertaking the project activity. But that part is going on. After entering into some of this definitive agreement, they will seek approval of Board for the CapEx or commissioning of this [indiscernible].
Okay. Just a couple of follow-ups. You didn't touch upon the Singapore subsidiary for LNG trading and the plant there. And lastly, on the CapEx side, the 2 tanks that you are constructing in Dahej and the third jetty, apart from that, is there any other project that you're working on for FY '23 and '24?
Yes. I will just [indiscernible] I would like to -- that jetty, as you know, has already been formed on 7th March 2022. And we are now in process of looking for opportunities. But right now, the LNG price is too high for LNG that trading through that arm is also a challenge. So we had an objective of having some spot trading of cargo through that entity. But right now, software is not so good to have some port LNG in our portfolios and supply because demand is less. Price is, of course, high, but demand is not there in India.
So we hope that as soon as these prices also stabilizes, it come down and be affordable, then perhaps we can think of trading through that arm. But right now, we cannot think of any opportunity and not even any opportunities coming up to us through that entity that they can do. In future, we will do, so Gopalpur port trading will be through the jetty. So this is all just [indiscernible]. And the CapEx of this also -- first is our tax that is already in process, and we have a target of INR 1,250 crores.
And makes the jetty also for which we are going for getting Board approval. Board approval is there. We have to now go for awarding of the role and all that. [indiscernible] is there, but we have to profit with BMP selection and other change for that purpose. So that is already going on. And third one is, in fact, expansion of Dahej regasification terminal from 17.5 MMTPA to 22.5 MMTPA. That is also in [ buses ], and the CapEx would be around INR 570 crores in total. So these are the projects which are -- we've undertaken a [indiscernible] part from this petchem in future, which will come up after DFR and other things are finalized. So this is what we have planned for Dahej, and Gopalpur I have already discussed. So broadly, these are our CapEx plan.
We have a next question from the line of Mayank Maheshwari from Morgan Stanley.
Just one question I had was on this LNG sourcing on the long term. You talked about RasGas and a high-level committee that has been formed. Can you just talk a bit about what you are seeing apart from Qatar in terms of gas sourcing because a lot of your Asian peers in China and Thailand, et cetera, have already signed long-term contracts with the likes of [indiscernible], et cetera. So what has been India's strategy around it? If you can just give us some color around that.
It's actually this particular time is not good for long-term sourcing also because, right now, price being so high in the spot market. If we go for any long-term contract, it comes at a very high flow. So we are waiting for some time because, if prices come down, then we can think of having a good long contract. But right now, everybody will ask the flow, which is very high because everybody has seen that price -- LNG spot price is at $42, $44. So at this price, if you go in the market, even for the long-term contract, you find that store is very high. So we are looking forward to some opportunities. But of course, that is preventing us from talking too much to the dealer because it is in huge demand. European countries are short on LNG now. They are ready to buy at any price. So that is, in fact, appreciating the market. We are finding it difficult to even search for the good suppliers. So we are hoping that once this Ukraine-Russia war is over, and it is -- market stabilizes and it becomes a reasonable price in the range of $15, $18, then we can think of, in fact, going for this too much.
But right now, we are focusing on our gas. So this is how we are proceeding. But if you ask me whether we are moving forward, it's not prudent to go at this at very high slope because in future, prices will definitely come down. At this point of time, if you go for a long-term contract, you will, in fact, enter into a contract which is very high price, and in future, it will be difficult to, in fact, sell that LNG. So we are waiting for a right environment when the prices of LNG -- for LNG come down, and for us, that will be the right atmosphere. And we are hopeful that, next year, it will be there. And hopefully, we will then negotiate a good contract.
Got it, sir. and but the thinking is still about linking to oil, not linking to Henry, which you've recently seen as contracts with fixed tolling fee and all those things. That's not something that you're kind of thinking about right now as well?
Everything is open. We are not saying we are against any sale. So whatever it should be because it's a part of negotiation, we may make [indiscernible] some say, gas in [indiscernible] 50% on crude base. So like that, it might be a hybrid of that kind of [indiscernible]. But of course, anything we cannot say right now even nothing is there on table. So we have to see how it shapes it in future. So right now, it is difficult to comment, but it could be either way because, if you look crude-linked contracts, again, consumers are a feature to this cruise-linked contract. Even if gain is buying in [ NGL ], nobody is interested in the NGL contract. So that is, again, a question mark because we are ambitious to having this crude-based -- crude-linked nexus rather than gas-based. And of course, in future, customers may also change, and then they may agree to have their contract also. But we are open to it. It's not a big question, but the right kind of pricing is a big issue. So that we have to look at.
We have a next question from the line of [ Kishan Mundhra from Antech Research ]. We'll move on to the next question from Mr. Nitin Tiwari from Yes Securities.
Sir. Thanks for the opportunity, and thanks for having this call. So my first question is actually about [indiscernible]. So how much of the Gorgon volume [indiscernible] to-date in this quarter?
5.2 TBTUs.
Sorry sir, 0.5?
5.2 TBTUs.
All right. And sir, the next question is actually related to this one. So we had guided some time back that utilization at Kochi, Kerala would start picking up, but it remains [indiscernible] between about 15% to 20% [indiscernible] up, and we continue to get this mainly Gorgon volume back [indiscernible]. So if you can maybe help us understand that why the utilization at Kochi [indiscernible] and what is the road forward for Kochi? And also late, if you can confirm the Kochi regas tariff that we are charging at this moment.
First question is why utilization level has not increased. So very right question you have asked, I will explain it. So if you look at last year, when it was Kochi-Mangalore pipeline was commissioned. So we were hopeful that utilization level will be at least 30%, 35%. And in fact, we have reached up to the level of 28%. That one is part of time. But after that, this LNG price surge has created a [indiscernible], and we are not able to sell LNG because what market has gone so high that for major consumers like MRPL, some [ CFL ] or NPL, they are not able to afford this price.
So major reason is price that we have not able to utilize whatever. When the prices will come down, definitely, all these consumers, including MRPL, NPL and CFL. They will consume more gas, but at this price, they have moved to some alternate fuels. They are not interested in using gas. So this is a major reason why utilization level is low, but once price is able to stabilize, it will come down, and affordable, then certainly, these consumers will start taking gas, and then it will increase.
So first part is -- and then next quarter is the Kochi-Mangalore connectivity. So that I've just explained that the section from [indiscernible] Mangalore, which is still to be commissioned around 250 from the pipeline. So once that is commissioned, then it will be connected to national gas rig, and then perhaps consumption may pick up because then we can swap the volumes from Kochi, Kerala to anywhere in India. But unless/until this is connected to this national grant rate, it is not possible to fill the volumes.
Understood, sir. And sir, the Kochi, Kerala that we are charging is still on...
[indiscernible] 81.03 [indiscernible].
Understood. And lastly, a final question on mode. So we discussed the LNG prices that [indiscernible] in the call today. So would it be fair to assume that if the current LNG price environment continues and with higher gas coming up in third quarter of this year. So we might like to know of the [indiscernible] at a lower inflation level than we had in March this year. In the next -- I mean, in the first quarter of FY '22. So any thoughts on that?
It's not like that. We are utilizing what is the current utilization level of the -- it is 87% is still running. [indiscernible] the quarterly inflation is very high. Still, we are able to utilize 70%, 80% of our capacity, which is not less, and it's such a difficult and turbulent market. So if you compare with Q1 of the corresponding quarter, it is 1% higher, 86% versus 87%. But fourth quarter has been a little bit low in the previous quarter, but -- of course, we are hopeful that this level of utilization will continue throughout the year, even today, it's 87%. [indiscernible]
No, why I mentioned that is because, in the March quarter, we saw oil and LNG prices touching the highs, and that impacted utilization plus that is at the time when [indiscernible] terminal is actually also operational. So if we put all these factors together, I mean, the high energy spot LNG prices, which reduces the demand, and then higher gas coming in and [indiscernible] being operational. So if all these things come together, is there a possibility of [indiscernible] pricing that was what I wanted to understand. So how do you see it?
No, it is not likely to be because it will be kept in the last quarter also. You need to check that it was Ukraine only to the extent of 78% -- 79 TBTU, but 78%. But still, we have this usable as well. So we have, in fact, invoiced them with use or pay charges. [indiscernible] was not able to meet the commitment. So it is not that our bottom line is affected. But often our utilization was less, no doubt. But that, of course, we hope that will not be there this year because whatever consumption is there is committed by all the offtakers in the beginning in the form of ADP. That they have to meet, otherwise, they will use or pay charges kind of thing. But we are hopeful that this level of utilization of 87% will continue throughout the year.
We have a next question from the line of [ Hamand ], an individual investor.
I'm sorry, I've got just had one basic question. When you look at your gross margin for this quarter versus last quarter, and I'm sure there are multiple things, the margins have declined, right? What would be the reason for that?
Last year, gross margin you're asking -- can you repeat your question, please?
Yes, sir, if you compare quarter-on-quarter or even last year quarter to this year, year-on-year, gross margins have come down by maybe quarter-on-quarter, I was seeing was 250-odd bps and from last year, so it's down. So I just wanted to know what is the reason for that?
Trading margin was higher in the last quarter. So that was a major reason. But of course, this quarter, there is not that much of steady margin.
So going forward for the rest of the year, given the conditions that we are in at the gas price, if you consider the market conditions are the same, do we consider the same gross margin rate for next quarters going forward?
I think this will continue, and we will not be lagging behind. If you look overall performance, we are able to give a good result. I see last year also, there was a lot of less is cargoes coming in. But it's still we are able to maintain the profitability, even grew at least 10%, 20% higher, 10%, 15%. This year also that trend will continue because, when there is a fee when we see that there is a condition which is not conducive to our business, then certainly, we make more effort towards something else to optimize and then to have more LNG through optimization and sell it in the market and on the trading margin as we have done last year, we have done a trading of almost INR 1,700 crores last year. And that too -- and we had a trading margin of almost INR 858 crores. So those optimization come in time, but of course, we have to see opportunities come to us, and then we do accordingly, but of course, we will not be lagging behind the margins in the next quarters and maybe over the years. That's the only way the company is performing very well in its site of the [indiscernible].
We have our next question from the line of [ Ankur Agarwal ] from PhillipCapital.
There's 2 questions from my side, 1 being a follow-up from previous participant's question. You mentioned that the Kochi terminal utilization levels are low because of high gas prices, particularly spot cash prices. But wouldn't the carbon volumes be coming under the long-term contract, they would probably be still available at a reasonable price? If you could provide some clarity on that.
The Gorgon contract is already committed to the offtakers, who it is, in fact, taken by offtakers either at the Angul or at Kochi. So we are not having too much of customers on Kochi. So most -- many of all 3 factors, 2 of them, the 2 offtakers are bringing their volume to the Angul. I think in future, when there will be right at core sizes that were reasonable and affordable, then this entire Kochi volume -- this Gorgon volume will go to Kochi only. But right now, because of pipeline connectivity to Mangalore and other things, it is not possible to shift that volume there.
But one thing is very clear that customers in that region do not have that long-term contract. So that's a big difficulty. So they are dependent on it for volumes only. Yes. So this long-term volume cannot be given to customers who won't have -- who have not tied up with the offtakers. So that's why I'm saying that whatever customers are available in that region, they will start taking gas when the prices could be reasonable and affordable. So we are hopeful that it'll come because these prices cannot continue at such level all the time. They have to come down.
It's only the time that maybe not this year, next year, definitely don't come down. It cannot remain at this level because if you look at the trading at this level, not much of trading will happen, but because of the panic in Europe, it is causing such a price rise. But we are hopeful that this will normalize, and next year, hopefully, prices will be down, and then Kochi terminal will be utilized because then customers may start taking gas.
Okay. So just one -- another question was that you mentioned, right now, slopes being negotiated are on the higher side. If you could provide some color if you have some insight into what kind of slopes are we talking about through these negotiations that probably some Asian buyers have tied into contracts. So any color on that, what we are looking at in terms of percentage slopes linked to bank contracts?
See, these things are not to be discussed, but on [indiscernible] this is very high as compared to our existing slope. So once any contract which is having a slope of more than 18% of crude isn't more affordable. That's what I can say. So you can say that if you compare crude and gas, it should not be more than 18% of the crude price. If it is higher than that, then there is no impact logic of taking gas. So that's what I want to explain that more than 18%, we can equate gas to oil at 18% now, maximum. That is also on the higher side. But more than that, it is unaffordable.
Right. Makes sense, sir. Just one last bookkeeping question, sir. You mentioned that there was a ForEx loss of INR 124 crores during the quarter, which was booked in your other expenses. So excluding that, sequentially, there's a drop in the other expenses. Is there any particular reason for that other expenses were lower if I were to exclude this ForEx loss.
[indiscernible]
Yes, if you see the last quarter and the corresponding quarter, in the corresponding quarter also, there was a loss of INR 35 crores in the other expenses. And in the last quarter, it's around INR 60 crores. So if you take out these from the other expenses, I think it should be more or less in line.
We have a last question from the line of Somaiah V. from Spark Capital.
I mean, you did mention about the projects that you indicated for the next few years. What would be the annual CapEx run rate maybe this year and next year, if you could speak to us on that.
CapEx this year and next year? Yes. If you look at the projects we are undertaking, this stands to grow with what is already going on. And this is likely to be completed by 2024 beginning almost. So maybe in next 2 years, we have to spend INR 1,250 crores, so INR 600 crores each year in CapEx roughly.
So this will be...
INR 150 crores this year [indiscernible]
At the company level for the other projects also taking, I mean, [indiscernible] expansion or the Dahej expansion? So in total, at the company level, what will be the annual CapEx?
CapEx, if you look at, we have planned almost -- you see how much [indiscernible] INR 1,200 crores CapEx we have planned this year as [indiscernible] suggested. This year, INR 1,200 crores, so maybe the same, at least we can proceed next year, maybe more because jetty will come next year after time, and Dahej expansion, which is costing around INR 170 crores. That will come up by 2024 and max in. So you look at the spread over 2, 3 years. These are the expenditures. And apart from that, if petrochemical comes, and it will levitate [indiscernible] that we cannot anticipate right now how much it will be year-on-year basis.
Got it, sir. Sir, one on the FSRU. What is the expected time line for the project in terms of completion? And what would be the capacity? And also one thing [indiscernible] sorry, generally, you do a feasibility study in terms of demand. And what is the kind of back-to-back contracts or minimum offtake that you're looking for before you start on this.
For the FSRU terminal, we are proposing of 3 to 4 MMTPA. And in fact, CapEx I already discussed with INR 1,500 to INR 1,700 crores. But only thing you are saying back-to-back contract. So of course, we will try to have some at least whatever for 30%, 40% backup back to that. But we cannot say that it should be 100% higher. It is not possible nowadays. And we will take that if at all, 30%, 40% is secured. That is good enough. And we go ahead with that. This proposition [indiscernible] demand in any case has been very high. Price is growing. Demand is likely to remain high. For our lone project coal versus LNG for sale LNG, we can have some kind of this consumption. And apart from that, it is still likely to come with this [indiscernible] pipeline is commissioned, then we will have more opportunities for our tender. And we are hopeful that this will be a good opportunity. Initially, 30%, 40% is also the yield that we can get out of it.
Understood. So one last question, if I may. So the current tariff in the hedge, and this 5% annual escalation cost that we have, so has this been implemented every year so far? And in terms of continue to implement this, do we see at some point in time the prices at a certain level from a competition intensity standpoint, we might have to think about this 5% admission cost.
Escalation is there as a contract 5%. We are already doing it. Right now, it is INR 57.05 [indiscernible]. So I think this is as for the contract, and informally, it will continue to be so. I don't think there is any challenge coming from anybody. And this is a tariff which is based on all the terminals which are there. In fact, Dahej has defined the benchmark for others. So I don't see any challenge assets as the 5% hike every year. That's all. I think anything specific you are asking? I don't know, but this will continue to be so.
I now hand over the call to the management team for closing comments. Over to you, sir.
Thank you. Thank you very much, all of you. And in fact, I would like to thank all of you for reporting faith in us. And in fact, our management will continue to strive to increase the bottom line from quarter-to-quarter, year-on-year basis and will do all efforts that the company grows like anything. And in fact, we have seen last year also that we have shown for this commitment towards half office, and it has been a difficult time no doubt for the entire LNG industry, but we are able to maintain our profitability in all the situation so far we have faced. And this quarter also, we have performed very well.
We compare this last quarter also, it is better. But only thing to see that the Ind AS loss, the foreign exchange loss of INR 124 crores has caused us some loss as compared to previous quarter. But if you add that which is a notional kind of loss, you'll find that it is in the range of INR 825 crores, INR 800 crore almost.
If you look at INR 135 crores off of INR 124 crores of ForEx loss. So truly speaking, we are doing the best to maintain and increase the profitability -- and bottom line and to just increase the faith of the investors on us, and we are very confident that all of you will report faith in company. And we are 100% sure that kind of business model we are having that there should not be any concern for any investors because we are protected in such a way that -- it is very difficult to, in fact, go in north because we are not taking too much of risk. So again, I will thank all of you for being here, and we hope we'll continue to grow like this in future as well. Thank you very much.
On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.