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Petronet LNG Ltd
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Ladies and gentlemen, good day, and welcome to Petronet LNG Limited Q2 FY '23 Earnings Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Hemang Khanna from Nomura. Thank you, and over to you.
Thank you, Yashashvi. Good afternoon, and thank you, everyone, for taking the time to attend the post results conference call of Petronet LNG. We are privileged to have with us the senior management of Petronet LNG today, led by Mr. Vinod Kumar Mishra, Director Finance; Mr. Rakesh Chawla, Group General Manager and President, Finance and Accounts; Mr. Gyanendra Kumar Sharma, Chief General Manager and Vice President, Marketing; Mr. Vivek Mittal, Chief General Manager and Vice President, Marketing; Mr. Debabrata Satpathy, General Manager, Finance and Accounts; and Mr. Ashwani Agarwal, Manager Finance and Accounts.
We now hand over the floor to the management to make their opening remarks, post which we will open the floor for questions. Thank you, and over to you, sir.
Thank you very much. Very good morning to all of you. And first, I will just read out the highlights, then we can take the questions. So there has been highest ever turnover in this Q2 as compared to previous year turnover of same period or in the previous quarter. And the growth has been as compared to Q2 of the previous year, it has grown by 48%. And as compared to previous quarter, it has grown by 12%. And PAT and PBT has also increased in current quarter as compared to the previous quarter by 6%. So now I just tell the highlights for this quarter. During the quarter ended 30th September, Dahej Terminal processed totaled 182 TBTU as against 196 TBTU in the previous quarter and 225 TBTU in the corresponding quarter.
And Kochi has, in fact, also has processed 10 TBTU in the current quarter as compared to 12 TBTU in the previous quarter and 15 TBTU in the corresponding quarter. So total throughput in both the terminals has been in this quarter, 192 TBTU as against 208 TBTU in the previous quarter and 240 TBTU in the corresponding quarter. And company's financial result has been, PBT has been INR 994 crores in the current quarter as against INR 937 crores in the previous quarter and INR 1,105 crores in the corresponding quarter. And PAT has been INR 744 crores in the current quarter as against INR 701 crores in the previous quarter and INR 823 crores in the corresponding quarter.
The company has registered highest ever turnover of INR 15,986 crores as against INR 14,264 in the previous quarter and INR 10,813 crores in the corresponding quarter. Company reported highest ever turnover of INR 30,250 crores in the first half of this financial year as against INR 19,411 crores in the corresponding first half of 2021, '22, registering a growth of 56%. Due to foreign exchange volatility, lease liability has an accounting impact of foreign exchange loss amounting to INR 98 crores. As per the provision of relevant Indian accounting standards, Ind AS, considering the performance, the Board of Directors of company has approved a special interim dividend of INR 7 per share. The company was able to achieve robust financial performance despite high energy prices due to optimization in its operation.
So now floor is open for questions. Thank you very much.
[Operator Instructions] We have our first question from the line of Maulik Patel from Equirus.
A few questions. Can you just quantify your trading or inventory gain in this quarter?
Well, trading gain in this quarter has been INR 273 crores and inventory valuation impact has been INR 118 crores.
INR 118 crores?
118.
So this is compared to close to around INR 139 crores in the previous quarter of Q1 FY '23?
It was in previous quarter, INR 103 crore trading margin and INR 110 crores inventory valuation to that. So total INR 213 crores was there.
Okay. Got it. The second question is that if you can jump in your inventory on compared to the March. Does this indicate that there's a lot of volumes lying in your storage tanks and off-takers are not taking that?
Of course, we -- it's not that they are not taking it. They are taking it, but sometimes it happens that they are not able to update it and some shutdowns are taking place in some of the industries. So all these things, in fact, sometimes slow down the send out, and that's the reason sometimes it becomes like that.
Okay. Sir, last question. GAIL has mentioned in the con call that next year onwards, monsoon onwards, that Dabhol Terminal will be fully available. So in your assessment, what could be the potential loss to Petronet because GAIL has had lot of volume or some cargoes during the monsoon to the Dahej and possibly at Kochi also. And what -- in your assessment, what could be that loss to the volume?
It's not a loss to the volume. You may see the capacity of the Dahej terminal. It is already booked to the extent of almost 16 MMTPA. If you look at all the volumes of RasGas 7.5 MMTPA and Exxon Mobil volume of 1.4 MMTPA to 5 MMTPA. And then capacity booked by various operators to the extent of almost 9 MMTPA. So that is the assurance that we are having utilization to the maximum possible limit means out of its 16.5 MMTPA total capacity is booked. So out of 17.5 MMTPA, 16.5 MMTPA is booked. So it doesn't matter whether Dahej terminal -- Dabhol terminal will be in operation for the entire year. Of course, it may affect to some extent. But as far as we are concerned, we are not that much affected because of the capacity booking on Dahej terminal to the extent of almost 16.5 MMTPA. So I think others may get affected because we have long-term contracts, which are tied up with Dahej. So it's not a challenge, I think.
Okay. Sir, if you allow me the last question. Sir, any update on the potential investment we're planning in biogas and the petchem side?
Biogas is, of course, still we are exploring because certain issues have come up regarding allotment of land in the state of Haryana. So those things are not sorted out. So we are not able to take up the projects in Haryana, initially 4, 5 projects we were and we're chasing to take up. But now unless this land issue is resolved, we will not be able to set up it. So it's -- we are taking up with the Haryana government. And probably, they are also operating -- they are saying certain issues, and because there has to be a provision for allotment of land to like us, they are resolving it. We're in talks with them. So that is there. And petchem, as you have asked. So we are, in fact, going for this PDH-PP plant. And that, in fact, process is going on. And we are in the process of licenses selection. After completion of that process, will come out -- come to know about the exact CapEx, which will be incurred. And then we will be taking up with the board.
So probably by the end of this financial year, do you expect to get an approval from the board or it will be like...
Maybe it may cross this year, maybe March 23 can be...
We have our next question from the line of Varatharajan Sivasankaran from Antique Limited.
If you can share the lease details on the impact of...
I'm sorry, sir, can you speak louder, please?
Can you hear me now?
Can you use the handset, please?
Is it better?
Yes. please go ahead.
Yes. The lease-related charges and impact our EBITDA?
You are asking about lease impact, Ind AS impact.
Yes, that's right.
So it is to the extent of INR 98 crores in this quarter. And it was INR 124 crores in the previous quarter.
INR 98 crores. And with this rupee depreciation, how do you expect this to change?
Actually, it has caused that part also. In fact, if you see there has been upward rise of this dollar against rupee. So it was somewhere around 79, 80 in the last quarter. It has gone to 82-plus -- so it has impacted definitely. That's why there is a loss to the extent of almost INR 100 crores in the joint statement...
No, is this 100 is something which we have to assume going forward or would it depreciate assuming INR 81, INR 82 kind of number, would you expect this to go up further.
Dollar rate you are asking, 82, 83?
Yes.
We cannot predict all these currency markets and...
No, no, we can predict our numbers. I'm just saying if I assume INR 82 as a number, would this INR 100 crores become INR 105, 110 or will stay at closer to 100?
I can give you a ballpark number. If there is an increase of INR 1 in U.S. dollars, then it means roughly INR 40 crores of loss.
My last question on -- great -- last question on your East Coast terminal any at current...
Yes, it's a great news. This is the right time you asked this question. Yesterday, we had a board meeting, and our Board has approved the investment approval for Gopalpur FSRU terminal. So total CapEx will be INR 2,305 crores. And we are going ahead with this Gopalpur East Coast tender. So now all the term sheets will be signed with Gopalpur Port Limited, and then we will work out all the packages for our project. Basically, 3 packages will be there in the project, which will be considered, and that is basically what is a jetty proposal.
Jetty package will be there, then pipeline will be there because Gopalpur port roughly is 36 kilometers away from the trunkline of GAIL, which is Jagdishpur-Haldia-Dhamra-Bokaro Pipeline. It is 36 kilometers from that pipeline, which is basically a Srikakulam-Angul Pipeline. So it can be connected to that trunk line. So that pipeline package may be there. So license and then topside facilities for LNG jetty will be there for which also third package will be there. So likewise, we are proceeding with this project. So this is a good news that Board has approved and now we are going ahead with Gopalpur LNG terminal.
Great I just wanted to check the INR 2,300-odd crores like includes everything our pipeline or...
Everything, everything. It is inclusive of all taxes and duties also.
And the capacity would be how much sir?
4 MMTPA capacity.
We have a next question from the line of Somaiah Valliyappan from Spark Capital.
My first question is on utilization. Last quarter, our overall utilization in Dahej was around 82%, any color -- I mean, obviously, one impact could have been the highest spot LNG prices. Any other color that you would like to add, any impact on the long-term contracts? Anything from the Gazprom supply issue that impacted, and -- but do you see anything road -- I mean, things getting better during rest of the year or the take-or-pay cost could probably compensate for this? That's the first part. And second part is, if you could share what is the current level of utilization in Dahej that would be helpful.
So first is the utilization level. This time, utilization of Dahej has been 80% in the second quarter. And this was a little bit lower than 87% in the previous quarter, and 99% in the corresponding quarter. So utilization is low, and the reason is very obvious that price of spot LNG is very high. So spot cargoes, which used to come earlier are not coming. So that is the basic reason. Of course, the long-term LNG is coming. So that's why it is still good as compared to other terminals where not much gas is coming. So that way, it is still better. But for the rest of the year, we -- there's a good news that prices have come down of spot LNG also.
Now it is in the range of $24 around. So I think we are hoping that before -- in the fourth quarter, at least, it will be way below $20, so maybe $15, $16, $15 to $20 price. So that will be affordable and then perhaps some more LNG will be coming to India and then utilization will further increase. But right now, of course, it's a difficult situation because not much spot LNG is coming to India. So that is the reason. But of course, we are trying our hard to mitigate that particular loss, which we are incurring by not having more spot LNG by way of optimizing our LNG consumption, and in fact, we have been able to reduce our LNG consumption in our Kochi plant also, where we are able to optimize it through great power, and we are not using LNG for operation of GTGs. So that way, we have saved a lot of LNG and power saving is to the extent of almost INR 15 crores per month.
So that's why we are optimizing. We are saving LNG. Similarly, in case of vessel also, we are using more FO and saving energy to be used as fuel for the vessels. So that is also saving a lot of LNG. And whatever LNG, we are saving, optimizing that we are using for trading. And that's the reason you can see that we have trading gain of INR 273 crores as compared to INR 103 crores in the previous quarter. So we are trying to compensate whatever loss we are having in low capacity utilization through trading of LNG and to great extent we have done -- had this -- they have not been a foreign exchange loss of INR 98 crores, which we have incurred IndAS loss. We would have caused the corresponding quarter profit also at it was INR 823 crores in the corresponding quarter and INR 100 crores, if it has not been there in this time, IndAS loss, then we would have got almost INR 844 crore of profit. So still we are able to maintain.
It's a notional loss, but we have to show in the financials, we have shown it. But otherwise, physically, if you see, we have done extraordinary effort in not reducing our performance as compared to the corresponding quarter, we are still better than previous quarter. But we could have been even better had there been not much of this foreign exchange loss, which is a notion loss, and we have to book it.
Understood, sir. Just one follow-up on that. Any impact of the Gazprom supplies not being there to us?
Gas on supply, GAIL is too much affected, but we are also affected to the extent that some of the cargoes of Gazprom were coming to Dahej. So those cargoes we are not able to get. So there has been some default by GAIL also because they could not bring the gas on cargoes, which were scheduled for Dahej Terminal. So there has been impact -- but we are trying to compensate, as I've told you, to trading and through other things. So it has impacted, but GAIL is more impacted by Gazprom shortfall, which is there.
For us, would this be under a take-or-pay loss?
Yes, it is there. So that's what- that what I could -- I will answer now because what's happening is that we have a calendar year as our take-or-pay obligation. So in third quarter of this year, we will book use or pay kind of thing. And whatever capacity is not utilized, then we will charge the user base charges from the off-takers. And as far as GAIL is concerned, you very well know that whatever they have defaulted, Gazprom has defaulted, there is no mitigation in the contract. Hardly, there's a liquidity damage to the extent of 20% of the price of gas. So that is hardly anything as compared to the spot LNG prices in the market. So that way GAIL is impacted, but they are still in talks with the Gazprom, if they could do something for them.
And sir, just one last question from my side. Update on CapEx for this year and next year, what you're looking at. And also, if you could give some color on the progress on all our projects, be it Dahej expansion, the FSRU time line and PDP. How should we look at CapEx for the next couple of years? .
CapEx, if you look at, as I told earlier also, I am again telling you that we have already constructing two tanks with a CapEx of INR 1,246 crores at Dahej. So it is in progress, almost you can say that 38%, 39% of the progress is there. And Second project, which we are undertaking is third jetty at Dahej, which will be having a CapEx of INR 1,700 crores.
And then Dahej expansion, brownfield expansion, we are doing 5 MMTPA from 17.5 MMTPA to 22.5 MMTPA. So that brownfield expansion is, in fact, will be costing around INR 570 crores only. Whereas if you go for a greenfield project, LNG terminal, it will cost around INR 5,500 crores, but it's a low-hanging fruit. So we are doing expansion with just CapEx of INR 570 crores of 5 MMTPA capacity. So this will all be complete by the end of 2024 or beginning of 2025. So this is how we are proceeding in Dahej Terminal and then CapEx, you were asking for this year, it will be around INR 1,250 crores.
And next year, of course, will be there, but -- so far, we can say that it will be almost more than double maybe INR 3,000 crores we may reach next year. So CapEx will increase because we have so many upcoming projects like I have told you that Gopalpur Terminal is coming up. So as and when the contract is awarded for the packages of Gopalpur LNG terminals, then CapEx will happen next year. So those things will come down. And apart from that, whatever PDH-PP plant we are going to have at Dahej, but that we will see next year what happens because the approval is yet to be obtained from both or it may take next year, March, April will be there for approval of this project. But otherwise, CapEx, as I told you, this year, INR 1,250 crores, next year maybe more than that, maybe INR 2,500 crores to INR 3,000 crores will be there. This is our expectation, and let us see how much happens in the next year.
We have our next question from the line of Sabri Hazarika from Emkay Global Financial Services.
So I have 3 questions. The first one is on this East Coast terminal only. So have you booked any capacity? Or do you have any visibility of capacity booking for this?
See, it's capacity booking is already, we are talking to so many people, including off-takers. And we will be able to do that something at least 30%, 40% will try to engage because what's happening, that there is a mechanism of swap in gas, particularly. And we can -- in fact, GAIL has already laid pipeline in this Haldia-Dhamra-Bokaro Pipeline. So through this pipeline, we can optimize the utilization of terminals. And perhaps if somebody say GAIL or ICL has a customer in Orissa region and they can take gas from our Gopalpur Terminal through swapping of the gas and can directly build to that customer from Dahej or Dabhol to Orissa on CST sale basis, and by taking volume from our terminal. And in exchange, they will provide that volume in Dahej or Dabhol to us. So this is a mechanism provided by CST Act also.
So for gas industry only, there is no requirement of physical movement of goods from one state to another. If it is connected with a common carrier pipeline, and some volume is introduced in the pipeline. Then any customer can take that volume from any state. If it is put in one state, in another state, any customer can take it, and it will be deemed as if it has traveled -- molecules have traveled to that state. And that is the mechanism, which is a good thing. It's the open exit -- so we hope that even if GAIL or IOCL or BPCL have any customer in that region, they can take gas from Gopalpur, they will save in terms of transmission costs from Dahej or Dabhol to Eastern region, which is costing almost $3 per mmBtu. So we can optimize on that cost, and we can also share some margin with them. And they will also have their gas at a very cheap price landed at in Orissa or Eastern region. So this is how we are trying to optimize it and perhaps on East Coast, we are also trying to book some capacity.
And also, we are trying to have SSLNG project to be launched over there because -- we have seen that there are lot of many mining industries, which are located in Orissa region. So there are lot of dumpers, tippers and very heavy machineries used with diesel. So we can, in fact, use LNG as few for those particular dumpers and cranes and tippers. So I think those -- that area is there where SSLNG, small-scale LNG will be launched over there. And apart from that, there are a lot many city gas distribution entities are coming up along this pipeline, Jagdishpur-Haldia-Bokaro-Dhamra pipeline. They will also need gas, which is -- which will be provided through the nearest terminal, which will be Gopalpur. And they can use that gas, if they want to, they can swap it with the government's domestic gas at GAIL. If it is a city gas distribution company, they can take gas on there instead of bringing it from West Coast of India. So that way, it can be -- utilization will be optimized, and we are hopeful that capacity booking is not an issue. It will be dealt with properly.
All right, sir. Second question is on the spot LNG that you -- I mean it's quite commendable that you are able to extract this much quantity. So what exactly is the guidance? If I assume that Dahej operates, let's say, 85% kind of a capacity utilization, -- so is it fair to assume that 2 to 2.5 TBTU of spot LNG, you would be able to like save and sell it on the spot market?
Spot market you are talking -- spot LNG itself is so costly, who will buy it.
I'm talking about the technical feasibility of like the savings that you have done by using grid power and like saving up on the internal consumption and then selling it in the spot market. So this -- is there a ballpark rate? I mean, it's a big delta right now for the the company, I guess. So I was just wondering...
We are selling this gas at the spot prices almost -- all we are selling on this gas exchange.
Is there. So we are selling on that whatever prevailing prices.
Yes, because this has increased from 1 TBT to 2 TBT from Q1 to Q2. So I was just wondering is there -- is there a ballpark rate? I mean, can we assume like...
Okay. Debabrata will reply to your side.
Sabri, this is Debabrata, am I audible.
Yes. You're audible.
Yes. So let us look at it from the financial numbers, you see the volumes have gone down from 87% to 80%. And at the same time, there is a commensurate increase in the trading margin right?
Trading margin, trading gain that has been done. So if we look at financial numbers, then as explained to the market that as long as the spot prices are high, the main reason of volume going down is spot prices basically. As long as the spot prices remain at that level, whatever efficiency we do, that efficiency will fetch some trading margin. And once the spot prices come down to closer to a level of the long-term prices, then we would -- then definitely the volume will increase and we would not need the trading gains. So the message here is that this is not a one-off thing. It has been proved time and again since last 6 to 8 quarters, that if one doesn't happen, the other will happen because of the sheer volume and scale of the -- and the positioning of the company and the commercial tie-ups. So we need to understand it financially. As far as you are asking about the technical details that we do not disclose. How much technically it will happen and how it can because the spot prices are also fluctuating. And depending on the spot prices, we also do more or less trading gain. I hope that will answer your question.
Right sir. Got it. And the third is basically the bookkeeping question. How much was the regas service income and Dahej volume -- Gorgon volumes in Dahej and IndAS impact on interest, depreciation and expenditure, these are the.
Yes, Gorgon volumes in Dahej was 13.9 TBTU. It is YTD. You have the last quarter's number. YTD is 13.92%. And the regas income is INR 438 crores, and as far as the IndAS figures, INR 133 crores at gross margin level positive. And then INR 8 crores at other expenses level positive. INR 98 crores ForEx loss at other expenses level negative. And INR 84 crores of depreciation and INR 79 crores of financial adjustment.
We have our next question from the line of Puneet from HSBC.
My first question is on the FSRU Terminal, would you start the construction before tying up with the off-takers or after tying up with the off-takers and similarly on the other side from the sources of gas.
The construction will take off because it cannot wait. But in the meantime, before it is completed, we will work out all these issues, and we will book some capacity at least. And at least we will mitigate those risks, and that is sure. And perhaps there are not many customers coming up over there. The gas demand is, in fact, is there and perhaps we'll be able to tie up before the completion of the terminal. So it's not that -- nowadays, it's not always possible to have 100% booking like we had with the Dahej Terminal.
But at least to some extent, 30%, 40% -- 40% rates if you will try to tie up so that there is assurance that, that much capacity will be utilized. So to your question, as you say, before tying up, that means we will have to wait long. So still, whatever things we have to do, it will take some time, 6 months, 1 year and more than that also. So we have to do that effort in between and tie up so that it is simultaneously, it is done, both the things. And by the time it is completed, capacity will be in place. Capacity will be booked to some extent. And then we can further explore other areas where we can sell the gas to utilize the terminal.
So you're looking to tie up 1.6 metric million tonnes.
You can say, yes.
And that to on a long-term basis, right? Any potential leads that you can share that you're discussing with?
We would not like to share. Unless something happens, we cannot share those things. It's all we create. As and when something happens, you will come to know.
And when do you actually start placing orders for this?
Orders will be maybe in the next 3, 4, 4 months, 5 months, we will start placing orders because we have to sign term sheet first with Gopalpur Port Limited. And then a lot of things like site development and other infrastructure things are to be completed. And simultaneously, we will also try to float the tender for various packages, which I've just mentioned, including jetty, pipeline, topside facilities, all those things. So that part, we will do later. But at least 4 months, in the 4, 5 or 6 months, it may take.
Okay. And is environment clearance done? Or is that yet to be done?
It is to be done. It has to be done. Environment clearance, we are now -- the Board has approved it. So now we are going for environment clearance first, and all the clearances required from the Orissa government that we will see if required.
But I would presume draft feasibility report is now completed?
That is over. That has been completed by Engineers India Limited. And the financial appraisal has been done by SBI Cap -- and it has now found that it is a project which we can undertake. It is having good IRR, and it's a good project, we should go. And that reason, which is in fact is deficient of the gas in Eastern region. So I think once the gas reaches the entire region more and more avenues will come for supply, like I have said, that the City Gas Distribution companies are coming. So small consumers will come through those CGD entities. So that way, it will further pick up.
Okay. Understood. That's really helpful. Secondly, on the take-or-pay contract, any acknowledgment from your customers that they will pay. And what's happening in the current quarter? Have they paid for the capacity? Or will you book the shortage only in the December quarter?
No, it's -- shortage will be booked in December. That is the last quarter of the calendar year. It will be in third quarter that we will book use or pay charges. So for whatever default has been committed, we have not booked any revenue until Q2. So now in the third quarter is -- and perhaps they have not paid last year use or pay. That is true. But we are following up with all the customer to pay it and let us see what happens in next quarter.
We have our next question from the line of Rakesh from HDFC Mutual Fund.
Congratulations on delivering...
Sorry to interrupt, Mr. Rakesh, your volume is very low.
Okay. Is it better now?
Yes.
I have 3 questions. One is short term and slightly two on long term. So short term, if I look at your Dahej volumes, now for the first 9 months of the calendar year, you probably would have done about 10.5 million, 10.7 million tonne of LPG, assuming fourth quarter is also ballparking the similar range, probably we'll end up about 14 million tonne, maybe 15 million tonne. So does that mean we're going to book about 1 million ton or maybe 1.5 million ton of takeover revenues in the coming quarter? Would that be ballpark the right math?
Right now, I'm not confirming anything. But whatever default is there in long-term volumes, that will be -- of course, we will account for in third quarter, default is there to some extent. So it's not that it is not there. But everything will be known in the third quarter. And capacity utilization, I have told you, it is around 80% only. So that's way you can just assume that whatever shortfall is there, that will be booked as the use or pay charges.
Got it. And sir, 2 more questions on the East Coast terminal. Would we be competing with the Dhamra Terminal, which probably would be in the vicinity or maybe about 300, 400 kilometers far away from each other. But does that mean that we'll be competing for the same market -- or will the markets for both the terminals be different? And an extension of that, if you can help us understand what is the demand potential on that part of the country from an LNG demand perspective?
Dhamra capacity is already booked. And perhaps many industry has already -- have already tied up with Dhamra Terminal. So I think that is already booked -- so now additional volume will be coming from our Gopalpur Terminal. So this is how we are banking on. And as far as the industry is concerned, nearby industry, if you look at in Orissa region, the major anchor customers are there, which includes NALCO, Utkal and Vedanta, 3 projects are coming up. So they are the anchor customers who could be potential customer for our terminal.
And Apart from that, I've told you that swapping of the gas and other thing mechanism will be adopted and SSLNG will also be there. So that way, we will be able to utilize almost 50%, 60% in next meet after commissioning in 3, 4 years. So I think that will be good enough to at least sort, and we see that there is a potential increase in the consumption of gas in years to come. It's only for the time being that consumption is low because of high LNG prices. But as and when these prices will be normal, the consumption will increase. And we hope that by 2025, '26, it will be much, much higher. And therefore, demand will be there in that reason. And Vizag is also there, which is one of the potential customers.
Right. And one last question. Between FSRU and land-based terminal, if you can help us understand your choice. And also, my understanding is that currently, Germany is also bidding out for a lot of FSRUs to move away from the pipeline gas, which they have. That means they need to put in more LNG terminals. So do we see a possibility where availability of FSRU itself might be a challenge in the coming years? Or will that's not an issue at all?
You're right, because it's not easy to get it. But of course, we will try to do that. And if we are able to find a good FSRU, then we will hire it, but we have a provision in this project that later on, we will convert this terminal to land-based terminal. But initially, we are going for FSRU terminals. So that way we have planned and perhaps maybe after 5 years, we may venture to set up this land-based terminal. So whatever facilities we have created, like we will be able to construct jetty for this project. All these infrastructure will be used for land-based terminal also. So it's a common thing. And with not much CapEx, we'll be able to set up land-based terminal in future, based on the demand perspective in that region.
But right now, we are going for FSRU, and we will see how much is the market is there and what is the price available, and if at all, we get a good price is whatever INR 70,000, INR 80,000 per day kind of FSRU if we get dollars per day. Then we'll have it if it is very costly, then perhaps it will not suit over economics in the future. Then we'll see what happens. But as of now, market is not good to assess whether this will continue like this. In future, prices will be lower and perhaps we will be able to hire FSRU. And there is no issue as such.
Understood, sir. And from a time line perspective, is it fair to say, assuming you take probably about a year to get all the approvals, environmental approvals and local approvals, et cetera, and then you probably would need another 3, 4 years to get or the time lines are a little shorter. If you can help us understand...
[The time] will be there for construction of terminal next year.
We have a next question from the line of S Ramesh from Nirmal Bang Equities.
So on the FSRU project, again help us understand what is the kind of volume required to generate the IRR expectation? And what is the tariff assumption there?
This is all actually -- so you are asking very internal thing. But of course, I'm telling you that we are having handsome IRR. And if IRR is good enough as per our this project appraisal and investment policies, we are having adequate IRR coming in this project. And capacity utilization, we are taking almost 50%, 60% and that's where we are working it out. And maybe after 5 years, it will be almost 70%, 80%. So this is how we are proceeding and we hope that it will be utilized to the maximum percentage. But at least it will go up to 80%.
Okay. And on the capital cost for the FSRU, when you talk about FSRU, rentals of $70,000, $80,000. So how is that cost built into this capital cost? Is it going to be capitalized on the lease? How will it work?
No, it's not capitalized. It will be OpEx. Capitalization doesn't include this FSRU hiring charges, this will be paid every year.
Fair enough. And on the volume growth prospects, say, for FY '24, '25, you assume your brownfield expansion will be done by, say, end of FY '24 or beginning of FY '25. So apart from the improvement from the current base is low, is there any other additional growth you expect, say, in FY '24, '25, assuming the gas prices are reasonable as per the current trend?
You are talking about Dahej Terminal?
Yes, Dahej and Kochi combined in terms of the volume growth for your company over FY '24 and '25.
Yes, it is the volume growth will be there because we are expanding the capacity. That's why I'm telling you that even with the estimated growth, it should be -- I think, right now, consumption level is around 163 MMSCMD. And we hope that it will increase to almost 200 around next 3 years, 4 years because by that time, all CGD entities will come up. And they will also be helping in growth of consumption of gas in the interior locations of the country. So that will be a great thing because still some of the projects are not completed in CGD. They are under construction. And then I think when CGD will pick up, it will automatically take -- it will be one of the highest consumer of gas in the future. Right now, it is second highest consuming almost 21% of the gas, the total kitty and after fertilizer. So I hope that after coming up of this city gas distribution project, gas consumption is bound to grow.
So just to understand the time line for the Dahej brownfield expansion. When do you think the first 2.5 million tonnes and the next 2.5 million tonnes will be ready for operations?
It will be by end of '24 or maximum and second phase because it is in 2 phases. So 1 is the end of '24 2.5 MMTPA and balance is, say, in the next year, '25 March-April, almost.
Okay. Fair enough. And finally, when you're looking at your Dahej operation, there are 2 terminals, Mundra and Chhara and then Swan LNG terminal. So is the Swan LNG terminal likely to see completion this year? And how do you see the Chhara Terminal coming up because there is a certain amount of competitive intensity, much as you are competitive, how do you see these -- the new terminal helps Swan LNG and Chhara Terminal taking shape in the next couple of years?
But we have already booked capacity to the extent of almost 16.5 MMTPA. So there is no challenge to us as such I think. Because if you look at all those things, it is not there with any other terminal as any -- and other terminal has got a long-term capacity booking. It's not there and has any terminals got some long-term volume tied up back to gas, it's not there. So there is no competition as such with those customers. But of course, as and then those terminals have come, of course, they will also compete for the additional volume of spot LNG for which we will be competitive and we are much, much ahead of anyone in terms of the things that we have already recovered our CapEx, and there is no -- nothing to lose on that front.
And that way, we can be competitive. And additional volume will be, of course, the competition will be there. And another thing is that it's not that terminal is coming then it will be utilized. It will be seeing whether that connect terminal is well connected with the pipeline network or not. Dahej is the most well-connected pipeline with the pipelines of the country. And as long as I know that at least 4 pipelines are connected to Dahej [indiscernible] and the terminal. So it's the most feasible location for taking the gas. And all the terminal you are talking about Chhara and other terminal, but they are not so well connected, and it also makes a difference in long term. So let us hope that we will compete with them for the addition spot volume only. Long-term volume, we have security to that extent. So that way, we are well protected against any future terminals, which are serving us.
We have our next question from the line of Varatharajan Sivasankaran from Antique Limited.
Sir, if you know in this case of Gazprom volumes, is there scope for GAIL to pull up a force-majeure kind of a clause, does something like that exist in contracts, which can provide a escape route?
This is for the GSP they have entered with the customer. You are talking about contract with Gazprom itself?
No, no, no. I'm talking about the contract with the off-taker. So is there scope for GAIL to pull up saying that this is a force-majeure kind of a situation. And hence, like the compulsory take or pay, may not apply on this volume. Is there scope for them to do that?
Yes, it is, I think, I have not seen the contract, but it is there, they can invoke the force-majeure clause, because if there is a disruption in the supply facility, then force-majeure is involved. And the Ukraine and Russia war is one of the event which -- which can be seen as a disruption in the supply chain.
And anything else actually happening on this LNG outlets, which you had originally entered into arrangement with IOC and a couple of other players. So is that something which you are still progressing? Or is it on a hold at this point in time, given the economics?
It is taking place. But as you know, that we have already tied up with one of the OMC, and we are going for setting up 4 LNG stations in southern region. We have already bought the LNG dispensing equipment and will be setting up maybe in the next 5, 6 months, you will see that they are installed. But it's not in a big way, it's going on.
Sir, that is more like a pilot?
It will take some time to understand that. Yes. But otherwise, other OMCs are also coming, like IOCL, BPCL and HPCL. They're also bringing their own LNG station. So our effort is not only to have some of dispensing stations we should own. But we won't that -- anybody can set up the LNG station. If oil marketing companies are doing this good also because our objective is to supply it from our terminals. So that our utilization level increases. So whosoever have the LNG station, if they take LNG from our Kochi Terminal or from our Dahej Terminal, that will also fetch some of the revenue to us. So we are doing it because we want to connect with the customers, but may not be that we will go in a big way right now. It will be in a phased manner.
And we'll see the -- whether this viability is there or not. We'll see 10, 15 stations after putting a 20th station, what is the visibility in that particular area. If it is good, then we will expand further. So it's -- you can say, -- it will take time. And simultaneously, other companies, OMCs will also open.
Ultimately, this will be cannibalizing their diesel or their fuel. So they would like to set up on their own. So we are not saying that we only have to set up this. So they are doing that means that they will do it and still we will be benefited out of it. But we will do to the extent possible. We have started doing it.
[Operator Instructions] We have our next question from the line of Manikantha Garre from Franklin Templeton India.
So wanted to check now that you have taken the decision to go ahead with the Gopalpur FSRU, and you are doing other investments at Dahej and Kochi, are your all international scouting that you are doing earlier is off the radar now? I'm also asking in the perspective that...
There is no opportunity as such now. As and when something comes up, then we'll discuss it and see the merit of the case. But right now, nothing is going on. As far as the international acquisition or kind of thing investment is concerned, that is not there right now.
Understood. I'm also asking from the context that Europe is looking to add a lot of LNG import capacity. So if you are finding any opportunities there? And if it is something that you'll be thinking about in the future?
Europe is doing only for their own consumption for FSRU type of setup they are seeking. In fact, their objective is different. We are not receiving any kind of investment in Europe. It could be somewhere where original, these LNG suppliers are located to -- it was there earlier, but now it is not there. So we cannot answer a hypothetical question because we don't have anything right now with us. But as and when it comes, we will see the merit of the case and then go ahead. Otherwise, we will not.
Understood. But as of now you are saying that there is nothing on the radar?
Nothing on the radar right now.
Thank you. Ladies and gentlemen, that was the last question for the day due to time constraints. I now hand over the call to Mr. Hemang Khanna for closing comments. Over to you.
We would like to thank the management of Petronet LNG for taking time to answer all of the questions that were posed today. Thank you so much, sir, and thank you all of the participants. I wish you a very happy year ahead.
Thank you very much. Thanks to all of you.
Thank you. On behalf of Petronet LNG and Nomura, that concludes this conference. Thank you for joining us and you may now disconnect your lines.