Petronet defers gas from Rasgas, faces take-or-pay
However, the postponement has triggered the take or pay clause
Petronet LNG has postponed around 30 per cent of the long-term contracted gas from the Qatar-based RasGas to second half of the fiscal year as the spot prices of natural gas have halved in line with fall in crude prices and the pressure from customers to renegotiate the long term contracted prices.
However, the postponement has triggered the take or pay clause that would enforce an advance payment for the unsourced gas that would be settled when the offtake happens leading to a potential impact of Rs 9,400 crore on the company in December 2015, said market experts.
The company sourced only 68 per cent of the contracted gas in the first two quarters of the calendar year from RasGas, while the remainder has been postponed as the spot prices have dropped to $7 per million metric British thermal unit (mmBtu) from the long term contracted price of $13-$14 per mmBtu. This has triggered a take or pay clause under which the company will have to pay the price for the unsourced gas in advance that will be settled at a later date at the prevailing price when the company buys it again, said market experts.
“There is a downward flexibility to postpone around 10 per cent of the agreed contract for later date however anything lower than that triggers the take or pay obligation. The situation is likely to persist for the industry till the oil pries bounce back again,” said K Ravichandran, director coproates at Icra.
Petronet LNG officials declined to comment on the issue calling it sensitive that can have repercussions for the company and the customers.
Vaibhav Chowdhry, senior analyst with KR Choksey said the RasGas contract negotiation will act as a key short term driver for Petronet LNG. The RasGas offtake volumes stood at 1.3 million tonne in the fist quarter of the current fiscal which means only 68 per cent utilisation in the first half of the calendar year 2015. “Petronet has reduced its contractual off take of high priced long term volumes from Qatar by around 30 per cent which triggers take or pay obligations with a potential impact of around Rs 9,400 crore in December 2015. Though Petronet is negotiating with Qatar on this issue, clarity on it is likely only by third quarter of fiscal year 2015-16,” Chowdhry said.
According to experts there will be an impact on the off take in the coming quarters as well after the total volumes fell around 5 per cent and the long term volumes 30 per cent in the first quarter due to lower off take from the long term contracts.
The total revenue of the company in the first quarter fell around 18 per cent to Rs 8,377crs mainly on account of sharp decline in utilisation at the Dahej terminal. The long-term volumes for the quarter fell 30 per cent year on year to 67 trillion British thermal units (TBTUs), while spot cargos were up 47 per cent during the period at 25.6 TBTUs. The plant utilisation at Dahej Terminal was at 98.6 per cent against 72 per cent sequentially, said Prayesh Jain, senior energy analyst at India Infoline.
https://www.mydigitalfc.com/companies/petronet-defers-gas-rasgas-faces-take-or-pay-324
