Petronet LNG formed by the Government of India to import LNG and set up LNG Terminals in the country. Petronet is a Joint Venture Company promoted by the GAIL (India) Limited (GAIL), Oil and Natural Gas Corporation Limited (ONGC), Indian Oil Corporation Limited (IOCL) and Bharat Petroleum Corporation Limited (BPCL) with an authorized capital of Rs. 1200 crores (US$ 240 million). Petronet LNG has selected GAZ de France (GDF), a French national company as its strategic partner who is holding 10% of the equity in the company.
GDF is the largest importer of LNG in Europe over the last 30 years. Its business covers every aspect of the gas supply chain and the company is taking a lead role in the field of energy sector. It has been developing the expertise in natural gas production, supply, transmission, liquefied natural gas (LNG), storage and distribution and in other applications. In LNG Technology, GDF is recognized as a world leader and, therefore, as a strategic partner. Petronet LNG will have the benefit of their considerable experience in setting up the LNG Terminals.
Products & Services—
Petronet LNG Ltd. has setup its LNG Terminal at Dahej in Gujarat with the capacity of 10 MMTPA (equivalent to 40 MMSCMD of natural gas) and is in the process of setting up another terminal at Kochi in Kerala with the capacity of
5 MMTPA (equivalent to 20 MMSCMD of natural gas). The company is also increasing capacity of its Dahej LNG terminal by 30% in 2014.
Natural Gas from this terminal is being distributed to consumers through a pipeline from Dahej to the Vijaipur, which runs parallel to the existing HBJ Pipeline from Vemar (84 KM from Dahej). The Dahej site is ideally located to satisfy the enormous demand of Power, Fertilizer and other users located in the industrial belt between Vadodara and Surat.
Gujarat Maritime Board allotted 55 Hectares of land for setting up LNG Terminal. The marine facilities for Dahej Terminal includes a 2.4km long all weather Jetty. The receiving, storage and re-gasification facilities include unloading arms, tanks of 160,000 cu. Meters capacity, vaporization system and utilities and off-site facilities. The terminal is the first ever LNG cargo in India.
Storage & re-gasification are main business segments of the company. Company want to play a major role in this key segment area of industrial gas, commercial auto gas etc. Natural Gas is predominantly Methane, but also present in varying proportions are smaller amounts of ethane, propane and butane. Natural Gas is transported via pipeline. However, it is extremely bulky; for example, a high-pressure gas pipeline can transport only about one-fifth of the amount of energy a day that can be conveyed through an oil pipeline.
Natural Gas meets many of the requirements for fuel in a modern day industrial society. It is fficient, clean burning fuel, eco friendly and has flexibility of control. The key uses are:
• Electricity generation by utilities: Fuel for base load power plants and for use in combined ycle/co-generation power plants.
• Public and commercial: LNG is clean fuel for use as is piped Gas in household. Economically cheaper as compared to LPG. In fact most of the Western Countries use iped gas in houses. The household use of piped gas is expected to increase in future.
• Industrial: As an under boiler fuel for steam raising and heating applications.
• Alternative Motor fuel to diesel: With only one carbon and four hydrogen atoms per olecule, natural gas is the cleanest burning fossil fuel. Moreover, it has 30 to 40 % igher fuel efficiency for running motor vehicles. Due to environmental considerations, he use of natural gas in Automotive Sector is bound to increase considerably on account f higher efficiency and being a cleaner fuel.
• Petrochemicals: A variety of chemical products e. g. methanol can be derived from natural gas
Valuation & Conclusion—
New capacity addition by the company will increase earnings growth in the years to ome. At current market price stock is trading at 9.35 P/E multiple of its FY2013 estimated arnings. We recommend investors to buy “Petronet LNG limited” with medium to long term nvestment horizon.