Event Participants
Executives
6 Saurabh Mukra (Director Finance & CFO), Rakesh Chawla (ED Finance & Accounts), Gyanendra Kumar Sharma (CGM & President Marketing), Vivek Mittal (CGM & VP Marketing), Debretta Sarkati (CGM & VP Finance & Accounts), Vikas Maheshwari (GM)
Analysts
10 Hardik Solanki (ICICI Securities), Jayesh Shah (Individual Investor), Kishan (DAM Capital), Mayank Maheshwari (Morgan Stanley), Nitin Tiwari (PhillipCapital), PK Nigam (Individual Investor), Probal Sen (ICICI Securities), Simran Kumari (Narnolia Financial Services), Vineeth Banka (Nomura), Vivekanand (Ambit Capital)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| LNG volume processed (company) | 207 TBtu | Down 5.9% YoY (220 TBtu) and 5.5% QoQ (219 TBtu); lower Qatari volumes due to force majeure |
| Dahej terminal volume | 192 TBtu | Down 7.2% YoY (207 TBtu) and 4.5% QoQ (201 TBtu), partly offset by replacement/tolling cargoes |
| Capacity utilization – Dahej | 66% | Vs 92% YoY / 90% QoQ on expanded capacity base (raised from 17.5 to 22.5 mmtpa on March 31, 2026) |
| Capacity utilization – Kochi | 23.37% | Reflects continued low pipeline connectivity; improvement pending mechanical completion of pipeline |
| Capacity utilization – overall company | 58% | Vs 76% YoY and QoQ on expanded aggregate capacity |
| Standalone PBT | ₹1,514 crore | Up 33% YoY (₹1,136 crore); driven by trading and inventory gains |
| Standalone PAT | ₹1,133 crore | Up 33% YoY (₹851 crore) |
| Consolidated PBT | ₹1,491 crore | Highest-ever first-quarter PBT |
| Consolidated PAT | ₹1,137 crore | Highest-ever first-quarter PAT |
| Regasification revenue | ₹1,214 crore | Quarter figure as reported by management |
| Trading gains | ₹301 crore | Support margins during low-volume quarter; market-spread driven |
| Inventory gains | ₹193 crore | Contributed to gross margin improvement |
| Capex – FY27 budget | ~₹9,064 crore | Similar guidance for FY28; anchored on petrochemical project |
Geographic & Segment Commentary
Dahej Terminal: Processed 192 TBtu for the quarter versus 207 TBtu in Q1 FY26, with utilization of 65.6% on the newly expanded 22.5 mmtpa nameplate capacity. Over two-thirds of the shortfall from Qatari force majeure volumes has been compensated by replacement cargoes brought by offtakers under tolling arrangements, and management noted a pick-up from April lows through May–June.
Kochi Terminal: Utilization stood at 23.37% during the quarter, constrained by limited pipeline connectivity. Management expects mechanical completion of the final pipeline connectivity leg by Q2–Q4 of FY27, which should improve throughput sustainability.
Trading Operations: Trading gains of ₹301 crore and inventory gains of ₹193 crore drove most of the gross margin improvement despite lower volumes. These gains arise from market dislocations where spot prices exceed long-term contract prices—an established business model seen over the past 5–6 years; spot trading volumes remained small at ~60 TBtu.
Petrochemical (HTP) Project: The project is on schedule with ~40% physical completion. Propane sourcing for the PDH plant is expected to be contracted from 2027, with Middle East (including Saudi Arabia) a likely source; a 600 TTPF off-take agreement has been executed.
Company-Specific & Strategic Commentary
Qatar Force Majeure Management: Qatar Energy has declared force majeure on long-term LNG deliveries due to the Strait of Hormuz situation, with declarations made ~a week before each month-end. Replacement cargoes are being sourced through offtaker tolling arrangements, and management expects Qatari FOB volumes to resume promptly once the strait reopens; Qatar has started ramping up production per recent media reports.
New Qatar Supply Contract (2028): The upcoming long-term contract with Qatar Energy shifts from FOB to DES basis with a formula-driven price that includes shipping cost; management is meeting offtakers almost daily to finalize terms, with closure expected within 2–3 quarters.
Use-or-Pay Offsetting: Replacement/tolling cargoes brought by offtakers can offset use-or-pay commitments, with current-year obligations taking precedence over prior-year carryover; this can retire use-or-pay obligations faster than originally scheduled.
Time Charter Suspension: All time-charter vessels have had operations suspended under contractual suspension clauses (not force majeure), mitigating charter costs during the Qatari supply interruption.
Tariff Status: No active tariff revision review; discussions with offtakers on new contract terms are ongoing and expected to conclude in the next 2–3 quarters.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Capacity utilization | Improvement expected once Strait of Hormuz reopens | Qatari volumes should resume on FOB basis; replacement volumes from tolling are continuing month-on-month and April lows have already recovered |
| Kochi pipeline connectivity | Mechanical completion by Q2–Q4 FY27 | Will materially improve Kochi terminal utilization (currently ~23%) |
| Capex | ~₹9,064 crore in FY27; similar level in FY28 | Driven by the petrochemical project; financial spend lags physical progress (40% complete) |
| Petrochemical commercial contracts | Closure in next 2–3 quarters | Propane procurement expected to be contracted from 2027; equity IRR not yet re-disclosed |
| Tariff / offtake contracts | Finalization expected within 2–3 quarters | New Qatar contract effective 2028; terms being negotiated with offtakers |
Risks & Constraints
| Risk | Context |
|---|---|
| Gulf conflict / Strait of Hormuz closure | Qatar Energy has invoked force majeure on long-term LNG volumes; declarations are made month-to-month, creating volume uncertainty. Management sees no issue with replacement volumes while the crisis persists, but a prolonged closure would keep utilization depressed. |
| Sustainability of trading/inventory gains | The ₹494 crore combined trading and inventory gain is tied to a high spot-versus-long-term price spread. If the spread normalizes, gross margins will likely revert to lower levels. Management frames this as a recurring opportunity in dislocated markets, not a guaranteed run-rate. |
| Use-or-pay / offtake dynamics | Replacement and tolling cargoes can offset use-or-pay commitments, potentially accelerating their retirement; however, sequencing rules prioritize current-year obligations, which could defer recognition. |
| Lower utilization on expanded capacity | Dahej's capacity base grew from 17.5 to 22.5 mmtpa, diluting utilization metrics (66% vs 92% YoY) even before factoring the Qatari disruption. Recovery depends on both conflict resolution and market demand. |
| Petrochemical project execution | Project is 40% physically complete with ~₹9,064 crore FY27 capex and similar for FY28; commercial contract finalization (propane sourcing, offtake) and final project returns remain to be disclosed. |
Q&A Highlights
Volume Mix Shift and Qatari Force Majeure
- Question: Long-term volumes have fallen sharply while third-party regas volumes have grown—is this the expected mix until the Gulf conflict resolves? (Probal Sen, ICICI Securities)
- Answer: The pattern continues into Q2; management expects the Gulf issues to resolve soon and Qatari volumes to resume. (Saurabh Mukra)
Margin Drivers – Trading and Inventory Gains
- Question: Where did the margin improvement come from despite lower volumes—any inventory gains? (Probal Sen, ICICI Securities)
- Answer: Trading gains of ₹301 crore and inventory gains of ₹193 crore drove the improvement; these arise from the high spot-versus-long-term price spread and can normalize if the market gap closes. (Vivek Mittal)
- Question: Is this a sustainable business model? (Probal Sen, ICICI Securities)
- Answer: Over the past 5–6 years, whenever spot prices exceed long-term prices and throughput drops, these trading margins have kicked in—an established model. (Vivek Mittal)
Capacity Utilization and Outlook
- Question: What is the separate utilization for Dahej and Kochi, and how will it trend? (Simran Kumari, Narnolia Financial Services)
- Answer: Dahej 65.6% on expanded 22.5 mmtpa capacity (effective March 31, 2026); Kochi 23.37%. April was soft, with May–June recovering; current run-rate is at the May–June level, suggesting slight improvement ahead. (Vivek Mittal)
- Question: Capex for FY27/FY28? (Simran Kumari, Narnolia Financial Services)
- Answer: FY27 capex budget ~₹9,064 crore, similar for FY28. (Vivek Mittal)
Tolling Cargoes and Use-or-Pay Offsetting
- Question: Can replacement/tolling cargoes be treated as an offset against use-or-pay obligations? (Nitin Tiwari, PhillipCapital)
- Answer: Once current-year commitments are satisfied, additional cargoes can offset prior-year use-or-pay, accelerating its retirement. (Vivek Mittal, Saurabh Mukra)
Qatar Supply Visibility and Alternative Sourcing
- Question: How much visibility do we have on replacement volumes during the conflict, and what capacity should we model for Dahej? (Vivekanand, Ambit Capital)
- Answer: Force majeure is declared roughly a week before month-end; replacement volumes under tolling/service contracts are covering over two-thirds of the shortfall and are seen continuing. Trading gains are independent of spare capacity—driven by market opportunity. (Saurabh Mukra, Vivek Mittal)
Tariff and Contract Renewal Status
- Question: Any update on tariff discussions with offtakers? (Kishan, DAM Capital)
- Answer: No tariff revision review; new Qatar contract terms (from 2028) are being discussed with offtakers almost daily, with closure expected in 2–3 quarters. (Saurabh Mukra)
Petrochemical Project and Propane Sourcing
- Question: Have propane contracts been signed for the HTP plant, and has equity IRR been recalculated? (Vineeth Banka, Nomura)
- Answer: Propane contracts expected to be signed from 2027, likely with Middle East suppliers including Saudi Arabia. IRR recalculations will follow once remaining commercial contracts are finalized; useful life assumed at 25 years. (Vivek Mittal)
Deepak Fertilizer and Kochi Contractual Volumes
- Question: Have Deepak Fertilizers' incremental cargoes started, and have ExxonMobil's Kochi volumes increased? (Kishan, DAM Capital)
- Answer: Both contracts have commenced—Deepak Fertilizers brought two cargoes until the contract's May 2026 expiry, and ExxonMobil volumes at Kochi have also increased. (Saurabh Mukra)
Tariffs and Vessel Charges
- Question: What are current tariffs at Dahej and Kochi, and are time-charter vessels under force majeure? (Nitin Tiwari, PhillipCapital)
- Answer: Dahej tariff ~₹69/unit, Kochi ~₹90/unit. Time-charter vessels have suspended operations under contractual suspension clauses (not force majeure). (Vivek Mittal, Saurabh Mukra)
Key Takeaway
Petronet LNG delivered a resilient quarter despite the Qatar force majeure-induced volume shortfall, with standalone PBT/PAT up 33% YoY to ₹1,514 crore/₹1,133 crore on operational efficiencies, trading gains of ₹301 crore, and inventory gains of ₹193 crore. Dahej processed 192 TBtu (down from 207 TBtu), utilization at 65.6% on the expanded 22.5 mmtpa capacity, with over two-thirds of the Qatari shortfall replaced by offtaker-sourced tolling cargoes. Management expects utilization to improve as the Strait of Hormuz reopens and Qatari FOB volumes resume, while the petrochemical project (40% physically complete) anchors ~₹9,064 crore FY27 capex. Kochi pipeline mechanical completion by Q2–Q4 FY27, tariff negotiation closure in 2–3 quarters ahead of the 2028 Qatar DES contract, and sustainability of trading-driven margins are key watch points for FY27.