Petronet LNG Ltd is said to be in talks with global oil traders such as Vitol Group and Trafigura Group to rent out storage tanks at its grossly underutilised 5 million tonne capacity LNG regasification terminal at Kochi as India’s biggest gas importer looks at ways to raise utilisation levels by tapping into the energy crisis in Europe that has sent LNG prices soaring.
Petronet LNG is in talks with many entities including Vitol Group – the world’s largest independent oil trading company – and Trafigura Group, the world’s second largest oil trader, for renting its storage tanks for re-export purposes, an official said.
The capacity utilisation of the Kochi LNG terminal, built with an investment of some Rs4,500 crores and opened in 2013, is only about 16-17 percent, as a lack of pipeline connectivity to Bengaluru, crimped sales.
Unless the terminal is connected to the national grid, there is no way it can raise capacity utilisation, the official said. Work on the Kochi-Bengaluru pipeline has languished for years due to resistance from people in areas through which it passes.
The terminal is currently supplying natural gas to Bharat Petroleum Corporation Ltd and FACT Ltd in Kochi besides a few small customers in Mangaluru through a pipeline.
The terminal has two storage tanks, each with a capacity to store about 1,60,000 cubic metres of LNG.
The Kochi terminal is capable of re-exporting LNG unlike other terminals in India that can only import the cargo and re-gasify it ahead of selling to customers within the country.
Petronet LNG is also weighing plans to offer gassing up and cooling down (GUCD) services to LNG ships.
LNG carriers that are newly built, fresh out of dry-dock or completely emptied at their previous discharge port need to have their cargo tanks cooled from ambient to cryogenic temperatures (minus 160 degrees Celsius) before loading their next LNG cargo.
In this exercise, a ship will require some 600 to 3,000 metric million British thermal units (mmbtu) of LNG.
By offering re-exporting services to oil traders, Petronet LNG reckons that it can boost the capacity utilisation of the Kochi terminal by at least 10-15 percent to 30-35 percent.
“That is why we are putting efforts in this direction,” the official said, noting that the company has built the infrastructure to undertake re-gasification, re-loading, gassing up and cooling down as well as LNG bunkering services.
Petronet LNG has formed a subsidiary – Petronet Energy Ltd – to carry out these activities.
“Nowadays the LNG price is high in the spot market and global oil traders are keen on renting storage capacity at LNG terminals for arbitrage activities,” said the official.
To be sure, Petronet LNG rented out storage capacity at its Kochi terminal for a brief period to Singapore-based Trafigura Group, after it started operations in 2013.
“We stopped that business because the LNG price was not conducive for renting out storage tanks as rates dipped to about $ 2.5-3 per metric million British thermal unit (mmbtu),” the official said.
LNG is currently trading at around $27-28 per mmbtu in the spot market after soaring to about $80 per mmbtu two months ago as Europe battled an energy crisis in the backdrop of the Russia-Ukraine conflict.
“Now, the situation is completely different, and many parties are showing interest. That’s why we are thinking of renting out storage tanks again for better utilisation of the terminal facilities,” he added.
The re-export of LNG and gassing up and cooling down services to LNG carriers are expected to bring more ship calls to Cochin Port, where the LNG regasification terminal is located, fetching extra revenue to Cochin Port Authority.