Petronet LNG’s next growth leg depends on improving capacity utilization
While Petronet has added capacity, high LNG prices are expected to keep utilization low in FY27.
Petronet LNG’s capacity expansion at the Dahej terminal shifts the focus to how quickly its utilization rates can rise now. The answer depends largely on LNG prices. Dahej capacity has increased to 22.5 million tonnes per annum (mtpa), from 17.5mtpa at the end of FY26.
Motilal Oswal Financial Services expects utilization to fall to 70% in FY27, from 91% in FY26, before recovering to 82% in FY28. High spot LNG prices have dissuaded customers from committing to additional long-term volumes.
JM Financial Institutional Securities expects spot LNG prices to moderate from FY28 as significant new global liquefaction capacity comes onstream over the next 12-18 months. Lower prices could make LNG more affordable for industrial consumers and allow Petronet to monetize its recently added Dahej capacity.
Motilal Oswal expects Dahej and Kochi volumes to rise to 18.5mtpa and 1.5mtpa in FY28, respectively, from 15.8mtpa and 1.3mtpa. Kochi’s contribution may rise over time. JM Financial expects Kochi volumes to rise from 1.2mtpa in FY27 to 2.7mtpa by FY29, supported by the extension of pipeline connectivity to Bengaluru, linking the terminal to the national gas grid.
To be sure, high LNG prices are not fully negative for Petronet. JM Financial raised its FY27 Ebitda estimate by 14.5% to account for higher trading and inventory gains in an elevated spot-LNG environment. So, while pricier LNG can hurt regasification volumes, it can create opportunities for trading gains.
Besides, when analysts visited the Kochi terminal recently, Petronet’s management pointed out that the tariff for the 7.5mtpa Qatar volumes would not fall below the current level, although the final structure is still under discussion.
But there are worries about Petronet’s capex plans that can weigh on its balance sheet. “Petronet is investing about ₹ 30,000 crore in multiple projects, including a petrochemical complex, LNG capacity, CBG, and other infrastructure projects. Its balance sheet shall convert into net debt of ₹ 4,160 crore in FY30E from net cash of ₹ 729 crore in FY26,” said HDFC Securities.
Petronet’s shares are up just 3% over the last year, and trade at 11 times FY27 estimated earnings, according to Bloomberg . Dahej utilization, LNG prices, Kochi’s volume ramp-up and the break-up of regasification and trading gains would be on investors’ radar to determine how much of the capacity expansion translates into sustainable earnings.
