Engie to sell Petronet LNG stake

15 March 2017, Week 10 Issue 556

France’s Engie will sell its entire 10% stake in the Petronet LNG joint venture and will hand first right of refusal to its state-owned Indian partners.

Engie said that its stake was primarily a “financial” consideration, while asserting its “strong belief” in Petronet LNG’s potential despite the divestment.

The sale, of 75 million Petronet shares valued at 29 billion rupees (US$438.2 million), will initially be offered to partners Oil and Natural Gas Corp. (ONGC), Bharat Petroleum Corporation Ltd (BPCL), Indian Oil and GAIL (India), each of which already owns 12.5% interest.

“It is mandatory for [Engie division GDF International] to offer its holding to other founders as per the shareholders agreement,” Petronet LNG’s finance director, R K Garg, told Bloomberg, “If the other founders don’t buy, GDF can sell it to anyone it wishes.”

However, ONGC’s director of finance, A K Srinivasan, said the partners were not required to purchase the stake. When the Asian Development Bank (ADB) sold its 5.2% share in 2014 for 7.14 billion rupees (US$116.8 million), the four state-owned stakeholders declined to use their option, leaving ADB to turn to the public market.

“It is not necessary for us to buy,” Srinivasan said. “The structure has to be maintained, otherwise government approval is required.”

India currently possesses around 25 million tonnes of LNG capacity at four terminals, of which two are operated by Petronet LNG at Dahej in Gujarat State (15 million tonnes) and Kochi in Kerala (5 million tonnes).

Petronet also plans to develop a third terminal with a launch capacity of 5 million tonnes at Gangavaram Port in Andhra Pradesh, a move that will help India advance towards New Delhi’s target of 47.5 million tonnes of capacity by 2022.

Petronet recorded a 12.35 billion rupee (US$186.6 million) net profit during the nine months ending December 2016, up from the 6.7 billion rupees (US$101.2 million) a year earlier.

It has benefited from the global supply glut for natural gas as fresh liquefaction capacity has ramped up from LNG producers such as Australia and the US. As a result, Petronet was able to pare down the price paid for 7.5 million tonnes of the LNG supplied under its 8.5 million tonne deal with Qatar’s RasGas from January 2016 onwards. Petronet was charged around US$7-7.50 per mmBtu (US$193.62-207.45 per 1,000 cubic metres) at the beginning of 2016, according to the firm’s CEO, Prabhat Singh, down from the US$12.50 per mmBtu (US$345.75) paid prior to renegotiation.


Edited by

Andrew Kemp


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