Deal undone: Petronet & Tellurian’s $2.5-billion pact shelved

The Petronet CEO said that “we need to look for suppliers which meets our expectations of price requirement.”

A planned $2.5-billion deal between Tellurian Inc and India’s largest gas importer Petronet LNG has fallen through as the US-based firm hasn’t made any request to continue interactions after December 2020, Petronet MD and CEO Akshay Kumar Singh said on Wednesday.

“The (Tellurian) MoU has not been extended”, Singh said, adding that “as on today there is no MoU between us”.

On September 21, 2019, when Prime Minister Narendra Modi met CEOs of 17 global energy companies at Houston, US, Tellurian and Petronet LNG had signed a memorandum of understanding (MoU) to form a joint venture, with Petronet investing $2.5 billion in Tellurian’s Driftwood LNG export terminal in the US in exchange for the rights to 5 million tonnes per annum (MTPA) of LNG supply over 40 years. Global markets have changed considerably since the signing of the non-binding Tellurian MoU, and analysts feel that the firms are not keen on investments in such projects anymore because of higher gas availability and supply.

HSBC Global Research had pointed in February that the rejection of the Tellurian deal gives more confidence to analysts about Petronet’s upcoming capex deployment. Petronet plans to invest more than $2.5 billion in the next five years in projects such as expanding the capacity by 5 MTPA of the Dahej terminal, which is currently the largest gas import terminal in the country with the strength of 17.5 MTPA. It is also planning to set up a new terminal in the east coast of the country.

The company is planning to increase gas procurement from Qatar which it considers a “preferred supplier” owing to its closer distance from the country. “We have 7.5 MTPA long-term contract with Qatar and as per the terms, we need to take it all by December, 2023,” Singh stated, adding that “we are in dialogue with them and the extension of the existing contracts need to be firmed up in the next couple of years”.

The Petronet CEO said that “we need to look for suppliers which meets our expectations of price requirement.”

Petronet reported an 8.7% year-on-year rise in net profit to Rs 2,939.2 crore on a consolidated basis for the fiscal ended March 2021. Revenue in the fiscal dropped 26% y-o-y to Rs 26,382 crore while expenses — mostly cost of buying gas — fell by a sharper 31% to Rs 22,443 crore in the same period. Petronet shares were trading at Rs 228.55 at Wednesday end, 7.86% lower than Tuesday’s close. The company’s board has recommended a final dividend of 35% on equity, it said on Wednesday.

State-run Indian Oil, Oil and Natural Gas Corporation, GAIL and Bharat Petroleum each hold 12.5% stake in Petronet.