Petronet LNG Ltd, India's biggest gas importer, will invest Rs 20,685 crore in setting up a petrochemical plant at Dahej in Gujarat as it looks to diversify the business as a hedge against volatility in energy markets.
Petronet will use imported ethane to make chemicals that are the building blocks for a range of products - from plastics to detergents and cosmetics.
At a media call post announcing the second quarter earnings, Petronet chief executive A K Singh said the project, which will be built over the next four years, will have unique synergies with the adjacent India's largest LNG import facility and will "improve topline and bottomline substantially."
The petrochemical plant will consist of a 750,000 tonne per annum propane dehydrogenation plant (PDH) and 500,000 tonne a year of poly-propylene plant.
"The project is planned to give 30 per cent return on equity and the market should not have any apprehensions about profitability of the venture," he said.
Petronet is making a foray into petrochemicals business as per capital consumption in India is one-third of the global average and there is a vast demand growth potential.
He said a third of the planned PDH output has already been sold locally, mitigating large risk for the project.
Petronet board of directors at a meeting on Monday approved the investment in the petchem project that would bring revenue generation from the sale of poly-propylene, propylene, propane, hydrogen and ethane, he said.
The board of directors also accorded its approval for the execution of a binding term sheet with Deepak Phenolics Limited (DPL) for the offtake of 250,000 tonne of propylene and 11,000 tonne of hydrogen from Petronet Petrochemical Project at Dahej for a period of 15 years, he added.
Petronet is raising LNG import capacity of the Dahej terminal from 17.5 million tonne per annum to 22.5 million tonne at an estimated cost of Rs 600 crore.
Also, it is adding two LNG storage tanks to the present six tanks at Dahej at a cost of Rs 1,250 crore.
This is with a view to raising gas consumption in the country so as to aid in increasing the share of environment-friendly fuel in the primary energy basket of India from 6.7 per cent to 15 per cent by 2030.
Besides Dahej, Petronet has a 5 million tonne a year import facility at Kochi in Kerala.
With both its terminals on the west coast, Petronet is now eyeing a third import facility on the east coast.
A floating 4 million tonne a year LNG import terminal on high-seas off the Gopalpur coast is planned to cater to the increasing gas demand of the eastern and central part of the country, he said, adding the FSRU(floating storage regasification unit) based terminal may be converted into a land based terminal of 5 million tonne capacity depending on the demand.
LNG is a natural gas that is cooled down to liquid form for ease of transporting in ships. At the import terminal, LNG is re-gasified into its gaseous state before piping it to users like power plants for production of electricity and fertiliser units for making urea and other crop nutrients.
Petronet reported a 9 per cent rise in the September quarter consolidated net profit on higher capacity utilisation of Dahej terminal.
Net profit of Rs 855.74 crore, or Rs 5.70 per share, in July-September is compared with Rs 785.73 crore, or Rs 5.24 a share, earning in the same period a year ago.
Singh said LNG import volumes at Dahej rose to 210 trillion British thermal units (TBtus) in the second quarter of the current fiscal from 182 TBtus in the year-ago period.
The overall LNG volume processed was 223 TBtu, as against 192 TBtus in the year-ago period and 210 TBtus in the preceding quarter.
"The robust financial performance of the current quarter and half year was achieved due to efficiency in operations and higher capacity utilization of the Dahej terminal, that remained consistently above 90 per cent in the current quarter and half year, taking huge leap from the utilization level in FY 2022-23 that was below 80 per cent," he said.
Revenue was down 21.6 per cent at Rs 12,532.57 crore on lower gas prices.