Spot LNG prices in Asia-Pacific increased from $4.2/mmbtu in May 2016 to $8.0 in December 2016 and as much as $9.2 for February delivery. As a result, LNG import in November declined to 1.5mmt, 5% below monthly import in 1HFY17. However, import in November was still 15% higher y-o-y.
Consequently, Petronet’s stock price has declined 8% this month. However, we believe that LNG prices would correct soon, and see the recent sharp fall in the stock price as an excellent investment opportunity.
Japan, the largest consumer of LNG, imported 7.54mmt of LNG in November 2016, up 12.7% y-o-y due to severe winter. China has also been battling a severe winter. As a result, it imported 2.66mmt of LNG in November (+47% y-o-y). Global LNG trade stood at 245mmt in 2015. A total of 142mmtpa of LNG liquefaction capacity is under various stages of construction. This makes us believe that LNG prices would remain structurally weak for a long time, even if oil prices were to rise.
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As against expanded capacity of 15mmtpa, Petronet has got firm usage for 16.75mmtpa. It already operated at annualized rate of 12.4mmt in 1HFY17. We believe that while GSPC’s Mundra terminal may be completed in mid-2017, the lack of pipeline connectivity may remain a problem for next two years. Ennore terminal is also likely to be completed in 2018. There is no progress on pipeline there too.
