Ladies and gentlemen, good day and welcome to the GAIL (India) Limited Q1 FY23 earnings conference call hosted by ICICI Securities.
As a reminder, all participant lines will be in the listen-only mode, and there will be opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and zero on your touchtone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr. Prabal Sen. Thank you, and over to you, sir.
Thank you, Seema. Thank you everyone for making the time to attend this post Q1 2023 financial results call of GAIL (India) Limited.
We are pleased to have senior members of GAIL (India)'s management, led by Mr. Rakesh Kumar Jain, the CFO with us.
I will hand over to him immediately for some opening remarks and a brief on the numbers, then we can move into the Q&A. Sir, over to you.
Thank you, Prabal Sen. Good afternoon, Mr. Prabal Sen from ICICI Securities, my dear friends from investors and analyst community.
A very warm welcome to GAIL's earnings call for Q1 financial year 2023.
We are thankful to you all for showing keen interest in this earnings call.
\The results for Q1 have been declared earlier today, and I am sure that you would have gone through the same.
Before I give insights on the financial performance, I am happy to inform you that our company has received nil comments from CAG on the accounts of.
Call is now being recorded.
On the financial year 2021-22. This is the thirteenth consecutive occasion when the company has been able to achieve this year.
Now let me take you to financial highlights. GAIL achieved gross turnover of INR 37,536 crore in the current quarter as against INR 26,909 crore in Q4 financial year 2022. This is an increase of almost 39%, and the increase is mainly due to higher natural gas marketing and transmission volume.
Higher gas prices, both domestic and RLNG. Higher LHC prices. LHC prices are higher by average almost 12,000 per metric ton. Higher petrochemical prices. This is higher approximately by 18,500 INR per metric ton.
However, this hike is partly offset by lower PC sales quantity in Q1 2023 due to annual shutdown of petrochemical plant in the current quarter, that is quarter one. Profit before tax increased to INR 3,894 crore in current quarter as against INR 3,546 crore in Q4 financial year 2022. This is an increase of 10%, and increase is mainly due to, as I said, with respect to revenue.
The improved performance of gas marketing segment. However, this was partly set off due to reduced profitability in gas transmission, liquid hydrocarbon segment due to increase in price of domestic gas used in internal consumption. That increase is well known to you. That is $2.9-$6.10 per MMBtu.
Petrol profit also reduced in spite of higher prices and realization. This reduction is due to lower production, as I said in Q1 2023, and sales and higher cost of input gas during this quarter. Profit after tax increased to INR 2915 crore as against INR 2683 crore in Q4 2022, financial year 2022.
This is an increase of 9%. On similar accounts, as I stated with respect to PBT. Segmental performance for the current quarter versus previous quarter. Our gas marketing volume stood at 100.84 MMSCMD in the current quarter, as against 94.69 MMSCMD in previous quarter. The increase in volume is driven by higher RLNG sales and also overseas sales.
The natural gas transmission volume stood at 109.47 MMSCMD in the current quarter as against 107.56 MMSCMD in the previous quarter. The capacity utilization for pipeline is 53%, as compared to 52% in last quarter. Polymer production stood at 132 TMT as against 194 TMT in last quarter.
This 132 is almost same if we compare with the Q1 2022, because we had annual shutdown in both the Q1 2022 and 2023. However, if compared it with the Q1 of last year. We have experienced very high PC prices, as I said. In current quarter, the average PC price is INR 1.26 lakh per metric ton.
With respect to LHC, the production stood at 227 TMT as against 212 TMT. In previous quarter, the capacity utilization was 64%. Liquid hydrocarbon price increased significantly, and the average realization in current quarter was INR 74,000-100,000 per metric ton.
Cost of input gas for LNG segment is primarily driven by domestic gas prices. From April 2022, the cost of input gas prices increased to $6.10 per MMBtu from $2.90 per MMBtu, which led to increase in cost of production. In respect of LPG transmission was 1,055 TMT as against 1,065 TMT in previous quarter, almost the same. The capacity utilization was at 110%.
Coming back to the consolidated financial of Q1 2023, as compared to Q4 2022, financial 2022, the consolidated turnover in the current quarter stood at INR 37,901 crore, versus INR 27,263 crore in previous quarter, almost 39% up.
The PBT in the current quarter is INR 4,230 crore versus INR 4,375 crore in Q4 financial 2022, down by 3%. The PAT is INR 3,253 crore versus INR 3,454 crore in Q4 financial 2022, down by 6%. With respect to GAIL CGD, that is the six CGD we are operating in, GAIL.
In terms of infrastructure, we have 121 CNG stations. In terms of DPNG connection, we have two lakh eighteen thousand DPNG connections.
During the quarter one, Q1 2023, 1 new CNG station and 17,000 new DPNG connections were added. Now with respect to GAIL Gas, during the current quarter, the gross turnover stood at INR 2,658 crore as against INR 2,102 crore in Q4 FY 2022. This is an increase of 26%, and again, mainly driven by increase in average gas price.
The PBT was marginally down at INR 97 crore in current quarter as against INR 103 crore in previous quarter. Profit after tax also declined marginally to INR 72 crore as against INR 74 crore in previous quarter.
The physical volume during the quarter remained flat at approximately 6 MMSCMD. GAIL Gas, along with its JV subsidiaries, has infrastructure of 800,000 DPNG connections and 341 CNG stations.
During the quarter, two new CNG stations and 21,000 new DPNG connections were added. In terms of CapEx, GAIL achieved CapEx of approximately INR 1,975 crore during the current quarter.
This is mainly on account of pipelines, petrochemicals, CGD projects, operational CapEx, equity contribution, and E&P. We have planned to spend approximately INR 7,500 crore in current financial year, and mainly on, again, pipelines, petrochemical, CGD, and equity.
With respect to project performance, 121 kilometers of Bokaro-Angul main line commissioned on thirtieth June 2022. 412 kilometers was commissioned till March 2022. Bokaro-Angul pipeline now it is making total, 533 kilometers. This was inaugurated by honorable PM on twelfth July 2022.
The work on various projects, PP projects at Pata, PDH/PP at Usar is going on as per schedule. That's all from my side regarding the overview of performance and projects.
The management team of respective executive directors from all the segments are available here, and will be glad to clarify on any questions that you may have.
Now over to you, Mr. Kumar.
Thank you very much, sir. Seema, we can open up the floor for the Q&A.
Thank you very much.
We will now begin with the question and answer session.
Anyone who wishes to ask a question may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question.
Ladies and gentlemen, we will wait for a moment while the question queue assembles.
Thank you.
GAIL का करना है ना। वो list में नहीं है क्या आपने?
We take the first question from the line of Maulik Patel from Equirus. Please go ahead, sir.
Yeah. Hello?
Yeah, yeah. Go ahead.
Sir, this is regarding the LNG volume. For the quarter, can you see how much of the cargoes you have received from the US and Gazprom?
Q1 बताइए।
Yeah.
Just hold on.
Yeah. We cannot give the exact breakup of the Q1 cargoes, but go on.
Overall, we did purchase some from both the US and other suppliers which are Brent-linked contracts. We did also purchase some spot cargoes to meet our spot gas requirements in the market.
This is with respect to this news in the media that Gazprom has declared force majeure, and there's over 2.5 million tons of contract. They are not supplying the cargoes since month of June, I think. What can be the impact of that? Wanted to know that have you sold out of this 2.5 million tons, how much of the volume has been sold to the customers?
In this contract, whether it was mentioned that it is on the Gazprom volume and the force majeure from the Gazprom will also applicable to the customers or not.
Let me take this question. As you know that, we have total portfolio of 14 MMTPA of LNG.
Sure.
For current year, Gazprom is supposed to supply 2.5 MMTPA of LNG. That, if you work out, they actually are supposed to supply almost 36 cargoes during this calendar year, because LNG contracts are on calendar year basis.
Sure.
there has been certainly supply disruptions, and it has happened since late May 2022. When I'm saying so, it means till almost May the cargoes were coming.
Mm-hmm.
If you talk to me till date, Gazprom has not supplied almost eight cargoes. Okay?
Mm-hmm.
8 cargoes. 8 number of cargoes if you talk to me till today, okay?
Mm-hmm.
Though supply disruption started some time in May.
Mm-hmm.
They in between also gave one cargo to us in June.
Okay.
This is what about the current situation, the portfolio, what we have total, the contract we have with Gazprom, and the supply situation till date.
Gazprom has not declared the force majeure. It is that they are not able to supply the cargoes.
Yeah. Gazprom, what they have said, basically, their regulator. Basically, this is now a company based out of Germany because we had a contract with Gazprom, then in between the reconstitution, our partners changed. In order to secure the supply for Europe.
Mm-hmm.
They are not certain about supplying LNG under this contract. They are not certain that they will not supply, but they are not scheduling at the moment.
Okay. How are we dealing with the situation? Because the eight cargoes are not a small number. I think it has impacted our volume, and we have probably sold large part of this 2.5 million ton to the customers. I mean, are we obliged to meet this volume from the other sources of gas of GAIL? Or how is the situation with customer and how are you dealing with that?
Yeah, you're right. The situation is certainly an area of concern if I talk to you today. I cannot say what will happen in future. If I talk to you right now when I'm talking to you, certainly it's a concern. What GAIL is doing, GAIL is actually honoring its contract. What we are doing in order to honor the contract, all contracts have take-or-pay levels.
Sure. 60%, 80%.
Let me explain. Take-or-pay levels are normally for the user. There are below levels also supplied by it. We have started supplying our volumes at the take-or-pay level.
Sure.
Okay? That take-or-pay level is enabling us. That is one solution I'm telling you right now how we are mitigating. That take-or-pay level is enabling us to deal with the situation partly.
Mm-hmm.
Secondly, we ourselves have cut down the load for our Pata Petrochemicals.
Okay.
That is also helping us. Thirdly, what we have done, we have started, though we were otherwise doing this as a course of risk mitigation or bringing cargo in advance or taking later. So we have been doing some time swaps. So we are advancing our cargoes through swaps, which are supposed to come, say, in 2023. We have done some of the transactions.
That is four. Third. Fourth, what we have done, we had some unallocated cargoes in the United States. We have hired ships for that, so that the unallocated cargo, which we were thinking at that point of time, we can use the arbitrage sale in the international market.
We are thinking that with those ships we will bring the cargoes to domestic market in order to mitigate the situation. Lastly, if we still feel that there is chance of it, we'll go for a spot purchase to meet the requirement.
Sure. Will this impact our profitability in a significant manner given that we are the Gazprom contract at whatever 13%-18% of the oil price, and you are buying some of this volume, which is in the spot market, which is substantially higher? Will this impact our profitability in a significant manner?
So-
It is a good selling business.
Yeah. Again, we are talking as of today.
Yeah.
You can say that profitability certainly will hit, not significantly. Let me again explain you the detail. Certainly there will be an impact on profitability. No one, nobody can deny if the situation remains like what we are talking today. That's how we are mitigating this situation or overcoming the situation through various measures.
We are avoiding purchase of spot cargoes. But what has happened, this volume which is not coming from Gazprom is almost 7%-8% of our total portfolio.
Right.
Correct? To that extent, in order to meet that, we have started using take-or-pay levels. Suppose, because there are different take-or-pay levels in different contracts, suppose we are reducing to 90%. To that extent, the marketing volume and transmission volume has come down as of today.
Mm-hmm.
If situation persists, certainly we'll be there lower in tomorrow.
Sure.
Tomorrow I cannot say what will happen, but I am only hypothetically supporting this situation. As of today, yes, we have cut down the supplies to take-or-pay levels, so it is to that extent, certainly there is an impact.
You mentioned that it is 7%-8%. It is actually 14%-15%, right? You have a 14 million tons of LNG commitment, and this is 2.5 million tons, so approximately 15% kind of a number.
Yeah. Let me tell you. I said in terms of total volume. If you go over LNG, yes, it's 15%.
Yeah.
If it is 15%, 10% we are cutting through take-or-pay, then we are doing other measures which I explained you in detail.
Okay, sure. Got it, sir. One more question, if you allow me.
How do you see this international prices, which has gone through the roof, spot, and countries also having the consumption is also coming down, particularly the volume at CGDs are under pressure, given that the blend has gone up to around $10.5 per MMBtu, so those industries are not able to afford this kind of.
How do you see this overall gas demand in the country, and also in the context of upcoming this KG field auction, which Reliance probably will do in next couple of months. In that context, how do you see this LNG demand or LNG import in the country view?
If you talk of today's spot LNG price, nobody is going to come up. As far as the new consumers certainly will take a hit. The plants which are already on gas will somehow are taking because they are on long-term basis.
They have some spot contracts. If you talk of new consumers, certainly then there will be an impact on new consumers until the situation improves.
Okay, sir. Thank you. We'll come back if issue.
Yeah.
Thank you, sir. We take the next question from the line of Pinakin Parekh from JP Morgan. Please go ahead.
Sir, just to continue the previous point, you mentioned implementing take-or-pay in lieu of the lost Gazprom cargo. What does that mean, sir? You are paying the consumer the differential in price?
Take or pay level is for consumer first. If consumer does not take that quantity, we have right to put take-or-pay gas price. There is one more level, supply-or-pay , which is normally below take-or-pay level.
In terms of contract, we are complying the contract. We are paying even more. We are supplying the quantity more than the quantity we are required to comply the contract. There is no question that GAIL will pay for differentials.
Understood. Sir,
Yeah, as of date, yes, that's our plan that if Gazprom cargo does not come and we are not able to source alternatively or then certainly we will continue to keep the Pata plant production at the current level or around that level.
Understood. Thank you very much, sir.
Yeah.
Thank you. We take the next question from the line of Sabri Hazarika from Emkay Global. Please go ahead.
Yeah, good afternoon, sir. And congratulations on good numbers for Q1. I have two questions. First, relates to the Gazprom only. You mentioned that the hit will mostly be on the transmission, marketing and petchem volumes.
Compared to Q1 run rate, what is the current rate? I mean, what kind of a decline are we seeing, say as of now, as of today?
In transmission volume, marketing volume, and also in petrochemical you are asking? Everything?
Yeah, all three of them. Yeah.
Let me tell you. If we have supplied on an average basis 100 MMSCM, transmitted 100 MMSCMD, marketed 100 MMSCMD in Q1. State RLNG cut by 10%. Six million cut we have already done. Out of 100, five or six million. Almost 95 million we, 90-95 million we may be marketing. Exact number difficult, but a range can certainly be shared because we have cut down by 5 million or so.
In terms of transmission also similar cut will come. Apart from that, not only that cut will come and Pata petrochemical consumption 2 million if we keep at continue at current level, so that will be at 7 million as compared to marketing. Because that transmission includes the internal consumption as well.
Yes, Pata, I didn't get it. You said that, we've, I mean, how much of Gazprom was being supplied in Pata earlier versus?
No, no. We are not very specific to any particular supply to Pata. We have always been maintaining that we are a portfolio holder. We used to supply Pata out of our portfolio. Gazprom was part of our portfolio. Gazprom is not coming.
Therefore there are issues in overall portfolio. And that's how we have stopped or reduced the supplies to Pata because overall availability is less. There is, there was no specific allocation per se to Pata.
All right, sir. Sir, second question is on your petrochemical.
Actually the realizations versus South Korean benchmarks have expanded significantly in Q1. Is it some specific grades you are selling or something of that sort? Is it like normal line of business?
Just hold on because this is very, very specific questions. Question with
I didn't got your question, sir. Will you repeat it, please?
I mean, if I compare the petrochemical realization, which is the revenue divided by sales volume.
Okay.
Number we compare with the South Korea benchmark, I think, it comes from Bloomberg.
Okay.
That potential used to be 15%. It has gone up to more than 30% now.
Okay.
I mean, your products are being sold at a premium versus the Korean benchmark.
Yeah, true.
Any reason behind that?
The thing is that, during Q1 and this thing, there were domestic plant shutdowns. The domestic prices were not in line with the international Platts report. We, the domestic player will charge the reasonable price.
Today, now slowly this market is correcting and now it is taking the adjustments.
Okay. Domestic prices were at a premium during Q1?
Yeah, during that period, yes.
Okay. Okay, that's all from my side. All the best. Thank you.
Thank you. Thank you.
Thank you, sir. We take the next question from the line of Krati Sanklecha, Credit Suisse. Please go ahead.
Hello, am I audible?
Yeah, yeah, very well.
Hi, sir. Sir, two questions. One, PNGRB has not fixed any tariff for phase two of Urja Ganga. Right now, whatever volume that's flowing through phase two, what tariff is being charged for that?
Yes, you are right. What has happened sometime in 2019, PNGRB fixed the tariff Urja Ganga for considering the CapEx of around INR 1,600 crore and capacity of 7.44 MMSCMD. It was based on that, and that is the tariff available to us for charging with the customer.
We are continuing to charge the tariff as approved by PNGRB. In terms of contract, we have a clause that once the tariff is revised by PNGRB, we'll charge the revised tariff. That means in order for you to explain in further detail that this pipeline has a CapEx of almost INR 15,000 crore. If you reduce the capital grant of INR 5,000 crore, almost INR 10,000 crore, I'm talking on broad basis.
that pipeline tariff has to be worked out considering the differential effects of almost INR 8,000 crore and capacity addition of from 7-16, that is almost 9. I am talking of total capacity, not-
Mm-hmm.
That tariff is significantly going to go up, because on LPU basis it has a further impact. Tariff will be around INR 140 or INR 150 subject to review and approval by PNGRB. Those tariff once approved by PNGRB will be available to us. Until then, we are charging the tariff of phase one.
Okay. Sir, in the transmission segment, the profitability was very big this time. The volume was higher. The realization was also higher. Still the absolute EBITDA was lower QoQ. It seems to be higher OpEx. I did not understand why higher OpEx in-
No, no, it's not due to higher OpEx. Let me tell you must know that the GTG we use for running the compressors, gas turbine generator, has an allocation of APM gas. APM gas used to be at a price of $2.9 per MMBtu, which has gone up to $6.1 per MMBtu. We are booking the cost of at a higher level, and the same is available through tariff adjustment when it is announced.
Actually then that is announced. Our OpEx certainly will be higher. Therefore, even though revenue increases, the margins will be lower.
Sir, just last one question on the LPG volumes. The LPG volumes have been consistently weak for many quarters now. Till FY 2020 actually, we used to be 300,000 ton per quarter. Now we are hardly 200-250. What has changed here?
Yeah, changed. Nothing changed except the availability of gas from ONGC, the rich gas.
Okay. Can you help me with what gas was allocated in 1Q? The APM gas.
1.7. 1.75 MMSCMD.
Okay. Okay. Thank you, sir.
Yeah, pleasure.
Thank you.
Yeah.
We take the next question from the line of Sujit Lodha, Birla Sun Life Insurance. Please go ahead, sir.
Hi, sir. Thanks for taking the question. First question would be regarding going back to the Gazprom volumes. What are the terms with both Gazprom and your customers in case if they fail to deliver the promised volumes, how do they make up for that? Is it over the course of time they have to make up for the same volumes?
Similarly, how do you make up if you fall short of supplying the volumes to your customers?
Actually, your voice is not coming that clearly. I'm sorry, you have to repeat once again.
Sir, am I audible now?
Yeah, you are audible, but it was not coming so clearly. Yeah.
Should I repeat my question?
Please.
Yeah. Basically on the Gazprom contract, what are the conditions with Gazprom if they fail to deliver? How do they make up for it? Is it on the balance tenure of the contract that they have to make up for the volume? And also vice versa, how do you make up in case it's you tomorrow fall short of supplying your volumes, the minimum take of the volumes and also to the customers, how would you make up for that? And what are the terms on?
I understand. With respect to Gazprom contract, it is not actually right at the moment for me to give you very integrity of the contract.
Mm-hmm.
They are. I will tell you on broad basis, if they don't supply, there are penalty provisions.
Okay. Okay.
We'll take up that, how we will take up that, how they will supply and what are the majors. Those are matters of taking up a negotiation. That's why it's not right on my part to-
Right.
go into the details of those provisions.
Mm-hmm.
With respect to customer. Let me tell you, it's not in most of the cases of back-to-back contracts with Gazprom.
Mm-hmm.
We have a portfolio contract.
Mm-hmm. Right.
It's not that when Gazprom is not supplying or supplying. We have made portfolio contract, and till then we are not going below the contractual provisions to which we are supposed to supply. Therefore, there is no question as of yet arising that we have to make up for the gas.
No, that I understood that you have a contract or based on portfolio, and they don't care whether it's coming from Gazprom or any other source. Basically at the price you will be able to supply, that's what you're saying. The minimum contracted volume, you will be able to supply at the contracted volume.
Yeah, yeah. More than minimum contracted volume we are supplying as against to other parties.
No, that would continue in future also, irrespective of where the Gazprom supply goes.
Yeah. We hope to do so because there are lot many measures, because this situation has happened all of sudden.
Mm-hmm.
Certainly, we are getting now time to overcome those situations, and we are working on that.
Okay. Sir, while obviously you cannot divulge details on the customer side, but so which would be the biggest sector which will consume and which will be consuming this gas?
Sorry, biggest sector?
Which will be the consumer for this gas?
Again, there is no specific. That's what I told you because any biggest customer, one of the biggest customer is fertilizer.
Okay.
Mm-hmm.
Okay. Thanks so much. I'll come back in the queue if I have anything else.
Yeah.
Thank you so much.
Okay, pleasure.
Thank you, sir. We take the next question from the line of Ashish Ramesh from Nirmal Bang Securities. Please go ahead, sir.
Hello.
Yeah.
Yeah. Thank you very much. I just had a couple of thoughts. One is on the pooled gas purchase for the CGD sector. If you can tell us what is the volume you would have purchased on behalf of the CGD companies, and what is the kind of margin you would have earned, is it included in your gas marketing segment in terms of the volumes and margins?
What is the kind of volumes you would have purchased on behalf of CGD companies? Would the margins on that be comparable to your average margins in gas marketing?
Last question first. Our marketing margin, which we normally add, is the margin we charge. Okay? There is no any significant delta or anything. We get a standard marketing margin, which we charge. With respect to what kind of volume we are purchasing for supplying to CGD, it is around 10%-12%.
10-12% of?
Total volume being consumed by CGD.
The total volume. What is the volume in MMSCMD which you have included in your marketing volumes, so I may understand?
Sorry?
How does that translate to in terms of the?
You can say it actually depends month to month because CGD demand is ever-increasing, so 2.5-3 MMSCMD.
2.5-3. Secondly, how much of that gas is procured from spot market? Because obviously the APM gas allocation is falling short. What proportion of that are you buying from the spot market?
This is what we are buying through spot market. That's what I was telling to you. 12.13%, whatever ratio comes. 2.5 MMSCMD to 3, depending on the the forecasted demand or gas consumption based on the pattern we arrive. That is the volume we are marketing as a spot or volume which we are blending.
The entire thing is on spot volume. Okay. If you look at your segment EBITDA, which you've shared with us, in LPG, it's very interesting to see that you have been able to maintain the LPG EBITDA at slightly less than Q4 and similar to last year Q1, in spite of the fact that your APM gas price has gone up from $2.9-$6.1. We would like to know how you have been able to achieve these sort of EBITDA numbers for LPG and-
I explained in the opening remarks that the LPG prices are significantly higher as compared to Q4. That is around INR 12,000 per metric ton higher as compared to Q4. You are right that the input cost has increased, but it has been offset by the higher LPG prices.
Twelve thousand rupees, sir, is not that big compared to the original price. See, because the gas prices have almost doubled. Even if you take the Q4 from $2.9 to $6.1, it's doubled.
The impact of dollar increase is around 4,000. Almost, it is offsetting. There may be some. Because if you consider 4,000, $3 it's 12,000.
Okay, if I may ask you, how do we read the trend for LPG and other hydrocarbon margins for the rest of the year, assuming that the current APM gas prices are stayed? Would you be able to maintain the same sort of PAT and EBITDA?
It is difficult to predict future oil and gas prices. I can only say based on the current prices, what we are doing, we'll be able to do. There will be a likely increase in October of APM gas prices. To that extent, whatever price increase, our margins will go down.
If you were to take a slightly philosophical view on the gas sector, we are seeing very significant pain because of the high gas prices and lot of the volumes are being sucked in by Europe. If you look at the numbers being quoted by consultants, most of the LNG projects are all tied up with long-term contracts. How are we approaching the process of negotiating for our future contract volumes?
Because Petronet LNG is due for renewal of their Qatar gas contract. What is your reading in terms of being able to line up future gas supplies from LNG projects for long-term contracts on contract prices?
To what extent will we continue to be exposed to having an increased per share of our gas requirements coming from the spot market? If you can share your thoughts, we'll be grateful.
We have been sharing our thoughts in this regard. We were in the market for sourcing 0.75 MMTPA of gas for coming five to 10 years. Unfortunately, because of the current situations, we did not get the response the way we are expecting.
Again we are now scouting the market for various indices, whether it's the United States gas or the Middle East gas or any other source of gas. Currently we are in the market for sourcing long-term gas, not only to meet the current crisis, but also to meet the increasing demand of the country. As of date, I can only share that we are in the market.
Okay. Thank you very much, and all the best.
Okay.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address all the questions from the participants in the conference, please limit your questions to two per participant. Thank you. We take the next question from the line of Kirtan Mehta from BOB Capital Markets. Please go ahead, sir. Mr. Mehta, your line is in talk mode, sir. Please go ahead.
Thank you, sir, for giving me this opportunity. Just to sort of take the CGD supply question further. You mentioned that you are not able to secure the long-term volume or still finding the long-term volume. Is there any plan to sort of supplement this volume with a short, medium-term volume of 12-18 months, which might be available?
Let me tell you, we are in the market for all kind of periodicity, short, medium, long. But the market today is such that short-term volumes are not available at the desired price. That's the challenge we are facing. Though we are there in the market, but that's the challenge we have.
Right, sir. How do you see the LNG price sort of? There could be a possibility that we might see the continued surge in LNG prices during the European winters. What's the plan to sort of protect CGD sector against that additional surge?
Plan is that we are scouting the market on what can be the other plan. You can only source at a cheapest available price, and that's what we are doing. It's difficult to predict what will happen, but we are doing that.
Right, sir. Just one more question on the Kochi Bangalore pipeline. Is there any further update in terms of the finalization of the plant, Kochi Bangalore pipeline?
So the-
Commission team will know. Bangalore.
Oh, there is no further change in that. There is no further change in the status.
Thank you, sir. I'll come back in the Q&A.
Thank you. We take the next question from the line of Vipul Kumar Shah from Sumangal Investments. Please go ahead.
Sir, what is your volume, which is on the long term from Qatar and Gazprom? What is the long term and what is the short term you are sourcing?
Can you come back? What is our long term volume from Qatar? That was the question first you asked.
Yeah, Qatar and Gazprom and every all long-term contract included.
Yeah. Let me take you through the data. We have 14 MMTPA of approximate LNG contract. We have almost 4.8 MMTPA from Qatar, 5.8 MMTPA from United States, and then almost 0.42 from Gorgon. Then what else?
2.5.
2.5 from Gazprom. That's around 14.
Right now, only this 2.5 is the problematic area, right?
Right.
Similarly, on the sales side also, all your sales is a fixed price or what percentage is fixed price and what percentage is spot?
I also don't know. Because we have all kind of contracts, we have the back-to-back contracts with marketing margin. We have the contract with the index at which we bought, and we have different marketing margins.
We sell on fixed price, not for a longer period, but for a period, say, short contracts of month or 15 days. We have all kind of contracts. Fixed price contract you are talking about is not for a longer period. It's only for a smaller period of 15 days or one month or so.
Okay, sir. Thank you. All the best.
Thank you.
Thank you, sir. We take the next question from the line of Vishnu Kumar from Spark Capital. Please go ahead, sir.
Thanks for time, sir. Sir, just to summarize out of your 100 MMSCMD that you're doing in natural gas marketing, about 9 MMSCMD ideally should come from the Gazprom contract, which is roughly 2.59 MMSCMD, of which 3 or 4 is roughly getting impacted. Is that the right understanding?
What you said in last three or four what?
No, no. You have 2.5 million ton would be 9 MMSCMD, roughly.
No, no. Let me tell you. 2.5, you are arriving at nine. But actually, out of almost 39 cargoes, 36 we are supposed to supply in terms of contract. They have right to supply or not to supply. We consider that 8-8.5 MMSCMD of gas, which is supposed to come from Gazprom.
Okay. On a monthly run rate, or if you can just say what is the shortfall that you're seeing on even a percentage basis?
So the-
Yeah.
In last quarter, we did not receive 8 cargoes. Okay? Since May.
Got it. Roughly almost 80% of the volume that you're supposed to get, you did not get. Because if I take 38-
This was the situation in last quarter. I cannot say what will happen in this quarter.
Understood, sir. The second question is that normally, you have some spot allocation, out of your overall portfolio. Does this mean that you don't have any spot for the next couple of quarters, assuming the current situation holds, and you may have to source a little bit of spot gas and supply to a few customers if required?
No. We certainly source for the spot also because the biddings comes in between whether you talk of fertilizer bidding or whether the spot customer requirement. There are customer who are also taking at this price to meet their requirement. We are there in the market for spot for sourcing and supply side both.
Can it be said, sir, that out of this 100 MMSCMD earlier, 90%-95% used to be. You used to say that 80%-85% to 90% used to be contracted. Some 10 MMSCMD or 10% used to be on spot. Now you don't have any spot. That's the only question I'm asking.
Actually, I also said, spot is there. If you talk of LNG contract, the fertilizer supply is which happens quarterly bidding, that is spot.
Okay.
Spot is there, spot will remain there. It may reduce certainly, because some of the volumes may not come up, or top of volumes may not come up at this price. It's not in there significantly.
Understood. Sir, in the past you mentioned that some of the US contracts in 2020 we have locked in on time swaps, and they will likely roll off in a year's time frame. Next year, I mean, I'm just hypothetically asking that the US contracts which you have kind of entered into in terms of contracts, they will be available to you next year onwards, which will ease some of the issues that you currently have.
Numbers is not there. Certainly they are available. Numbers we can give you offline, but yes, that's there.
Got it. Sir, if you could just give your internal consumption, segment-wise, gas transmission, or on a normative basis, Petchem LPG, if you could just give the internal consumption of gas segment-wise.
I think it's not. Right now I am not able to share with you.
Okay. On your Urja Ganga line.
Sir, sorry to interrupt.
This is the last question.
May we request you to come back to the question queue. There are participants waiting for their turn.
Got it. Thank you.
Thank you. We take the next question from the line of Varatharajan Sivasankaran from Antique Stock Broking Limited. Please go ahead.
Thanks for taking my question, sir. Couple of questions. One, LPG allocation, you mentioned 1.75 MMSCMD. That is just the allocation or the actual supplier always meets the allocation or does it fall short?
No, it's there. Right now it's there.
Right now it is meeting the allocation. Secondly, this CGD, like the pool pricing, if you can just give us some insight into how the mechanism works. For example, like last time it was $8.95, it is $10.52 this time around. When we budget for the increased demand and you place an order in the spot market for the LNG on a delivered basis, what you count that and that is how, like this number shifts from month to month or, like how does it work?
This number changes month to month, and the price is based on the availability of domestic gas and the actual consumption. Reform base price is calculated with the mix of domestic gas and the other spot source gas.
The requirement is taken on a quarterly basis or on a monthly basis, sir?
As per the recent guidelines of MOPNG, the consumption numbers are taken on a quarterly basis, and every entity is allowed to consume up to 102.5% of UBP gas. If their consumption is higher than that, they will top up it with their own sourced LNG or whatever, and that will come up in the next consumption. Whenever the consumption figures are revised after a quarter, that will be taken as their consumption.
If my understanding is correct, if their requirement is, like in the last quarter consumption was 100, this 2.5 extra is something which you anyway place an order for or like do you vary the volume month to month based on what you see as the actual, like intent placed with you by the customers?
As I said, the consumption numbers have to be revised after the end of quarter.
Okay.
Monthly, the consumption numbers are not revised monthly.
Okay. Sure. Thank you, sir.
Thank you, sir. We take the next question from the line of Yogesh Patil from Centrum. Please go ahead.
Thanks for taking my question, sir. Both of my questions are related to current higher LNG prices scenario. In first case, can you please update on upcoming fertilizer plants? Do you see any delay in commissioning of fertilizer plants due to the shortfall of LNG?
Now two fertilizer plants, Ramagundam and Gorakhpur is already commissioned. Now Sindri and Barauni, both are under pre-commissioning phase, and they have their plans to light up the reformers. I think the commissioning is due sometime end of August or September. They have few technical glitches which they will be sorting out during the next one or two months.
Okay. You don't see any kind of a delay in commissioning of fertilizer plants due to the higher LNG prices or shortfall of LNG from the long-term contracted volumes?
No.
Sir, second question is again related to the rising gas prices or LNG prices. Do you see any deferment or postponement of the commissioning of new geographical area for the CGD sector?
Difficult for us to say because this individual entity will take a call, commercial call. As far as gas based on UBP, which is available to all these CGDs, will be available to them. Now they will see their commercial viability and they will see alternative fuel price based on rich price, when they will commission or what, how or when they will supply.
Okay. Thanks a lot, sir.
Okay.
Thank you very much. We take the next question from the line of Vikash Kumar Jain from CLSA. Please go ahead, sir.
Hi, Rakeshji. Thanks for taking my question.
Yeah. Hi. How are you?
I'm very good, thanks. Just wanted to understand this Gazprom situation on a QoQ basis. If last quarter anyways your volumes were much lower, then why? I mean, I understand that part of that demand was anyways offset because of your petrochemical plant functioning at a lower level. If I were to look at that, and you maintain the petchem plant at lower utilization, then why would the situation change dramatically this quarter versus one Q?
We also said so because we also said that with reference to one of the question that whether you will be able to maintain same marketing spread. I said difficult or may not be possible. Question was whether you will be able to maintain INR 1,100 crore as you maintained last time. I also said it's really in difficult situations, difficult to say with certainty. Yes, there is a challenge in this quarter.
No, no. What I mean is that last quarter, that is 1Q, you did not have Gazprom in any case. Okay? What I mean, only 1 cargo was there, right?
No. In last quarter we had full supply until-
1Q. I mean, 1Q, you had full supply, right?
That's what I was trying to explain because in last quarter, until May end, we had normal supply. For June, till June month we got only one cargo, and in between there were interruptions. You can say that last quarter was not that greatly impacted. In this quarter, there is no certainty as far as whatever communications we have. We are talking at all levels, including the government to government level, including we are talking to Gazprom. As of now, when I'm talking to you, there is no certainty about the availability of Gazprom volume. If it comes, certainly we will be better off as we were there in Q1. It's still difficult to say as of now.
Sorry. That was my misunderstanding. Just to understand that, so broadly you said that your volumes would be down by roughly 6-7 MMSCMD, both in the transmission side as well as in the marketing side. That is the impact of Gazprom?
Yeah. We currently
Okay.
Currently we have already reduced almost 5-6 million per day of volume from supply side. If transmission, you consider 7 or 7.5, because internal consumption is part of transmission, not the marketing volume.
Okay. Basically whatever is the 1Q average, our current transmission volumes are about 6-7 MMSCMD, lower than that. Petchem, at what utilization level are you kind of running to manage this situation?
Currently we are running around, 50%.
Around 50%. Okay.
Yeah.
Basically the hit is three way. Volume of both marketing and gas transmission, about 6-7 MMSCMD, and petchem being run at 50% utilization.
Yeah.
Right? That's.
Maybe little lesser than 50.
Okay. with if since there is this talk of Europe reducing energy imports from Russia by say from, I think it's the December. If that really plays out, would that free up more gas to be available to us? Or that's something that is not. I mean, that's not the way to look at it.
No, free up which gas? Mostly they are dependent on pipe gas.
Right. Okay.
Availability of piped gas will not make LNG available.
Yeah. Okay.
That is the challenge.
This is simply because of production issues? Since you said that your contract with the German subsidiary of Gazprom. What exactly is causing this? This is a production issue?
Basically, it's a portfolio supply, and they are telling that we are not able to supply you because in order to meet the European, because there's some regulator in Germany. They have said that in order to meet the European requirement, we are not able to supply you from portfolio. They have not said until they will not supply, how much they will not supply. That is the current situation.
No. That's why I asked that because of the that if Europe reduces imports, so essentially even that supply which is being kept by the German regulator would also get freed up or no? This is only.
No. Very, very difficult. Very difficult to say what will happen, how it will happen. Uncertainty is there.
In the current scenario, actual versus the 1Q base, we are 6-7 MMSCMD down.
Right.
Basically, how do we see volumes rising from here? These fertilizer plants coming in will allow us to get more US LNG into India, and that is how volumes are rising in a scenario till Gazprom is not addressed.
We are taking a lot of actions. One is that, in order to make availability of gas for new plants, we already have the supply lined up from U.S. That we have already accounted for plants which are likely to be commissioned.
We have kept that in mind. Gas is available from United States. We had unallocated cargos. For that we have already made arrangement for ship chartering, so we will be able to bring the volume in order to supply that gas to those fertilizer plants. For that, there is no concern about that. Further, in order to meet the further deficit, I was explaining to other participants that we are taking two, three, four actions.
One of the actions we have been taking for the last one year is that we are in the market for contracting the gas on a long-term basis. We had invited tender for 0.75 MTPA, but there was no good response because of current situations.
We are also discussing with some of the other players for sourcing of gas. We are also there in the market, United States and all this. Volumes are available, but the only challenge that we are getting volume in 2023 than 2024. Thereafter the volumes are available, but there are some suppliers which are capable of supplying some of the volume in 2023, 2024. We are working on that. Hopefully, let us hope for the best. We are working on that.
Just one bookkeeping question. Any reason for corporate expenses to be so much lower? Number two, can you tell me what proportion of your US volumes are, I mean, not contracted for selling outside India in 2023 versus 2022?
I have to check that. 2023 not sold. They are sold.
Okay. What proportion have you kept for India in 2023, and what proportion did you keep for India in 2022?
Actually, I think because readily it's not available.
On the corporate expenses thing, sir. Any reason why expenses are lower, corporate expenses, the way you report as a segmental one?
Actually, corporate expenses has not gone down. If you have gone through our Q4 accounts, we provided a provision for ECL, financial guarantees we have given, to our U.S. subsidiaries. So that was around INR 170 crore. Second, only that, the CSR was in December. In Q4, that was the only major 170 crore.
Okay. Basically nothing one-off here, but the sequential quarter was bloated because of that. That's what you mean.
Yeah. That's what I explained. Actually, in Q4 it was INR 170 crore provision, which is not there in Q1 2023. That one-off was in Q4 last year, not this year.
Sure. Okay, sir. Thank you so much. Thanks for your time.
Thank you.
Thank you, sir. Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Yeah. Thank you very much. Hopefully, we responded most of the questions. Yeah, some of the questions we might have not responded. Participants are free to call us offline, and we will be able to respond for the questions which we could not respond and questions which they have and they could not ask. Thank you very much for taking interest in us. That's all.
Thank you very much, sir, for your time. Thank you all to all the participants.
Thank you.
You can log off now. Thank you very much.
Thank you, everyone. On behalf of ICICI Securities, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.