GAIL (India) Ltd
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GAIL (India) Ltd
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Good evening, everyone. It is our privilege to host the senior management team of GAIL (India) for the 3Q FY '19 Results Conference Call, led by the new Director of Finance, Mr. A.K Tiwari. Without any further ado, I hand over the call to the management for the opening remarks, which will be followed by a Q&A session. Thank you, and over to you sir.
Okay. Thank you very much. My dear respected investors, analysts, shareholders, a very good evening to all of you on this earning call of Q3 FY '19. The physical and financial performance for the quarter ended December 2018 has already been uploaded on the GAIL website. I presume that all of you have gone through the same, however, for the benefit of the audience, let me reiterate the following few highlights of Q3 FY '19. Number one, in the period of Q3 FY '19, we have cropped -- flagged off INR 4,903 crore, and with this we have already surpassed the full year of that of INR 4,618 crore of 2017-'18. The turnover of Q3 FY '19 is INR 56,101 crore, as against INR 38,294 crore in the corresponding quarter of Q3 FY '18. GAIL registered highest over quarterly turnover in Q3 FY '19 at INR 19,743 crore, whereas the previous highest was in the last quarter, Q2 FY '19 at INR 19,096 crore. Today, I'm happy to announce that the company has declared interim dividend of INR 6.25 per share. As far as our loan portfolio is concerned, during periods up to Q3 FY '19, the company has repaid loan close to INR 1,100 crore and with our current loan outstanding is to-date around INR 1,000 crore, which leads to the debt-to-equity ratio of 0.03x. So at this point in time, we are a company with practically debt-free balance sheet. I'd like to share with you that in this quarter, we have witnessed the bounce back in the -- in our ENP profitability on account of restoration of our gas supply to the customers, which was disrupted in the month of June '18 on account of blast in the China section of South East Asia gas pipeline. The supply continued to remain disrupted during the second quarter, which was resulted in this quarter, leading to a jump of around INR 75 crore in the profitability of this segment. To mention that our U.S. volume in the period up to Q3 FY '19, we have received a total 58 LNG cargo from our U.S. suppliers and out of this, 31 has been sold in the international market to various parties and the remaining 27 has been brought to India via various destinations and [indiscernible]. It is also worthwhile to mention that till the end of this quarter, Q3 FY '19, we have imported 47 cargoes in India and out of these 47 cargoes, 12 have been regasified at our Dabhol terminal. And out of these 12 cargoes, 9 were regasified at our Dabhol terminal at this very quarter itself. CapEx during the quarter was INR 2,592 crore and out of our yearly target of INR 6,400 crore, we have already met CapEx of around INR 5,500 crore for the period up to Q3 FY '19. We are very much on schedule as far as project execution and CapEx plan are concerned, and we are very bullish about the meetings, all our stipulated deadlines of the project, which are under execution. On the capital grant front, we have received capital grant of INR 578 crore in this quarter and our total capital grant received till date is around INR 2,000 crores. With this, we have received close to around 40% of the total capital grant of approx INR 5,200 crore approved for Jagdishpur-Haldia pipeline project. Further, GAIL's petrochemical unit at Pata has ascribed history by being first in India to produce the value-added metallocene film grade in this month. If I talk about the physical performance, I'd like for this quarter, as compared to the corresponding quarter of the previous year, Q3 FY '19 -- excuse me, FY '18, our gas marketing volume has gone up by 8 MMSCMD, mainly due to start of overseas sale of U.S. LNG, which has led to an increase of around 8 to 9 MMSCMD in our volume. Our transition volume has decreased marginally of approx 1.49 MMSCMD from 109.22 MMSCMD in Q3 FY '18 to 107.73 MMSCMD in Q3 FY '19. And the capacity utilization of LNG pipeline remain around 52% to 53% of our total pipeline capacity. In this quarter, our polymer production continues to remain robust with successful introduction of metallocene grade. As far as the LSC production is concerned, we have observed an increase of 12 TMT in this quarter as compared to corresponding quarter of previous year and our LPG transmission volume is up by 101 TMT. Moving towards the financial performance of this quarter as compared to the corresponding quarter of previous financial year, that is Q3 FY '19, vis-a-vis Q3 FY '18. Our gross sales has increased by 37% from INR 14,371 crores in Q3 FY '18 to INR 19,743 crores in Q3 FY '19. This is mainly due to the increase in gas marketing volume upwards in which tariff revision in the natural gas pipeline, better physical performance of PC, LSC and LPG transmission segment and healthier product price realization. TBTU has also increased by 35% from INR 1,858 crore in Q3 FY '18 to INR 2,507 crores [Audio Gap] FY '19. And the same is the case with the PAT, which has witnessed an increase of 33% from INR 1,262 crores in Q3 FY '18 to INR 1,681 crore in Q3 FY '19. The increase in profitability is mainly due to better performance in our gas marketing and gas transmission and LSC segment. So I've concluded highlights of the financials of this quarter and given overview of the -- whatever the challenges, whatever the points -- deducted points are there. With this, I come to end of this highlight and would like to open the house for question -- question-and-answer session. Thank you very much.
[Operator Instructions] First question is from the line of Probal Sen from IDFC Securities.
I had a couple of questions. One, with respect to the trading volumes, sir, obviously the volumes are being sort of received as per the contract. But I just wanted to understand, sir, a little bit about what is the percentage of volumes that you said was received in India? Is under destination and swap contracts?
See, as you know that we have already started the U.S. volume coming here in India as well as we have also sold in the international market. As I have told that we have sold in the international market the volume, to the extent of around 18 cargoes. 18 cargoes we have sold in the international market in Q3. And here we have, just 1 minute please. Yes. So total is 60, and out of destination swap, up to Q3 is 27. And we -- in the overseas, we have sold up to Q3, 33 cargoes.
Sorry. So 18 cargoes sold internationally, sir? And then the destination swap is 27?
No, no. Total 60 cargoes. [Audio Gap] sourced from the second part, DCP, which includes Gazprom also and [ Bonivar ] also...
Eight, sorry. Overseas sale of LNG, 8 cargo, total 18.
Total 18?
Up to Q3 is 60. [ Up, I'd say ] 33. Only Q3 is 18, 10 and 8.
That's what I want to again, clarify, that up to Q3, I am telling. I'm just taking Q1, Q2, and Q3. Total is 60 cargoes, out of this destination swap, we have done around 27 cargoes and overseas, 33 cargoes. And for this quarter, we have 18. Sold 18, for this quarter particularly.
Q3 is 18, of which, again, 10 is swap and 8 is overseas sales?
Yes, that's correct.
Sir, the other question I had was broadly on a little bit of guidance. Obviously, this year till date we have seen about 107-odd MMSCMD of transmissions volume. Any guidance you can give us in terms of next year's prospects, given that there are some additional LNG terminals that are now being commissioned. What can we actually expect for next year in terms of transmission volumes?
I think the transmission volume will almost be, maybe it may increase 5% to 7%...
So there are couple of new, large customers coming up in fertilizer sector. Hopefully this will grow by a couple of percentage points. That's what the take is at the moment.
So somewhere around 110 is the number that we should work with, give or take?
Yes. There will be increase that will...
A lot depends on power sector also. Look, this quarter actually, if we compare with the previous quarter -- previous year, this quarter's number is lower mainly because this quarter, there was hardly any consumption this year by power sector. Whereas last year power sector has taken a lot off our LNG. So if case is -- our consumption keeps growing and domestic coal can't make the place -- pace, then things can grow.
Otherwise, also, third-party transmission of gas has not picked up in the manner it was expected. Hopefully, next year, third-party transmission would also grow. So we could see close to the number that you are talking about.
Even with the open access that we have given for this booking of the capacity, it is almost flat you can say.
Right. Sir, last question, if I may. On the petrochemical business, you mentioned about the new grade that you have now been the first to launch. But if I look at this quarter's numbers, is it fair to say that it's only the shutdown that has resulted in the higher operating...
That has resulted and -- yes, because we are shifting to the metallocene grade. So shutdown was taken in the last quarter, but the production has started in this month only, January only. So we have started this grade in this month.
Right. So sir, for FY '20, should we be building in full capacity utilization of around [ 80% plus ] ?
Yes, yes, yes. 100%.
With better price realization because acceptance is coming gradually for the new grade.
Yes, metallocene grade, as you know, it's more...
Value added product.
[Operator Instructions] The next question is from the line of Pinakin Parekh from JPMorgan.
Now on the remainder of calendar year '19 basically the FY '14 -- Q4 FY '19 and 3 quarters of FY '20. So can you give us a sense of how many cargoes are -- is GAIL obligated to pick up from all its overseas contracts? And versus that, how many cargoes has already entered into a swap or a hedged position?
See, annually, we get about 86, 87 cargoes from U.S. And 12 cargoes this year, we're supposed to get from Gazprom. Rest of the volume comes through PLL. So if we take this and then another vast gas 15 contract, so that will be another 4.5 cargoes. So 16.5 cargoes other than U.S., and 86 cargoes from U.S. So out of this, I think, we have arranged, either we've swapped it or we've sold it or -- swapped it or sold it up to, I think, 76 cargoes. Only 9 or 10 cargoes we have yet to decide, that we have purposely kept open because we are not sure of the demand in the country. So if the demand is good, it's almost about a cargo per month for the remaining of the year, where we are open, that we are keeping ourselves aligned and we keep doing it 3 months in advance. Like up to April, we are done. Nine cargoes are left for the months beyond April. So this is calendar year we're talking about.
Calendar year.
Not the financial year. So if the demand increases. So in case the demand is there, we'll bring the cargo here, otherwise we'll sell in the international market.
Just to understand this further. On the 76 cargoes, which is basically swapped, hedge or sold forward, has GAIL locked in the trading profit or will that be a function of some underlying basis risk in terms of how the prices move or have we locked into what the grade margins are?
Yes, most of it is locked. Just to give overview of that, whatever the cargo we are sourcing from DCP or whether the indexation -- price indexation is there, what we're doing, we're either selling to the international market and/or we're setting -- or we're putting to India. But depending upon the price movement, we're hedging also. So we're locking that. That way our price, wherever we feel that the price movement or forward movement will be there. So that way we're synergizing and that's why you're seeing the good profit in this quarter as well as the last quarter. That is the result of that.
Understood. And sir, lastly, of the 8 cargoes that were brought into India in this quarter and, I think, you said 33 for the year right, 27, one of them. So, how many did GAIL consume internally in its [Petro] plant?
There's no specific cargo...
Authorization is done for whatever is being brought in. And there's no specific cargo destined only for internal consumption.
The next question is from the line of Amit Shah from BNP Paribas.
Just further carrying and just one more clarity. You said that of the 76 cargoes, right -- sorry, of the 88, the 76 are already contract and the rest you keep in the open market. But even for that, the next 3 months are always contracted. So you're actually open only from April onwards for -- so basically, open only for FY '20 onwards. For Q4, the entire 87 are -- or basically the entire quarterly output is locked in?
Yes.
Is it fair to say that the Q3 Gas Trading profits are reflective of what Q4 should also be?
We can't say. We don't know the price movement. So it depends on the margins.
The margins, because that is locked in, right? You said the margins are locked in. So -- then the revenue might differ, but the margin would be the same, right?
The margin, as well the price we have taken the power, that has been locked. And it depends, again, which price we have locked. So there are the different cargoes, because you know that if you see that trend of FY '17. [Audio Gap] the crude price was $49. FY '18, $58 for the full year, on an average. And now for the Q3, up to these for 9 months only, the average price is $72. So it depends where we have -- which price we have locked. Each cargo, parked cargo, everything has a different strategy as well as the hedging portfolio. So that way, it will have incremental thing.
But you can take it that we're reasonably hedged, more than very well hedged and it should remain more or less where it should be.
Yes. All I'm trying to get at is that if, say, oil prices further correct from here, right, and is it a chance that Q4 profits can be cut by half for Gas Trading as compared to what they were in Q3? Or the fact that you have enough hedges in place to give it the visibility that there will not be such a big volatile swing or decline in profits if oil prices correct?
There won't be...
I can't give you any specific number for that, but you can presume that whatever was in Q3, it can be more or less that way. But it depends, again, with the marketing and as well as the hedging what we've done. But it will be almost same.
The next question is from the line of Avadhoot Sabnis from CGS-CIMB.
Sir, the variation to petrochemicals, the commentary we're hearing is you're unable to stabilize output in the near quarters largely because of the technical issues being able to produce the required grades. Now you're saying that this grade metallocene is being produced since January, can we take it from you that all the technical issues have been fully sorted out and now there's really no sort of hiccups we expect going forward? That all the past 2 years is history and now we're looking at sort of full output with the required grade everything is produced?
Yes, yes. We've -- the plant is stabilized and unless some technical other things come up. Otherwise, the plant is totally stabilized and our production from January onward, whatever the period we've taken production start, it is moving steadily and there is a continuous growth in the production profile.
We've already demonstrated by producing 100% and going beyond 100% also. This was only for production of these value-added grades that this particular modification and the shutdown was required. And henceforth, we can take it that this will be done 100%.
Okay. That's great. Secondly, sir, I mean, if I just look at the production sales volume and whatever the implied inventory at the end of December, since we're an all-time high, with 3,000 units. Are you reasonably confident of being able to bring down the inventory in the next -- in this particular quarter?
Yes, yes. We're aiming for that and the various measures we're taking to reduce the inventory level. And these are the cyclical many times. So it is not very high, you can say, as per our feasibility or the target, it is as per our standards. These are the reasonable inventory that is not very high inventory. But we are evaluating our inventory and selling that whatever is there.
And sir, lastly, on the dividend payout. Given your low gearing, is there any clarity can provide that sustainable dividend payout going forward will be higher than what it has been, let's say, in the last 4, 5 years?
This is the highest dividend we've paid. We've declared today the dividend 80%. And you can calculate very easily, it was a very good dividend, which is highest ever dividend we've declared so far.
Yes, exactly. So we really are seeking guidance for the overall full dividend for the year kind of stuff. Normally, the payout has been at best 44%, but normally it's been around 30%, 35%. Are we looking at like a 50% plus number going forward?
You know that as per the dividend policy, as per the defunct policy, we have to pay the dividends 5% of the net worth, opening net worth or 30% of the PAT. So we have declared 5% of the PAT, which is around INR 1,800 crores approx. So that way, this is the dividend we have declared. So I think this year's dividend will be in this range only.
The next question is from the line of Aditya Suresh from Macquarie.
Just a few questions. Firstly on pipeline open access, I understand this is early days, but are you able to quantify any impact of that on your business or more broadly across the value chain? And second is, can you give us an update on your various tariffs decisions?
So far as the pipeline open access is concerned, whatever we were selling in the past period, almost the same quantity or same volume is being sold as of now. So that pipeline open access practically has not yielded anything. And yes, please?
After we came out with the portal where electronically people could access the pipeline system, we've got about 250 responses and the hope is that in the going forward quarters, people -- more people will be able to access, depending on how much they can source and whether they can market additional volumes. So the expectation is these numbers should grow in the coming year.
Yes, we're expecting so. As far as the status of the tariff, which you have asked, this tariff declaration and the tariff revision is cyclical thing. There are the various pipelines, which are there. So every 5 year are the periodicity, which is there, it is being done. Last quarter we have already informed that this DUPL and then your Agartala network, all these [ PAT 4 ] pipelines where the tariff revision was there. Now few pipelines, which are due, are under process by the PNGRB. And we expect that in the days to come, the tariff order will come.
The next question is from the line Rakesh Sethia from HSBC.
Sir, if you could update us on the status of Jagdishpur-Haldia pipeline. The various stages you've been working on and what is the initial volume you would be targeting on those pipelines?
Yes, just 1 minute. Yes, Jagdishpur-Haldia pipeline is having around 8 sections. And the total, including the Barauni-Guwahati pipe section, is around 3,384 kilometers with CapEx of around INR 16,000 crores. So all these sections, as you know, that we have already reached Varanasi and we're targeting to reach Patna this month only. In Varanasi, we have already started gas supply to the CVD entities and as well as we have commissioned CNG stations also. This month, we're targeting to commission this Patna where the CNG and PNG will be there. All the sections are parallelly being executed and they are -- whatever the job as per the schedule is there, that is progressing well. And we're hopeful as per the target, as per the schedule that we have decided, we're going to complete in a progressive way, excluding Barauni-Guwahati, by December '20. And then Barauni-Guwahati, we're targeting by December '21. And we're on schedule to commence -- complete the whole Jagdishpur-Haldia [ project ] on the pipeline.
So one follow-up on that. First, so what is the status of the Kochi-Mangaluru pipeline? And what are the volumes you would be looking to sell out from your Kochi-Mangaluru pipeline in the initial year? If you could clarify that?
Yes, Kochi-Mangaluru pipeline is around -- section 2 is around 444 kilometers. Around 87% of the physical progress has already been completed. And you know that last year, there was very -- this flood was there, which has disrupted our previous -- our many activities, otherwise we could have completed this project by this time. So it may take further 3, 4 months further to complete. We're on the track and within 3, 4 months from now, it will be completed. And phase-wise, commissioning has also started in the project.
So is it fair to say by June, you will be able to connect this pipeline to your customers and the volumes would...
Yes. And total capacity of the pipeline is 16 MMSCMD, out of which approx 3 MMSCMD we have already tied up. Approx 3 MMSCMD, less than that, we're tied up and then further CGD are coming so we are in the position to...
[Operator Instructions] Next question is from the line of Rohit Ahuja from BOB Capital.
Sir, 2 questions from my side. On the international cargoes, you gave a very good data for calendar year 2020. Do we have a similar visibility for beyond that? Like calendar '19, you gave a visibility, but calendar 2020-'22 would you have a visibility in like how many cargoes you've already sold and how many are pending to be sold from U.S.?
So the calendar year 2020 could be a queue for '21 and '22. It is all work in progress and we're very confident that what we've been able to achieve in '19 will be followed up in '20 and the years beyond.
So when do we see the bulk of the cargoes from the U.S. entering India? Because right you're selling 80% to 85% outside India, so are there any arrangements...
As the demand in the Indian market increases, the cargoes, you will see increasingly more volumes of LNG flowing into the Indian market.
So far as the Indian market is concerned, our pipeline are under execution, as soon as these pipelines and fertilizer units comes. In total, it is the demand will increase and the volume will be consumed here. So that way we'll see how many cargoes will come here, whether we have to spot purchase or whatever the sourcing is done. That way the consumption will increase and we'll be consuming more cargoes in India. That is there.
So I just come to the second part of my question. I think in terms of volume visibility in the system, we have so many LNG terminals coming across in Gujarat and then you have the pipeline at Kochi-Mangaluru, as you mentioned, is getting commissioned. So which of these terminals do you think would be operational this year and next year and contribute meaningfully to your volumes for your transmission or your marketing business?
We can't give any target, which terminal is going to come. But so far as the sourcing of the gas from international market is concerned, we're in a position to regasify in the country and sell in the country. And some of the cargoes, as I've already told in my highlights that we're using the Dabhol terminal also to the extent to regasify the cargoes of our own. So far as how -- when these are going to be commissioned, that possibly, I may not be able to tell.
So, I mean, if you look at this year, we have PLNGs incremental 2.5 MMBtu getting commissioned. Do you think it will be able to operate fully, I mean, the entire volume would be able to sell in next 1, 1.5 years?
We have no comments to offer on third-party terminals. All we can say is we're trying to optimize maximum, using whichever terminals and whichever pipeline systems require that volume from international sources. We will do the optimization.
The next question is from the line of Vidyadhar Ginde from ICICI Securities.
Relating to Gas Trading, in the past you had indicated that you are comfortable if Brent is over or oil is over $54 and very comfortable if it is over $60. So what I really wanted to find out or get your thoughts on is that if, let's say, oil from now on remains below $54 then you're hedging and all the tying up, which you've done, that will protect your margins and profitability for how long? Will it only be FY '20 or how many more quarters from here?
So, what we can predict 2, 3 years down the line.
No, I am saying, sir, what are you tied up for? You're tying up I presume that even if, let's say -- so the first question here is that if oil goes below $54, what you already tied up, does it ensure decent profitability even -- because you've tied up at when oil prices were higher? For [ some ] quarter at least?
Most of the cargoes downline 1 year you can't say or maybe up to FY '19, this year '19.
Calendar '19.
We have been tied up reasonably with a better forward. And going forward, depending upon the underlines, we'll be, again, tying up the cargoes wherever required. So that way it is a very dynamic...
It’s a dynamic rolling process.
We can't give you any specific cargo, half cargo, 1 cargo...
No, no, not that way. I'm trying to find out that -- so my impression is that given you had a high oil price environment till October and you probably tied up until October some significant volumes for at least, I think, in the last earnings call we were told that your most of the volumes up to FY '20, March '20 are tied up. So basically that would mean that even if oil were to go below $54, on a large proportion of your volumes, you are covered, and you should have decent profits at least for 3, 4 quarters. Is that right?
Yes, we have marginalized the risk also that way. We have protected the risk and. [Audio Gap] period. That -- you are very correct that we have marginalized that.
It would really hurt you if oil prices below $54 only if this -- in the year after next? Is that a reasonable way of looking at it?
Why are you thinking that oil price will...
No, no, I'm just trying to find out the risks. But all the good work you've done is going to protect you until March '20. Beyond that, it may not, if oil prices are lower.
We'll do...
We will work for you there, don't worry. We'll do.
And the related other question was, so therefore the fall in oil price since October. So that I've heard -- has the tying up activity gone down during this period? Are you biding or did you bide your time for oil prices to recover or how does that play out?
Yes, yes, we have done that. We didn't sell in distress.
So that tying up activity has sort of taken a back seat until oil prices are recovered?
Not kind of. Hedging you can say has taken a back seat.
The next question is from the line of Mayank Maheshwari from Morgan Stanley.
Two questions from my side. One was, obviously, in last quarter you had seen a lot of volatility on the hedging-up side. So I just wanted to get a sense of how you have managed that volatility last quarter? If you can give us some subjective comments on that? And the second question was more related on the petrochemical side. Obviously, demand last quarter was very tough. So I just wanted to understand of how you have handled the marketing segment of petrochemicals for you?
So far as the volatility is concerned of the NDL price, which is there. Yes, there were some instances that the NDL price was more. And as well as the Brent price was also not favorable for us. So we have strategized these cargoes to be brought to India. This cargo is to be -- that very spot purchase has to be done or whatever is there. That's why we have seen the market condition and we have taken the decision, including the hedging wherever it was required. And second question is your petrochemical, my colleague will tell, Sandeep.
Can you repeat the question for marketing of petrochemical? Petrochemicals [indiscernible]
Yes. So I was just kind of trying to understand that, obviously, last quarter you had seen a lot of inventory destocking, so demand in the market was not that great. So just wanted to understand how the marketing efforts helped you to kind of keep your volumes? Well, I [ invented it ] a little bit, but like your volumes, how did you kind of sell those volumes in the market? How's been the discounting situation et cetera?
Yes, it was a little tough because of falling prices, the demand had really gone down and that's the realization of the prices affected very badly. But we continued and we have -- and our sales is affected a bit, it's not much, but a bit. We couldn't, I mean, we have sold less than what we have produced in the last quarter because of that. And again, we didn't go too much into distress in this sector also. And at the same time, continued our marketing efforts to push the material to our customers.
And sir, what has been the -- as priced now quarter to date this year? Like has things got better or it's still getting -- remains a bit tough?
Prices have not really recovered. But at least the prices are stable and that is giving us from the marketing demand side, it is picking up.
The next question is from the line of Vishnu Kumar from Spark Capital.
I just wanted to understand the other comprehensive income, which you have shown here. It's showing about INR 1,100 crores of cash flow hedges. Does this represent the open hedges and the profit on them as of now?
It doesn't affect the profit. Because as per the accounting standards, these other comprehensive income or whatever the minus is there, it replace the price movement mainly of the ONGC prices, which was there and which has fallen. So that way we have adjusted this. Plus, whatever the follow-up we've taken that we have accounted. So these are mainly the movement of the price of the ONGC share price. That has no effect on the PAT position.
And is it right to say that this cash flow hedges gains that is there, most of it, I mean, ONGC's stock price is more or less stable so -- or declined. So at least 80%, 90% of it is unrecognized hedges?
No, it is not unrecognized. We're not hedging this ONGC price, we're just giving it as in disclosure, you can say, our accounting -- as per accounting standard, accounting the price movement plus and minus, whatever is there and then accounting in the books. So it is -- the PAT is -- PAT, which we're seeing is unaffected that way.
No, I understand that part of the PAT, sir, I'm just questioning one simple line item that you have net movement in cash flow hedge gain/loss. And you have another line for net gain/loss on equity share. I'm only asking the line on the cash flow hedge gain. You have about INR 1,100 crores on that. The only question is, that this 100% pertains to the hedges that we have in the U.S. contracts and this INR 1,100 crores will be the potential gain on it, that's the only question I have.
It is there, yes. It is based on the hedges, which we have done and as on 31 December, based on whatever the accounting and forward, which we have taken that, MTM loss and gain has been accounted in there. These are exactly the accounting that's there.
Sir, MTM price that you have considered for this in terms of Brent and Henry Hub, if you may have that as of December 31?
Difficult to say. We don't have that kind of visibility.
It is very difficult.
And just one final question on the value-added products and petrochemicals, what percentage of the production would come from this?
Yes, please.
It should be about -- only if we talk of -- only of metallocene grade, it should be about 10% to 12%. I'd say close to 12%, 13%.
The next question is from the line of Vinit Joshi from Goldman Sachs.
Sir, 2 questions. One, last quarter you mentioned that for the 2 remaining pipelines, we could expect the tariff revision by end of the current quarter. Sir, any updated time lines on that? And second question, sir, can you please tell us what is the delivered cost of the different LNG that you're sourcing at the moment?
Yes, so far as the pipeline division is concerned, we've already submitted this pipeline of this HPJ and others also opted it in. So we're expecting the orders and we expected that it should have come. But I think PNGRB is working on that and any moment this can be announced. So this is that -- and second question, what you have asked? [indiscernible] of LNG prices.
Delivered prices, sir.
Delivered will depend where the customer is situated. So depending on state taxes. So that is very difficult to -- it will be different...
What I'm asking is before the regasification process landed at the terminal is what I'm asked asking, sir.
Landed in India? That is what usually we call it.
Yes.
So that for U.S. gas, it will be between $7.5 to $8 at this point of time. And others, RasGas, will be about $8.5.
And for the other, Exxon and the Russian contract?
More or less on the same range.
Within the same range, plus/minus [ $5 plus $0.70 ] that's it.
And sir, for next year, what is your CapEx guidance?
CapEx?
Yes, FY '20?
This year, we had around INR 6,400 crores, which we're increasing and which we're trying to use -- it will be packed in that way. And next year, will be around INR 7,000 crores, that we're also planning CapEx.
The next question is from the line of Pinakin Parekh from JPMorgan.
Sir, just to understand on the hedging more clearly. The third quarter trading gains that were reported would have been locked in, sir, how much in advance? I'm just trying to understand, sir, what's the legal lag? So what has been the second quarter or the first quarter?
See, we're hedging upon the underline, which is there and going forward, which is, which cargo movement will be there in the days to come. So that way we're hedging and taking forward position, that too. And current price movement, which is there. So that way we have already whatever we've acquired, synergy was there, we have hedged for this quarter also, wherever required. That way we have locked. And in this year also, up to December '19 also, we have also hedged wherever it was required. So only a specific number is very difficult to say, but in totality, we can say that the volume, as per our consumption in India, we say with international selling, we have already hedged wherever required.
Understood. And sir, on the LPG segment, generally, what kind of lag do we see vis-à-vis the spot global prices? Is it a 15 day lag or 1-month lag, in terms of your realization?
LNG prices depends upon the import parity price, which is there. The lag, I think, 1-month lag is there.
[Operator Instructions] Next question is from the line of Aditya Bansal from UBS.
This is Amit from UBS. Sir, just wanted to know, in terms of value-added products, what is our metallocene output as a percentage of total 200 KTA per quarter or 800 KTA annual production of that here?
It will be around 15%.
15% of the -- 1-5 or 5-0?
1-5.
1-5. So if I were -- backed in capacity for 800 KTA, so we're targeting around 120 KTA of metallocene output, right?
No, I'm taking our plant, which can produce metallocene that is 400 KTA. And our plan is to produce anywhere between 50,000 to 70,000 tonnes.
50,000 to 70,000 tonnes of the new plant capacity, okay. And sir, how much additional relations do we expect because of this upgrade versus what we're realizing today?
This is very dynamic, it keeps changing, but as on today's existing conditions, it should be about $250 in terms of rupees per ton, you can take it about INR 9,000 to INR 10,000 per ton.
Okay. That's good. And sir, second thing, could you highlight that now if you look at the cost of gas in the petrochem business, how that is going to change in the coming quarters? So will it go into decline in light of decline in the spot LNG prices and how do we look at the things in the petrochem business from here? Because you know the profitability is, somehow, not coming in this business, despite several efforts all around the turnaround.
Yes, we have whatever, for our petrochemical segment, we're trying to source the tariff at the cheapest price, which are available, if it is part of this, maybe U.S., whatever the portfolio is there. And again, it depends upon the crude price and the price movement, too. We can't comment at what price would be. But we're trying to maximize the profitability by giving -- by sourcing the cheapest gas for our petrochemical plant.
Sir, I'm just actually looking from a trend perspective. Because if you see, after decline in the oil prices, petchem relations have declined. So which you also mentioned that petchem relations have been soft. Now can we expect to see some softness or a declining trend for the cost of gas for the petrochemical business? Otherwise this is clearly indicating that our spread from the petrochemicals will decline very sharply.
No, no, see, cost of gas will definitely go down if it has compared to previous quarters. Reason being simple that some of these gases are results priced at averages of last 3 months, 6 months, 7 months. So average moves down slowly. So after having peaked to $85, now crude is on downfall. So going forward, those averages are continuously coming down. So gas price will also come down. Plus it [indiscernible] and then we're also mixing spot appropriately if and when it is cheaper than our U.S. volumes.
Plus the price realization, it, again, depends upon the price of the petrochemical products, which are there. So as you have seen in the comparison with the Q2, there is a decline in the price movement by around maybe significantly, maybe 400 -- INR 4,000 per metric ton. So all these are a combined effort of that. We are trying to maximize the portfolio taking various measures.
And sir, second thing on the U.S. LNG, you explained like how many cargoes are coming to India, but are all those cargoes coming from our shipping arrangements or we are chartering some ships on spot mixes as well?
Could you [indiscernible], on ships also as well as wherever it lags. Because ship takes around 25 to 30 days to have movement.
Yes, so 1 day movement then?
One day movement.
So that's not a very optimal way of bringing volume to India. So we tried to optimize that shipping cost. That is our main focus area where we're trying to optimize by doing destination swaps or some kind of simultaneous sale and purchase, et cetera. Or sometimes we do hire ships also for a short period, 1-month, 2-month, 3-month, to take up 1 loading or 2 loading where we see it justified. And then if need be given, we sub-charter those ships also. So total focus is to keep the shipping cost lowest, as low as possible.
Okay, you mean to say that it takes 50 days for a round trip? 5-0. 50 days for a round trip?
Yes. 45 to 50.
45 to 50.
45 to 50 days for a round trip. And then we had some arrangements for the Western chartering conference, which we did. So for this for how many cargoes like they can organize for us? And how much we are laying upon the spot? Because I got your point that you will be optimizing based on destination swaps as well as simultaneously selling it to -- in different markets. But there's still -- because in U.S., I think that we have seen that the charter hiring cost for LNG has gone up in last 2, 3 months. So does it have some impact on our trading business at all?
No, it didn't have effect. Because you see, our own ship can bring 8 cargoes a year. It -- movement, okay, roughly. Okay, now because in between -- now what happens because of this ship, we could also sell volume in international market. On delivered basis, we sold volume in previous quarter on delivered basis in Middle East. So we keep looking for opportunities. So there are both plus and minus. So if we have our own ship, then yes at times, sometimes, it may bring in some kind of inefficiency in terms of return empty voyage. But at the same time, it gives us flexibility to sell volume on delivered basis if the prices and opportunity is there.
Yes, okay. And how many ships do we have as of now? Our...?
We have only -- our own ship is 1. We have right now only 1 ship on charter, long-term charter -- medium-term charter. But in between there was a time when we had 3 ships on our charter for 2 months. So it keeps varying. But as of now, there is only 1. And just for the...
And then just the last one.
Yes. And shipping rate follows upon that [ rate ].
Okay. They have come down after winters?
Essentially. Essentially. They hit a peak of about $200,000 a day. And now they're back to $60,000 a day.
$60,000 a day. Okay. And sir, just last question. Now in Southeast Asia, we're witnessing a $7 kind of spot LNG. So do we see any increased opportunity for Indian gas [indiscernible] power in this kind of pricing environment? Or do you see that power is still -- is dependent on some form of fee support from the government?
This is purely a power-demand scenario. It will be decided by power-demand.
If the power can absorb this kind of pressure, certainly, they will use all the LNG that we can bring in.
So are we seeing that kind of environment right now at $7? Are we seeing improved demand from the power sector in the last 1 month, 15 days?
No, rather as I said earlier, in the October, November, December quarter, this year was very low demand for gas, for power. Very low demand.
That was last year.
Yes, compared to last year. But now, perhaps, it depends on how much coal our Indian mines are able to produce. So if coal production can match with the power requirement, power demand then gas would be needed. But if that is not able to match, then gas will definitely be needed. And yes, if the prices are low, then the possibility of getting it absorbed is higher.
[ Operator Instructions ] The next question is from the line of [ Chetan Shah ] from [ ComChest ].
Sir, in cargo, when can we expect the break quarter to come in and have you ordered the same?
Yes. At Dabhol terminal, this tender has already been floated. And we expect that we can, maybe within 2 months, we are going to award the break quarter at Dabhol terminal.
And it will take 3 years to complete?
3 seasons, you can say. But it can be also -- it's still depending upon the progress of the project. But normally 3 seasons.
Okay. And sir, this Kochi-Bangaluru section. When can we expect that to start?
Start-wise, commissioning has already been started. And by June, it will be completed, total commissioning.
Sir, I'm talking about Kochi-Bangaluru, not Mangaluru.
Kochi-Mangaluru. Tamil Nadu section. That has not been started yet. This Tamil Nadu section is already on hold. And we are talking also with state government. We have not got any clearance for that. So that we are stuck on.
Ladies and gentlemen, due to time constraints that was the last question. I now hand the conference over to Mr. [ Tahrun Lahkotia ] for closing comments. Thank you. And over to you, sir.
Yes, I would like to thank this new management team for GAIL for taking time out to share useful insights for the quarter and beyond. I hand the call over to them for any closing remarks.
Yes. Thank you very much. It was an -- we are intrigued with the -- so many questions from the participants. Now I would like to thank all of you, once again, for participating in the GAIL earning call. But before we disconnect, I would like to wish all of you happy Basant Panchami to all investors, analysts and shareholders. Thank you very much.