19 October 2015
2QFY16 Results Update | Sector:
Oil & Gas
BSE SENSEX
27,365
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Free float (%)
S&P CNX
8,275
PLNG IN
750.0
222 / 160
3/9/-3
50.0
CMP: INR191
TP: INR194 (2%)
Petronet LNG
Neutral
M.Cap. (INR b) / (USD b) 143.3/2.2
Avg Val (INR M)/Vol ‘000 226/1198
Financials & Valuation (INR Billion)
Y/E MAR
Sales
EBITDA
PAT
EPS (INR)
EPS Gr. %
BV/Sh.INR
RoE (%)
RoCE (%)
Payout (%)
Valuation
P/E (x)
P/BV (x)
EV/EBITDA (x)
2015 2016E 2017E
395.0
14.4
8.8
10.0
5.4
74.1
16.7
14.4
23.4
17.8
2.4
10.6
1.1
359.9
14.9
8.2
10.0
0.3
81.8
12.9
13.9
23.4
17.8
2.2
11.1
1.1
364.4
18.1
9.6
12.8
24.8
91.6
14.7
15.9
23.4
14.0
1.9
8.7
1.4
D. Yield (%)
Estimate change
TP change
Rating change
Above estimate, led by higher Dahej volumes; RasGas long-term offtake remains at
68%
PLNG reported 2QFY16 EBITDA at INR4.7b (est. INR4.2b; -10% YoY, +29% QoQ).
EBITDA beat was led by higher volumes (boosted by higher third-party regas
volumes). We estimate spot marketing margin at nil v/s USD-0.1/mmbtu in
1QFY16. PAT stood at INR2.5b (est. INR2.2b; -5%YoY, +42% QoQ)—further boosted
by lower depreciation and interest charge, and partly negated by higher tax rate.
Dahej utilization at ~120% in 2QFY16, boosted by power sector offtake
Dahej regas volumes at 154tbtu (+3% YoY, +23% QoQ) were helped by huge
increase in third-party volumes at 72tbtu (+133% YoY, +104% QoQ) and could have
been led by power sector. While short-term remained volatile with volumes at
19tbtu (-23% YoY, -18% QoQ), long-term volume offtake was capped at ~68%—at
63tbtu (-33% YoY, -6% QoQ).
With no reloading revenue, Kochi EBITDA turned red and PLNG expects volume
growth from BPCL refinery in the near term and post the pipeline completion in
the medium term.
RasGas offtake clarity contingent on negotiations
RasGas offtake volumes stood at 68% utilization in 9MCY15. PLNG has take-or-pay
contracts with the RasGas volume offtakers and has indicated that the obligation,
if any, would be determined toward end-CY15.
RasGas offtakers are trying to renegotiate the contract because consumers are not
offtaking this gas as spot LNG is much cheaper. Early resolution of the issue is
critical for smooth operations at Dahej. Given the likely ample LNG supply globally
and India being a big customer for RasGas, we expect early resolution of the issue.
Valuation and view
The stock trades at 14.5x FY17E EPS of INR13.2. FY18E earnings show a sharp jump
(+35% YoY) based on PLNG’s long-term volumes. However, clarity on RasGas
contract enforceability and Kochi pipeline completion is critical. Maintain
Neutral
with a price target of INR194/sh as we believe the current valuations adequately
factor near-medium term growth.
Harshad Borawake
(HarshadBorawake@MotilalOswal.com); +91 22 3982 5432
Rajat Agarwal
(Rajat.Agarwal@MotilalOswal.com); +91 22 3982 5558
Investors are advised to refer through disclosures made at the end of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.

Petronet LNG
Key takeaways from concall
Dahej utilization could have peaked in the near term:
Dahej terminal’s
utilisation was 120% which is believed by the management to be a temporary
factor and the utilization is expected to decline to below 100% going forward,
partly led by restart of Dabhol terminal post monsoon now. The capacity
expansion is going as per schedule.
Despite take or pay some hit to PLNG led by timing issues:
Operating expenses
include INR0.4b towards charter ship which remains unutilized due to lower Ras
Gas off take. While these expenses will be passed on to the consumers in future
as the volume increases.
Off-takes to power sector can rise to 9-10mmscmd from the current 5-
6mmscmd on the backdrop of government’s plan to revive power plants.
Management has reiterated that it is not providing any concession in the regas
tariff to the power plants. However benefit to PLNG will depend on Dabhol
terminal volumes.
Current spot LNG price stand in the range of USD7-8/mmbtu.
While in the last quarter, the company received a tax credit, going forward a tax
rate of 25% has been guided.
Ras Gas contract
9MCY15 Ras Gas off-take stood at 68% of the contracted volume. While
management clarified that it will take a view on the take-or-pay towards the end
of the calendar year, it is hopeful of some positive results from the negotiations
with the Ras Gas.
Background:
Ras Gas has a long term contract (7.5mmt) with the Indian off-
takers (Gail, BPCL and IOCL), the price of which is linked to the JCC (Japanese
crude cocktail) crude and currently stands at USD12/mmbtu. Ras Gas contract
price is very high compared to spot LNG price of USD8/mmbtu and hence the
customers have shifted to spot LNG. The situation leaves off-takers in a
precarious position and Ras Gas contract only allows 10% leeway in reducing the
volumes. Hence, now off-takers are trying to renegotiate (defer) the volumes
with Ras Gas. Outcome of the negotiations are uncertain, however given the
surplus LNG market, expect positive (from off-takers point of view) resolution in
this matter.
Other key highlights
~INR10b bond issue:
Shareholders approved the issuance of bonds to raise
INR10b that is to be utilized primarily for paying off existing debt and for capex.
Post the issuance of additional debt, the net debt/equity will rise from 0.5 to
0.7.
2QFY16 revenue at INR72.5b (-33% YoY, -12% QoQ) was lower than est. INR90.6
due to shift of volumes to regas services PLNG recognizes revenues on regas
charges and not on gas cost.
19 October 2015
2

Petronet LNG
Exhibit 1: Petronet LNG: Key financial and operating performance metrics
(INR b)
Dahej Sales Volume (tbtu)
Long term
Third-party regas
Pure short term
Sub-total (Tbtu)
Kochi Sales Volume (tbtu)
Long term
Third-party regas
Pure short term
Sub-total (Tbtu)
Kochi Handling
Total (tbtu)
1Q
92.3
18.3
19.0
129.5
FY14
2Q
98.4
12.0
12.4
122.8
3Q
91.9
17.8
10.6
120.2
-
1.1
2.3
3.4
129.5
122.8
123.6
4Q
92.0
3.8
20.5
116.3
-
0.3
0.7
1.0
117.3
1Q
96.4
24.8
16.8
138.0
-
-
0.7
0.7
138.7
FY15
2Q
93.9
30.9
24.4
149.2
-
-
1.3
1.3
150.5
3Q
94.3
28.0
18.1
140.4
-
-
1.0
1.0
141.4
4Q
60.0
20.8
12.4
93.2
-
-
2.4
2.4
6.9
102.5
FY16
2QFY16
1Q
2Q % YoY % QoQ
67.1
35.3
23.1
125.4
63.0
72.1
18.8
153.9
-33%
133%
-23%
3%
na
na
105%
105%
-6%
104%
-18%
23%
2.5
2.5
3.6
131.5
na
na
2.7
8%
2.7
8%
3.6
0%
160.2
6%
22%
Source: Company, MOSL
Exhibit 2: Volumes up YoY and QoQ led by third party regas
Tbtu
Long term
Third-party regas
Pure short term
Total (tbtu)
28
1
63
4QFY10
0
6
89
5
0
94
17
9
94
14
94
20
94
28
17
90
22
98
25
26
15
94
21
11
96
27
17
90
30
14
97
24
4
94
19
18
92
12
12
98
11
18
92
20
4
92
17
25
96
24
31
94
18
28
12
21
94
60
4QFY15
19
23
35
67
72
63
2QFY16
2QFY11
4QFY11
2QFY12
4QFY12
2QFY13
4QFY13
2QFY14
4QFY14
2QFY15
Source: Company, MOSL
Exhibit 3: Dahej terminal utilization at >120% 2QFY16
Volume (mmt)
95% 100%
79%
73% 76%
106% 107%
115%
107%
101%
107% 112%
97%
Utilization (%)
103% 98%
96% 92%
110%
119%
112%
74%
122%
100%
4QFY10
2QFY11
4QFY11
2QFY12
4QFY12
2QFY13
4QFY13
2QFY14
4QFY14
2QFY15
4QFY15
2QFY16
Source: Company, MOSL
19 October 2015
3

Petronet LNG
Expansion projects on track
PLNG plans to expand its capacity from current 15mmtpa to 29mmtpa (Dahej:
10+1.5+5+2.5, Kochi: 5 and Gangavaram: 5)
Dahej 2nd jetty commissioned in April 2014:
PLNG commissioned its Second
jetty at Dahej in April 2014 at an estimated capex of INR8b. This jetty offers
operational flexibility and could add ~2mmt of additional volumes at current
capacity.
Dahej capacity to further expand to 17.5mmt:
PLNG is on track to complete the
nameplate capacity expansion at Dahej from 10 to 15mmtpa by end-2016 (65%
complete till 1QFY16). Earlier PLNG had indicated capex savings of INR6b on
Dahej expansion with revised estimate of INR24b. Dahej total booked capacity
stands at 14.75mmt (GAIL – 2.5; GSPC – 2.25, BPCL – 1, IOCL – 1.5 and Long term
– 7.5) v/s total capacity of 15mmt. Off takers have already given an advance of
INR6b towards capex (in all will give INR12b ~INR2b/mmt) which will be will be
settled over 15 years post commissioning of the expanded facility. PLNG board
has approved further expansion of Dahej terminal by 2.5mmt (INR12.5b) to
17.5mmt.
Gangavaram port receives state govt. approvals:
PLNG received the nod from
the Andhra Pradesh government to construct the terminal at Gangavaram. Post
EPC contract award, PLNG expects the terminal to be constructed in 36 months.
Exhibit 4: PLNG capacity to expand to ~28mmtpa by 2017
30
24
18
12
6
0
Current
Mar-14
2016 end
2017-18
Long-term
Source: Company, MOSL
Kochi
5
Dahej
10
Operatable Capacity (mmt)
Dahej
(Second Jetty)
0
Dahej
(Ph-2)
5
Dahej (Ph-3)
2.5
Gangavaram
5
19 October 2015
4

Petronet LNG
Valuation and view
Petronet LNG is a direct play on the India’s natural gas deficit situation. While
the near term earnings growth is constrained by Kochi ramp-up, PLNG offers
long term revenue visibility with fixed contracts.
Key things to watch out would be (a) resolution of Ras Gas contract issues, (b)
sport LNG prices and (c) timely completion of Kochi-Mangalore-Bangalore Phase
2 pipeline – critical for Kochi terminal ramp-up beyond 2 mmt.
We are increasing our FY16 earnings by ~5% to factor in higher third-party regas
volumes and model FY16/FY17 volumes at 11.6/11.8 (v/s 11/11.6 earlier).
While the long-term prospects for PLNG are good, Kochi pipeline delay and
Lower Ras Gas volumes are near-term concerns.
We note that PLNG’s FY18 earnings can see sharp jump (+35% YoY), however
clarity on Ras Gas contract enforceability and Kochi pipeline completion is
critical. Maintain Neutral with a price target of INR194/sh as we believe the
current valuations adequately factor near-medium term growth
Exhibit 5: Petronet LNG - Key Earnings model assumptions (Do not factor in Gangavaram terminal)
Exchange Rate (INR/USD)
Capacity (mmt)
Dahej
Kochi
Throughput (mmt)
6.4
Dahej
6.4
Kochi
Utilization rate (%)
128%
Dahej
128%
Kochi
Sales (TBTU)
Dahej
322
Kochi
Total
322
Re-gassification charges
Blended avg (INR/mmbtu)
30.7
Long-term/Third-Party/Spot (INR/mmbtu)
Dahej
28.2
Kochi
Chg (%)
Marketing margin (INR/MMBTU)
Dahej
14.05
Kochi
EPS (INR)
-
FY08
40.2
5.0
5.0
FY09
46.1
5.0
5.0
6.4
6.4
128%
128%
FY10
47.6
10.0
10.0
7.9
7.9
79%
79%
FY11
45.5
10.0
10.0
8.8
8.8
88%
88%
FY12
47.9
10.0
10.0
10.9
10.9
109%
109%
FY13
54.5
10.0
10.0
10.4
10.4
104%
104%
FY14
60.6
15.0
10.0
5.0
9.8
9.7
0.1
65%
97%
1%
489
4
493
38.6
37.2
62.8
FY15
60.8
16.5
12.0
5.0
10.5
10.4
0.1
63%
86%
2%
521
5
526
35.9
39.1
65.9
5.0%
-2.1
0.0
10.0
FY16E
63.0
17.0
12.0
5.0
11.6
11.4
0.2
68%
95%
4%
571
10
581
37.4
41.1
69.2
5.0%
FY17E
64.0
17.5
12.5
5.0
11.8
11.7
0.1
67%
94%
2%
589
5
594
39.5
43.1
72.7
5.0%
FY18E
64.0
22.0
17.0
5.0
14.5
13.5
1.0
66%
79%
20%
679
50
730
41.4
43.1
72.7
0.0%
321
321
32.8
29.5
398
398
24.7
30.9
440
440
31.7
32.1
548
548
38.5
33.8
525
0
525
41.2
35.5
14.0
-
-10.3
5.4
12.1
8.3
22.2
14.6
38.2
15.3
21.5
0.0
9.5
-3.0
0.0
0.0
0.0
0.0
0.0
12.1
13.2
17.8
Source: Company, MOSL
19 October 2015
5

Petronet LNG
Story in charts
Exhibit 6: India gas deficit situation expected to continue in
the medium term
Supply Deficit (mmscmd)
Exhibit 7: PLNG has 63% of India’s currently operating LNG
import capacity (mmt)
PLNG (Dahej, Kochi, Gangavaram)
Gail (Dabhol)
Shell (Hazira)
Likley new
27.0
Total
24.0
5.0
18.5
4.0
5.0
13.5
13.5
5.0
3.5
5.0
3.5
3.5
17
15
10
10
10
FY11
FY12
FY13
FY14
FY15
43.0
32.0
5.0
5.0
22
37.0
5.0
5.0
5.0
22
6.0
5.0
5.0
84
87
120
169
222
248
260
244
245
255
27
FY16
FY17
FY18
Source: MoPNG, Industry, MOSL
Source: Company, MOSL
Exhibit 8: Expect PLNG to report ~12% volume growth
through FY18
(In mmt)
Dahej
Kochi
Total
15.5
16.5
2.0
Exhibit 9: Expect PLNG to report 21% EPS growth through
FY18
17.8
9.5 10.0
12.1 13.2
20.7 23.5
7.9
14.5
1.0
11.6
10.9 10.4
10.5 10.4
9.8
0.1
8.8
0.1 0.2
0.1
9.7 10.4 10.2 11.5
1.5
14.6 15.3
8.3
13.5 14.0 14.5
5.4
FY10
FY12
FY14
FY16E
FY18E
FY20E
Source: Company, MOSL
Source: Company, MOSL
Exhibit 10: Expect return ratios to remain robust (%)
40
30
20
10
0
FY10
FY12
FY14
FY16E
FY18E
FY20E
RoE
RoCE
Exhibit 11: 1 Yr Fwd Petronet LNG P/E Chart
PE (x)
50
40
30
20
10
0
12.5
6.6
11.6
14.8
Median(x)
Peak(x)
Min(x)
42.1
Avg(x)
Source: Company, MOSL
Source: Company, MOSL
19 October 2015
6

Petronet LNG
Financials and valuations
Income Statement
Y/E March
Net Sales
Change (%)
RM + Other expenses
Employee Costs
EBITDA
% of Net Sales
Depreciation
Interest
Other Income
PBT
Tax
Rate (%)
Forex fluctuations
Adj. PAT
Change (%)
Prio reriod tax reversal
PAT
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Capital Employed
Gross Fixed Assets
Less: Depreciation
Net Fixed Assets
Capital WIP
Investments
Curr. Assets, L & Adv.
Inventory
Debtors
Cash & Bank Balance
Loans & Adv. and Other Assets
Other Current Assets
Current Liab. & Prov.
Liabilities
Provisions
Net Current Assets
Application of Funds
2011
131,973
23.9
119,504
306
12,163
9.2
1,847
1,931
680
9,065
2,868
31.6
6,197
53.2
6,197
2012
226,959
72.0
207,964
298
18,697
8.2
1,842
1,657
706
15,905
4,950
31.1
10,955
76.8
10,955
2013
314,672
38.6
295,869
370
18,433
5.9
1,866
1,184
865
16,248
5,710
35.1
952
11,490
4.9
11,490
2014
377,476
20.0
362,025
466
14,984
4.0
3,081
2,196
838
10,545
3,426
32.5
7,119
-38.0
7,119
2015
395,010
4.6
380,049
571
14,390
3.6
3,154
2,935
1,548
9,849
2,347
23.8
7,502
5.4
1,323
8,825
2016E
309,646
-21.6
291,939
628
17,079
5.5
3,336
2,594
1,426
12,575
3,521
28.0
9,054
17.6
724
9,777
(INR Million)
2017E
332,468
7.4
313,336
691
18,441
5.5
3,659
2,374
1,176
13,584
3,668
27.0
9,916
8.8
9,916
(INR Million)
2017E
7,500
62,641
70,141
24,477
5,704
100,322
107,677
25,444
82,233
11,740
900
2011
7,500
19,302
26,802
29,891
3,480
60,173
35,538
8,513
27,025
20,122
11,649
2012
7,500
27,698
35,198
30,340
3,630
69,168
35,568
10,353
25,215
32,900
1,399
2013
7,500
36,997
44,497
27,182
3,910
75,589
35,796
12,217
23,579
43,305
1,399
2014
7,500
42,361
49,861
31,965
5,530
87,356
77,946
15,295
62,650
8,799
1,399
2015E
7,500
48,109
55,609
29,477
5,530
90,616
86,946
18,449
68,497
13,640
900
2016E
7,500
55,044
62,544
29,477
5,530
97,552
106,546
21,785
84,761
9,240
900
2,480
8,472
1,575
3,165
125
7,124
12,859
9,839
2,689
86
10,366
16,898
12,685
2,570
26
9,557
20,156
12,327
4,098
140
8,826
13,428
16,472
4,098
4
7,635
14,422
3,674
4,098
4
8,198
15,485
6,638
4,098
4
12,601
1,838
1,377
60,173
20,658
2,285
9,654
69,168
32,940
2,299
7,306
75,589
29,042
2,729
14,507
87,355
32,520
2,729
7,579
90,616
24,453
2,729
2,650
97,552
26,245
2,729
5,448
100,322
19 October 2015
7

Petronet LNG
Financials and valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation (x)
P/E
Cash P/E
EV / EBITDA
EV / Sales
Price / Book Value
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios
Debtors (No. of Days)
Asset Turnover (x)
Leverage Ratio
Net Debt / Equity (x)
Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Others
Interest
Direct Taxes Paid
(Inc)/Dec in Wkg. Capital
CF from Op. Activity
(Inc)/Dec in FA & CWIP
Free Cash Flow
(Pur)/Sale of Investments
Inc from Invst
CF from Inv. Activity
Inc / (Dec) in Debt
Interest Paid
Dividends Paid (incl.tax)
CF from Fin. Activity
Inc / ( Dec) in Cash
Add: Opening Balance
Closing Balance
2011
8.3
-2.5
35.7
2.0
28
2012
14.6
-2.5
46.9
2.5
21
13.1
-77.8
9.0
0.7
4.1
1.3
25.2
19.9
20
1.5
1.2
35.3
27.2
21
2.3
0.7
2013
15.3
-2.5
59.3
2.5
19
12.5
-76.8
8.8
0.5
3.2
1.3
28.8
24.1
21
2.9
0.4
2014
9.5
-4.1
66.5
1.5
19
20.1
-46.5
11.2
0.4
2.9
0.8
15.1
15.6
20
3.0
0.5
2015
10.0
-4.2
74.1
2.0
23
19.1
-45.4
11.2
0.4
2.6
1.0
16.7
14.4
24
2.9
0.3
2016E
12.1
-4.4
83.4
2.4
23
15.8
-43.0
10.2
0.6
2.3
1.3
15.3
16.1
21
2.2
0.5
2017E
13.2
-4.9
93.5
2.6
23
14.5
-39.2
9.0
0.5
2.0
1.4
14.9
16.1
21
2.2
0.3
(INR Million)
2017E
13,584
3,659
0
0
-3,494
166
13,915
-3,631
10,283
0
0
-3,631
-5,000
0
-2,320
-7,320
2,964
3,674
6,638
2011
9,064
1,847
-381
1,807
-2,179
-1,717
8,441
-7,486
956
-6,262
587
-13,161
7,160
-2,740
-1,531
2,890
-1,830
3,405
1,575
2012
15,525
1,842
-589
1,430
-4,839
-985
12,385
-10,980
1,405
10,381
803
204
411
-2,992
-1,743
-4,325
8,264
1,575
9,839
2013
17,203
1,866
-670
1,184
-5,387
4,037
18,234
-8,406
9,828
0
721
-7,685
-2,420
-3,102
-2,179
-7,702
2,846
9,839
12,685
2014
10,545
3,081
-617
2,030
-1,927
-3,527
9,586
-8,761
825
116
617
-8,028
2,050
-1,821
-2,195
-1,966
-408
12,685
12,277
2015E
9,849
3,154
0
0
-2,347
8,073
18,729
-13,841
4,888
499
0
-13,342
513
0
-1,755
-1,242
4,145
12,327
16,472
2016E
12,575
3,336
0
0
-3,521
-7,870
4,519
-15,200
-10,681
0
0
-15,200
0
0
-2,118
-2,118
-12,799
16,472
3,674
19 October 2015
8

Petronet LNG
Corporate profile: Petronet LNG
Company description
Petronet LNG (Bloomberg: PLNG) was formed as a
joint venture by the government of India to import
LNG and set up LNG terminals in India. Each
promoter - GAIL, ONGC, IOCL and BPCL, holds
12.5% stake in PLNG. The company owns India's
first LNG receiving and regasification terminal of
10mmtpa at Dahej and 5mmtpa terminal at Kochi
commissioned in 2QFY14. It has a tied up long-term
off-take contracts of 14.75mmtpa effective from its
capacity expansion to 15mmtpa at Dahej in 2016.
Exhibit 12: Sensex rebased
220
205
190
175
160
Oct-14
Petronet LNG
Sensex - Rebased
Jan-15
Apr-15
Jul-15
Oct-15
Exhibit 13: Shareholding pattern (%)
Jun-15
Promoter
DII
FII
Others
50.0
4.6
22.8
22.6
Mar-15
50.0
4.3
22.6
23.0
Jun-14
50.0
3.3
22.1
24.6
Exhibit 14: Top holders
Holder Name
GDF International
T. Rowe Price International Growth And Incomefund
Government Pension Fund Global
Franklin Templeton Investment Funds
Smallcap World Fund INC
% Holding
10.0
3.6
3.2
1.8
1.4
Note: FII Includes depository receipts
Exhibit 15: Top management
Name
K.D. Tripathi
Prabhat Singh
Designation
Chairman
Managing Director & CEO
Exhibit 16: Directors
Name
K.D. Tripathi
Prabhat Singh
Philip Olivier
R K Garg
Rajender Singh
Sushil Kumar Gupta*
Arun Kumar Misra*
**To retire; *Independent
Name
Debasis Sen
Varadarajan Srinivasan
B C Tripathi
D K Sarraf
Atanu Chakraborty
Jyoti Kiran Shukla
Exhibit 17: Auditors
Name
T R Chadha & Co
Sanjay Gupta & Associates
Type
Statutory
Cost Auditor
Exhibit 18: MOSL forecast v/s consensus
EPS
(INR)
FY16
FY17
MOSL
forecast
12.1
13.2
Consensus
forecast
11.1
13.7
Variation
(%)
9.2
-3.5
19 October 2015
9

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Petronet LNG
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PETRONT LNG
No
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