Petronet LNG Enters Domestic Gas Production with ₹1,200-Crore Biogas Joint Venture

Petronet LNG is diversifying its energy portfolio through a ₹1,200-crore investment in compressed biogas (CBG), marking the company's entry into domestic renewable gas production. The strategic shift comes as geopolitical disruptions continue to highlight the risks associated with a heavy reliance on imported liquefied natural gas.

As part of this initiative, the company has signed a binding term sheet with Gruner Renewable Energy to establish a joint venture. Structured with equal 50:50 ownership, the partnership will set up 10 CBG plants, each designed with a capacity of 18 tonnes per day. While the regulatory filing outlined the broad framework of the collaboration, specific plant locations and commissioning timelines have not yet been announced.

The expansion into domestic biogas arrives at a time when Petronet's core LNG business faces supply-side challenges. During the April-June 2026 quarter, LNG throughput at the company's Dahej terminal declined to 192 trillion British thermal units from 207 trillion units in the previous year. This drop was driven by disruptions linked to restrictions around the Strait of Hormuz, which affected Qatari gas supplies. Additionally, spot LNG prices surged during the period, emphasizing the vulnerability of import-dependent energy operations to global market volatility.

Upon full operation, the 10 proposed plants will yield a combined production capacity of 180 tonnes of CBG per day. Assuming 350 operating days annually, this translates to roughly 63,000 tonnes a year. Although this output is modest compared to India's annual LNG imports of approximately 25.5 million tonnes, it provides Petronet with an initial foothold in the emerging renewable gas market and an alternative domestic revenue stream.

The biogas joint venture operates alongside larger capital expenditure initiatives by the company. Petronet is currently investing ₹20,685 crore in an integrated petrochemical complex at Dahej and is developing the ₹6,355 crore Gopalpur LNG terminal. The Gopalpur project is expected to expand regasification capacity by nearly 18 per cent to reach 32.5 million tonnes annually.

Furthermore, the CBG business stands to gain from evolving regulatory frameworks. Under current government mandates, city gas distribution companies are required to blend compressed biogas into transport CNG and household piped gas, with blending obligations scaling from 3 per cent in fiscal year 2027 to 5 per cent by fiscal year 2029. For Petronet, the primary operational challenge will transition from sourcing international LNG cargoes to securing a reliable, steady supply of agricultural and organic waste feedstock across multiple decentralized locations.

"Petronet LNG's move into compressed biogas illustrates a pragmatic approach to mitigating geopolitical and supply-chain risks through strategic diversification. While import-dependent businesses remain vulnerable to global shipping bottlenecks and price volatility, building a domestic renewable energy footprint helps balance long-term operational stability. However, the success of this ₹1,200-crore joint venture will ultimately depend on efficient supply chain execution, particularly in securing consistent organic feedstock across multiple operational locations to meet regulatory blending mandates." — Dr. Shishir Gupta, Founder & CEO, StartupLanes