Petronet LNG Ltd

Dear Shareholders,

The Directors have the pleasure of presenting the Thirteenth Annual Report and theAudited Accounts of your Company for the year ended 31st March, 2011.

Your Company has been instrumental in shaping the growth of the natural gas sector inthe country by mitigating the deficit and shortfall in domestic gas availability. In thesupply- constrained natural gas market in India, your Company owns and operates thecountry's first and largest LNG terminal at Dahej, Gujarat. The Company's main thrust ison catalyzing the growth of Indian gas sector through enhancing the gas supply to satisfythe needs of existing consumers as well as to develop new consumers. While making sincereefforts to further leverage the potential of imported LNG in the Indian market andstriving to be the nation's key energy provider, your Company continues to maintain asteady growth in its financial and operating performance during the year 2010-11.

FINANCIAL PERFORMANCE

In 2010-11, your Company has achieved substantial growth, both in turnover and profit.The turnover during the year under review was Rs. 13197.28 Crores against Rs. 10,649.09Crores in 2009-10. Gross margin stood at Rs. 1464.04 Crores against Rs. 1,082.16 Crores inthe previous year. Net profit during the year was Rs. 619.62 Crores against Rs. 404.50Crores in the previous year. The emphasis on higher capacity utilization, higher sales andbetter operational efficiencies led to increased profitability. A summary of thecomparative financial performance in the fiscal 2010-11 and 2009-10 is given below:

DIVIDEND

Keeping in view the consistent performance and financial position of the Company, theDirectors are pleased to recommend a dividend of 20% on the paid-up share capital of theCompany for the year ending 31st March 2011.

LNG SOURCING

With an aim to quench India's growing gas demand, stemming primarily from high-prioritysectors such as power and fertilizer, and armed with expanded facilities at the Dahej LNGTerminal, your Company has been engaged in sourcing additional volumes of LNG onlong-term, medium-term and spot basis for its downstream customers. Your Company continuedto maintain excellent relations with most of the global LNG suppliers for import of LNGsupplies. Your Company intends to diversify sources of LNG to ensure security of supplies.For the unutilized capacity at Dahej LNG Terminal as well as for the expected capacity atthe Greenfield Kochi Terminal, your Company is in constant touch with various LNGsuppliers to source LNG volumes beyond the present 7.5 MMTPA imported from Qatar. To meetthe growing additional requirement of natural gas in country, your Company has alsoexecuted short-term deals with various global LNG suppliers for approximately 1.5 MMTPA.Constant efforts are being made to supply RLNG to feed the demand created due to shortagein domestic supplies and demand generated from new projects.

OPERATIONS AT DAHEJ

During the financial year 2010-11, your Company has imported 125 cargoes (including 9spot cargoes) representing 7.98 MMTPA and 412.21 Trillion British Thermal Units ofregasified LNG was sold. Your Company has also provided regasification services to 7 LNGCargoes to Gujarat State Petroleum Corporation and 4

LNG cargoes to GAIL (India) Limited representing 28.14 Trillion British Thermal Unitsduring the financial year 2010-11.

Additional LNG Jetty at Dahej

The capacity utilization of Dahej Terminal is increasing and the operational practicesare at par with the highest international standards. The Company has commencedconstruction of second LNG Berth (Jetty) in Dahej to mitigate associated risks of portoperations of existing jetty and also to enhance the capacity of terminal from itsexisting capacity of 10 MMTPA. The two EPC contracts for the construction of jetty wereawarded in January, 2011, and the jetty is scheduled for commissioning by end ofSeptember, 2013. Presently, the EPC contractors are carrying out basic engineeringactivities for construction of marine and top side works for the same.

Shipping Arrangement

Presently, three LNG tankers (Disha, Raahi and Aseem) are regularly bringing LNGcargoes from RasGas, Qatar, to Dahej as per schedule. These three ships are transportingthe contracted quantity of 7.5 MMTPA of LNG.

The Shipping Corporation of India (SCI) is a major equity partner in the ship-owningcompanies. Disha and Raahi have been manned, managed/maintained and operated by SCI sinceDecember 2008. SCI is manning Aseem since delivery. K-Line is providing technicalmanagement from delivery to first dry dock and is training SCI for management of Aseem.

Pilot Project for Supply of LNG in Cryogenic Vehicles

Your Company has successfully completed the pilot project which was started in year2007, for loading of LNG in cryogenic road tankers. During the year, 689 tankers wereloaded and supplied to customers in the states of Gujarat and Maharashtra.

Direct Marketing of LNG

For consumers not connected with gas pipe, your Company has initiated steps to marketthe LNG directly to consumers across the country through overland transportation using LNGtrucks/ hubs. This direct marketing model is prevalent in several parts of the world andis an effective way of reaching out to far-flung consumers in urgent need of fuel supply.The concept makes use of the already existing road network as against setting up ofcomplex pipeline network.

LNG TERMINAL AT KOCHI

The construction of the Greenfield LNG Receiving, Storage and Re-gasification Terminalat Kochi is in progress. The capacity initially envisaged was 2.5 MMTPA. In January, 2011,the Company awarded contract for additional re-gasification facilities to handle andre-gasify an additional 2.5 MMTPA LNG to the present Regas contractor, taking the totalcapacity of Kochi LNG Terminal to 5 MMPTA. Civil works of the storage tanks being built byIHI Corporation, Japan, are nearing completion. Mechanical works are in progress withhydrostatic test being planned in June, 2011. The Marine facilities, being built by AFCONSInfrastructure Ltd., India, are also in an advanced stage of completion. Work is underprogress in the Re-gasification facilities awarded to CTCI, Taiwan. Civil works onbuildings and structures as well as piping and equipment erection are in progress. Atpresent, nearly 3000 workers are working at the site. The terminal of 5 MMTPA capacity isslated to be commissioned in the third quarter of 2012.

FINANCING

During the year, the Company has re-financed its entire long-term rupee loan of Rs.3,000 Crores from a consortium of Indian lenders. In the process, the Company couldachieve substantial savings in its interest costs.

Further, the Company has successfully made drawdown of USD 200 Million fromInternational Finance Corporation (IFC), USA. The company, in order to limit the risks offluctuation in interest rates and currency, has entered into Cross-Currency SwapTransactions consisting of exchange of both interest and principal for a component of theIFC loan.

As on 31st March, 2011, a loan of Rs. 3,034 Crores is outstanding in the Books ofAccount which consist of Rs. 1522 Crores from Indian lenders, Rs. 590.62 Crores from AsianDevelopment Bank and Rs. 922 Crores from International Finance Corporation.

MISSION & VISION OF THE COMPANY

As the business environment is rapidly changing, during this year, your Board ofDirectors along with valuable contributions and suggestions by the officers and employees,revisited the and approved the following Vision & Mission Statements of the Companywhich is now a shared vision:

Vision Statement

"To be a key energy provider to the nation by leveraging company's unique positionin the LNG value chain alongwith an international presence."

Mission Statements

• Create and manage world-class LNG infrastructure

• Pursue synergetic business growth opportunities

• Continue excellence in LNG business

• Maximize value creation for the stakeholders

• Maintain highest standards of business ethics and values

FUTURE PLANS

Considering the substantial demand of natural gas in the country, your Company isplanning to construct one more LNG terminal on the east coast. The Company has alreadyassessed the market demand in the region and is now looking for a suitable location andwould initiate Detailed Feasibility Report for building a LNG Terminal on the east coast.

SOLID CARGO PORT AT DAHEJ

A Solid Cargo Port, through a Joint Venture Company, namely, Adani Petronet (Dahej)Port Private Ltd., is being implemented in which your Company holds 26% of the equity. Theport is now mechanically complete and the initial operations have already commenced. TheSolid Cargo Port would have facilities to import/ export about 15 MMTPA capacity of bulkproducts like coal, steel and fertilizer.

GAS-BASED POWER PROJECT

The Company is planning to set-up a power plant of 1200 MW capacity at Dahej contiguousto its existing LNG Terminal. The Government of Gujarat has already earmarked 50 hectaresof land for the same. The Detailed Feasibility Report and integration study with existingLNG terminal have been completed. Also, your Company is in the process of completion ofvarious pre-project activities such as sea water utilization study, fresh water optionstudy etc. The Ministry of Environment and Forests (MoEF) has issued Terms of Reference(TOR) for preparing various reports including EIA for its approval for power plants. Thecommercial arrangements for sale of power are being finalized.

DEPOSITS

During the year, your Company did not accept any deposits from the public under Section58A of the Companies Act, 1956.

EMPLOYEE PARTICULARS

Pursuant to provisions of Section 217 (2A) of the Companies Act, 1956, read with theCompanies (particulars of employees) Rules 1975, the names and other particulars ofemployees are set out in the annexure to the Directors' Report.

CORPORATE GOVERNANCE

As required under Clause 49 of the Listing Agreement with the Stock Exchanges, theReport on Corporate Governance together with Auditors' Certificate regarding Compliance ofthe SEBI Code of Corporate Governance is annexed herewith.

MANAGEMENT DISCUSSION AND ANALYSIS

The Annual Report also contains a separate section on the Management Discussion andAnalysis which is a part of the Directors’ Report.

INDUSTRIAL RELATIONS

Your Company continued to enjoy cordial relations amongst all its employees. No mandays were lost due to strike, lock out etc.

CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION

All possible steps have been taken by your Company to achieve the objective of energyconservation and technology absorption. Your Company’s engineers have been involvedwith the Consultants and the Contractors in all phases of design of Dahej & Kochiprojects in order to ensure optimum conservation of energy and absorption of technology.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956, theDirectors hereby confirm:

a) That your Company had followed the applicable accounting standards along with properexplanations relating to material departures in the preparation of the annual accounts;

b) That your Company had selected such accounting policies and applied thoseconsistently and made judgment and estimates that are reasonable and prudent so as to givea true and fair view of the state of affairs of the Company at the end of the financialyear and of the profit or loss account of the Company for that period;

c) That your Company had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act forsafeguarding the assets of your Company and for preventing and detecting fraud and otherirregularities; and

d) That the accounts of your Company have been prepared on a going-concern basis.

CHANGE IN THE BOARD OF DIRECTORS

During the year under review, following are the changes among the Directors.

Directors Resigned

The Board placed on record its appreciation for the contributions made by all the aboveDirectors including the support and guidance provided by Shri S. Sundareshan as Chairmanof the Company.

Directors Appointed

FOREIGN EXCHANGE EARNING AND OUTGO

Your Company has incurred expenditure in foreign exchange to the extent of Rs. 11473.33Crores during the year under review. Foreign exchange earnings during the year were Rs.0.63 Crores.

AUDITORS

M/s. V. Sankar Aiyar & Company will retire at the ensuing Annual General Meeting ofyour Company and, being eligible, offer themselves for re-appointment. The re-appointment,if made, for the financial year 2011--12, will have to be by a Special Resolution asrequired under Section 224A of the Companies Act, 1956.

ACKNOWLEDGEMENTS

The Board of Directors thank and wish to place on record its appreciation of theMinistry of Petroleum and Natural Gas, Government of India, Government of Gujarat andKerala, Promoters of the Company, RasGas, Exxon Mobil and other LNG suppliers, Offtakers& Consumers of re-gasified LNG and the employees of the Company at all levels, fortheir continued cooperation and unstinted support. The Directors want to express theirsincere thanks to all the shareholders for the continued support and trust they have shownin the Management. The Directors look forward to a bright future with confidence.

PARTICULARS OF EMPLOYEES PURSUANT TO SECTION 217(2A) OF THE COMPANIES ACT, 1956

* Employed for part of the year i.e. up to 30^th June, 2010.

* * This amount includes retirement benefits.