Petronet LNG Ltd., India's biggest buyer of overseas liquefied natural gas, may ``underperform'' because of concerns over LNG availability and high fuel prices, Macquarie Research said in a report.

Existing supplies feed less than half of the 11.5 million metric tons a year that Petronet plans to commission at the Dahej import terminal by January, Macquarie Research said. New supplies from Reliance Industries Ltd.'s field in the later part of 2008 may crimp margins on spot LNG sales, the report said.

``The key reason for underperformance was lower-than- expected spot LNG volumes,'' Macquarie analysts led by Jal Irani said in the report today. ``We believe issues remain with regards to long-term supplies of LNG and sustainability of high price spot LNG.''

Macquarie cut Petronet's estimates of profit after tax for the year ending March 2009 by 5 percent on lower-than-expected first-quarter earnings. The brokerage rated the stock ``Underperform.''

``The tight domestic gas supply situation has allowed Petronet LNG to sell high price spot LNG at high margins,'' Irani said. ``Once Reliance Industries Ltd. gas supplies start in the second half of this year, India's gas availability at a low cost is likely to double, risking a sharp margin squeeze for spot LNG.''

Petronet LNG posted a 2 percent fall in first-quarter profit to 1.06 billion rupees ($25 million) in the three months ended June 30 from 1.08 billion rupees a year ago, the New Delhi-based company said in a statement to the Bombay Stock Exchange yesterday.

Petronet has agreed on a deal to import 3.5 million metric tons of the fuel annually for 10 years, Chief Executive Officer Prosad Dasgupta said.

Import Contract

The agreement will replace an existing contract to import 1.25 million tons a year from Qatar that ends in September, Dasgupta said yesterday. He declined to identify the future supplier. The company is currently importing about 6.5 million tons annually from Qatar under multiyear contracts.

LNG is gas chilled to liquid form, reducing it to one-six- hundredth of its original volume for transport by tanker to destinations not connected by pipeline. A spot cargo typically holds between 50,000 tons and 60,000 tons of the fuel.