Anupama Airy (*)
As India marches ahead towards becoming a gas based economy, the role of GAIL (India) Ltd— India’s largest gas transportation company assumes a lot of significance. Out of India’s 15000 kms pipelines network, GAIL owns natural gas pipelines network in excess of 11,000 kms. Besides, the company is currently executing about 3500 kms of pipeline network (under construction) while a large chunk of other projects across the value chain including petrochemical plants, shipping facilities, LNG terminal and others are under various stages of planning and execution.
With the increasing demand for gas in the domestic segment, GAIL is also moving fast to expand its city gas distribution (CGD) network, with the most recent being the Rs 1000 crore CGD network project announced by Prime Minister Narendra Modi for the city of Varanasi (in Uttar Pradesh). Named as Urja Ganga (or the River of Energy), the project will see GAIL laying a pipeline network of 800 kms in the city of Varanasi and feed clean fuel to nearly 37 lakh population residing in the city.
Apart from possessing one of the fastest project execution capabilities for laying pipelines, the company also has six gas processing plants for production of LPG, integrated petrochemical plants, LNG importing facilities (existing and under construction) besides having a decent presence in the upstream oil and gas sector. Along with sister PSUs, GAIL has participating interests (equity stakes) in various oil and gas blocks awarded under the New Exploration Licensing Policy (NELP) bidding rounds of Government of India.
In a free-wheeling interaction with Anupama Airy, the Chairman and Managing Director of GAIL (India) Ltd, B C Tripathi spoke in detail about the company’s investment plans and strategies in line with India’s plans to emerge as a gas based economy. The roadmap ahead for the company clearly holds a lot of investment potential for domestic and global companies in the energy space. While doing so, the company is also working towards while already contributing in a big way to the government’s Make in India drive while aiming to create new job opportunities and increased business options for the domestic industry.
Q: How is GAIL aligning itself and contributing towards the government’s plans of positioning India as a gas based economy? Also touch upon how your projects are helping the government in its Make in India drive while offering investment opportunities to investors across the globe?
A: The larger policy push of the government is indeed on making India as the gas based economy. So we are trying to place the midstream sector and our operations in line with and aiming to fulfil the government’s vision to spread gas across the country. Even today 50% of the country does not have access to gas so the major expansion plan of the pipeline that we at GAIL have started is about 3,500 kilometers line (trunk pipelines) entailing an investment of Rs 20,000 crore. This is definitely going to give support to the steel companies, EPC consultancy companies and other associated local equipment suppliers and manufacturers.
The second big ticket programme of this government is to supply clean fuel (gas) to households and GAIL is playing a major role in supplying piped natural gas (PNG) to households with Rs 6,000 crore of approved projects. We are also pushing LPG to rural areas where taking gas pipeline infrastructure is comparatively costly and the government is rightly and in a major way already supplying subsidised LPG to the rural areas.
Today the biggest PNG project by GAIL is in the city of Bangalore where there is a huge potential. Now with the recent approval of the Cabinet seven more cities in Eastern India have come to GAIL for providing PNG through a network of pipeline infrastructure. With this, GAIL will be largely present across the big cities in India barring a few like Chennai in South India. All seven cities are along the Jagdishpur-Haldia pipeline and include Varanasi, Patna, Bhubneshwar, Cuttak, Jamshedpur, Ranchi and Kolkata.
With these 3500 kms of trunk pipelines you will also have 20 other medium towns which will be in the catchment of these pipelines. They will offer investment opportunities in the city gas sector where the private sector players can come on their own or as Joint venture partners with GAIL and start expanding the city gas network.
The other expansion that we are looking at is the east coast LNG terminal at Kakinada. We hope this will be the first LNG terminal that will be commissioned on the east coast. It is on FSRU based project and the target is that by December 2017, this terminal should be commissioned. Lot of activities have already happened and the state government of Andhra Pradesh has already given their in-principal approval to be one of the partners and be the anchor load customer there. This gives support for the financial closure of the project. This is another opportunity where we could invite the international investors to come as partners in the LNG infrastructure on the east coast.
Apart from this, in the western India, the old terminal of erstwhile Dabhol will now go for a breakwater as the demerger is going to happen. Following the de-merger, the LNG terminal will be a separate company led by GAIL and we have agreed to infuse further equity (alongwith NTPC Ltd) to create the breakwater facility. So this terminal will also be functional in 2-3 years and unlike now when it remains shut for 5-6 months, it will be made functional round the year after the breakwater facility is created.
Then we have the Dhamra LNG terminal in Odisha where we are working with Adani and IOC, where we have taken the equity as also the capacity, should also be ready by 2020. There will also be an LNG terminal in down South near Chennai by IOC apart from our LNG terminals Andhra Pradesh, Odisha and Maharashtra. Then in Kochi you already have an LNG terminal as also in Gujarat. So, the whole Indian peninsula from East to West will have the supply source available and connected with the pipelines.
So that sums up GAIL’s major role or contribution towards helping India move towards becoming a gas based economy.
Q: What about your plans on the shipping front? With so much of LNG capacity, you need to have adequate ships available to transport LNG from the source to supply centres?
A: Firstly we are going for charter hiring of LNG ships for a short term period of 3-4 years from the international market. While doing so, we will still come out with a long term hiring of 17 years period. The short term period starts from 2018-21 and the long term will be post 2021. On this front, there is a huge investment opportunity for an international player to be part of supplying us with LNG ships. The tender for long term contract for LNG ships will be announced shortly. This 17 year contract will support government’s Make in India campaign for making ships in India and will be a win-win for both foreign parties and Indian players. Discussions are already going on with Samsung as a technology provider to Cochin Shipyard for construction and design of the ships and Cochin Shipyard have already signed a technical agreement for investment in dry dock. Now we will invite bids again to fix the role of the Indian entity here and the government has already agreed here that it will take all the additional financial burden as also the future associated risks. We are talking for 2 Ships to be Made in India and Six Ships abroad. So our shipping plans also offer opportunities to the domestic and global investors as also support the governments Make in India initiative.
Q: Apart from your existing petrochemical plants, any other new investments that you are planning in a petrochemical project?
A: After commissioning of our petrochemical plants at Pata and Assam, there is this is another major investment opportunity of Rs 60,000 crore for setting up a new petrochemical plant in Andhra Pradesh. The Detailed Feasibility Report (DFR) is almost ready. GAIL is leading this project along with HPCL and the government of Andhra Pradesh. We are currently establishing the financial viability of this project, which if comes will be a 1.1 mtpa dual feed project based on naphtha (out of HPCL’s Vizag refinery) and ethane. Site has been identified near Kakinada and we are doing the financial appraisal of this project. Our Pata and Assam petrochemical plants are currently running at 60-70% load and will be going on full capacity in next couple of months. So GAIL’s petrochemical capacity will increase 2.5 times from 4,30,000 tonnes to 1.2 million tonnes per annum (including 4,20,000 tonnes commissioned at Pata and 2,20,000 tonnes commissioned at Assam). If the financial capability of the Kakinada petrochemical project is established then it will be another 1.1 to 1.2 mtpa capacity plant but that will take 4-5 years and will come up as a JV project with HPCL and the state government. This project also offers a great investment opportunity for global players keen to enter India’s oil and gas space.
Q: What about the expansion of your LPG pipelines network?
A: We are also upgrading our LPG pipelines. The Jamnagar-Loni LPG pipeline capacity will be doubled from 2.5 to 4.75 million tonnes. So this expansion is also underway. Then we will also be expanding our Vizag-Secunderabad LPG pipeline which is presently 1.1 million tonnes and will go to 2 million tonnes. For this, a study is going on unlike Jamnagar Loni where the board has already approved the doubling of the project capacity.
Q: What about the company’s global presence?
A: The company also has a reasonably strong international presence in five countries including USA, Singapore, Myanmar, China and Egypt. GAIL has also signed a long-term agreement with Gazprom marketing and Trading Singapore for supply of 2.5 MMTPA of LNG from Russia. Besides, the company also has an agreement to source 38 MMSCMD of natural gas through transnational pipeline from Turkmenistan and is scouting for opportunities along natural gas value chain in North America, Africa and South East Asia. We are continuously evaluating right investment opportunities abroad. Our operations from the global business are profitable.
(*Disclaimer: These interviews have been done by Anupama Airy, Founder and Editor of EnergyInfraPost.com for The Confederation of Indian Industry (CII) which along with the Union Ministry of Petroleum and Natural Gas and state-owned Oil and Natural Gas Corporation (ONGC) is organising a conference during the Abu Dhabi International Petroleum Exploration Conference (ADIPEC) event on November 8th. The title of CII’s conference is : India – Emerging Investment Destination in New Energy Landscape.
The ADIPEC event is being organised by Abu Dhabi National Oil Company (ADNOC) at the Abu Dhabi National Exhibition Center (ADNEC) from 7 – 10 November 2016 and is one of the world’s largest technical oil & gas conferences.
The theme this year is Strategies for New Energy Landscape and the exhibition will see the participation of key stakeholders, senior industry delegates, and 2000+ exhibitors from over 120 countries.
The CII conference will focus on investment avenues in India’s oil & gas sector, covering upstream, midstream and downstream operations, with special emphasis on the Government’s Make In India campaign. A key focus area would be opportunities for the Indian oil field services sector to support the global industry with technological expertise and skilled manpower. Speakers will include senior Government officials, public and private sector multinationals from the oil & gas sector, investment agencies, and reputed industry consultants.)