Inside Indias 16400 Km Gas Pipeline Network Gail

TITLE: uuYfUCQ6MJ0 CHANNEL: Unknown DATE: ---TRANSCRIPT--- gas contributes around 6% to India’s energy basket along with other fuel sources like oil and coal the government wants to increase this to 15% by 2030 a key player in the sourcing and distribution of gas across India which ensures that it gets to your homes or your cars is gas authority of India limited India produces around 50% of natural gas domestically and 50% is imported from countries like Middle East United States Russia and Australia the gas authority of India Works across the natural natur gas value chain of trading transmission liquid petroleum gas or LPG production and transmission liquid natural gas regasification petrochemicals and City Gas apart from exploring for oil it also owns and operates a network of around 16,240 km of natural gas pipelines across the length and breadth of India it is also working concurrently on executing multiple pipeline projects to ensure that gas reaches you wherever you are and whatever you use it for my guest today is sandep Kumar Gupta chairman and managing director of Gail a fellow of The Institute of Chartered Accountants of India and he was earlier director Finance in the Indian Oil Corporation and has worked in oil and gas for 36 [Music] years Mr Gupta thank you so much for joining me thank you so I’m going to obviously talk about gas and uh the flow of gas your pipeline infrastructure what Gail is planning but before I do all of that uh you’re a chartered accountant working in a Oil Company oil and gas company so you’re you’re an exception of sorts so how do you see things differently from maybe the engineers and the technocrats uh I was in a training session some years back uh when a consultant told me that Chartered Accountants like a w are like a wicket keeper and they can see the direction of each ball coming so now in a CEO’s role I find that very very relevant uh because being charted accountant I can assess the risks which are affecting the business and perhaps take a correct call without being biased about my own functions of operations Etc so I believe it’s a very good uh thing that the ched accountant can function as CEO even in an engineering industry like Gil India limited and and risks as in in the whole oil and gas space including because of geopolitics have increased dramatically and seem to increase every year as we speak so how do you uh you know how do you I mean personally or otherwise how do you gear yourself to create a framework of risk if that’s the right term uh so as such the requirements for a listed company are very stringent and we need to have a robust risk management uh uh system but as a CEO and as a chartered accountant I can think I can uh visualize the things which are happening on a geopolitical level and assess the impact of that which can have uh on the business so besides the operational risks of uh maybe safety or security uh or the under capacity utilization Etc sourcing Supply Market I can see the impact of geopolitical developments which are there on the business per se and then effectively manage that and and what would you say has changed let’s say in the last couple of years I’m talking the context of risk so what’s the one factor that you may not have anticipated which has changed that everyone including let’s say CEOs of energy companies like yours uh like you have to be now more cognizant of no before 22 U I would say February March 22 before the Ukraine Russia War such kind of geopolitical risk was never ened the sanctions which were imposed on Russia and the the uh non-availability of the supplies of Russian gas impacted in a major way to everybody and more so to Gail you are aware that one of our contracts were not honored by A supplier and uh we had to incur a substantial impact of that in that particular year uh and these risks are increasing day by day in fact newer and newer sanctions are being imposed and now the thisis uncertainties are there in so many many geographies that we do not know when a risk can flare up and in what Manner it can affect a business so I believe that geopolitical risks have never been so serious to a business especially those business which are impacted by Global Supply chains okay so uh let’s talk about gas as a concept now so India Imports a lot of gas also produces some gas so tell us about the role of gas and its uh role in the energy mix of the country and then we can come to what Gail does so as you are aware that uh in the energy basket of India the composition of gas has been around 6% only and honorable prime minister had a vision of increasing that share 215% by 2030 uh unfortunately that has not happened and it is still at the almost at the same levels the reason is that the energy demand of the country is growing rapidly because as you are aware that in the last decade we have progressed from 10th largest economy to fifth largest economy and we are progressing very fast so energy demands of the country have increased whereas the natural gas consumption per se in terms of uh uh percentage has not increased though in absolute terms definitely it is increasing but it is almost the same percentage as it was earlier in the energy basket uh we are producing about 50% of uh ener natural gas domestically which definitely has increased that is why it is maintained at 50% level and 50% is imported the large producing uh geographies are Middle East mainly Qatar and then United States Russia Australia and some other parts of the world and uh we have been sourcing uh from every geography in fact uh I must tell that uh we have a very good portfolio of natural gas long-term contracts uh which were hit to about 14 million tons perom and we have recently increased it to more than 16 million tons perom uh securing energy for India uh so uh the progress is there but because uh in absolute terms in in the total terms the percentage is not increasing uh the reason is that there are certain incentives which need to be given for a growing energy uh which is natural gas uh the conventional fuels like Ms hsd or LPG have been there in the country for more than uh half a century and to displace those energies by your newcoming energy is extremely difficult unless it is given due fiscal supports so we we hope that some supports will be given and then perhaps the natural gas consumption can take off from these levels okay if I can maybe draw you back to uh take us through some history as well so the first pipeline that gas authority of India set up was maybe near 4 uh and then subsequently the company has grown in two ways one is the pipelines have grown uh the utility or the usage of those uh of the gas has grown from what it was originally envisaged and Gil as a company itself has Diversified so take us through yeah we started with the hvbj pipeline and now I’m glad to inform you that about 70% of the natural gas pipeline in the country is owned by Gil India limited we have more than 16,240 km of pipelines out of total about 22,000 km of Pipeline and we are executing Pro projects which will ensure that another 3 to 4,000 kilomet of pipelines will be commissioned very very shortly in fact many of those pipelines will get commissioned in the current calendar year itself so it has progressed very well about 70% of the natural gas pipeline is zoned by Gale about 65% of the total transmission happens through Gil India limited almost 50% of the natural gas consumption in the country is serviced by in terms of sale by Gil India limited so we are the leading natural gas company out of the total 207 307 geographical areas in the country for City Gas Distribution Gail and Gail group companies own 72 which is good uh 1/4 share in the total City Gas Distribution uh we own about 65% of the domestic PNG connections which have been authorized by any entity and we have about 40% CN share in the CG stations which have been put up in the country so in the natural gas vertical definitely Gail is playing the leading role and have Lion Share in most of the business besides that we have Diversified into other areas in the gas value chain uh in fact you would be astonished to realize or know that Gil India limited is the first company to put up a petrochemical plant uh in PA which was in part and get got commissioned in 1999 of all the existing public sector players was the first to set up that plant using gas using gas we crack gas uh and then thereafter we have expanded that particular capacity and we have also 70% stakeholder in the brahmputra cracker and polymer limited and also have a stake in opal that is ongc Petro editions limited uh so our total petrochemical capacity which is presently about 11% in the country we are also planning to expand that capacity we are putting above 500 kta uh country’s first propane dehydrogenation polypropylene unit at usar in Maharashtra and have also acquired a 1.25 million ton PTA plant from earthw jbf petrochemicals uh at Mangalore so that will and we are putting up a 60 kta polypropylene plant at PA in addition to the polyethylene which is produced presently at part so that will take our total capacity to about 3 million ton uh perhaps by end of this calendar year itself uh so in that direction also we have progressed very well and definitely then we have our presence in the new energy verticals also of renewable Etc so Gil today therefore is can be described as a uh Gas Distribution and petrochemical Company and obviously but how how I mean what’s the like the revenue split roughly and what is it looking like going forward uh our uh uh stable revenue is from transmission business uh that was uh what Gail was mandated for uh so that is a stable business where the variation is not much besides we uh have uh marketing margins as our uh vertical which is contributing towards profit it does not have uh uh it does not have stability and the marketing margins depend upon the market forces but that is also a reasonable contributor so these are our two main verticals and then petrochemical prices the scenario is not very positive these days because the margins are depressed but yes uh petrochemical also contributes handsomely to our Top Line as of now so these three verticals are made and then we have the liquid hydrocarbons uh production and sale uh from our uh plants at vijapur and Par so the you you had earlier talked about a 30,000 CR capital expenditure across um different verticals but as you look ahead is Gail more a petrochemical company or a gas company or is it a blend of both no we we are primarily a gas company natural gas company and our major capax comes from pipelines only natural gas pipelines only and as I mentioned you we are currently executing lot of pipelines like Mumbai nagpur jasoda jabalpur pipeline which will get Commission in this calary itself we recently commissioned our sakula mongul Pipeline and gasified it uh prior to that we had commissioned our Baroni ghati pipeline urag ganga is almost complete except for the two sections which are durgapur halia and damra halia which also we are planning to Commission in this particular year itself uh we are also completing coochi card Mangalore Bangalore pipeline the Tamil Nadu section of which was pending and we are confident that we will complete that also in the current current calendary itself and besides last year we won the gaspur jamu pipeline in a bidding round and we are working on that particular pipeline also so our major kex comes from pipelines only uh we are also planning to put up as I mentioned we are uh doing usar project and PARTA project for uh polymers so some capex in that also we are Reviving uh Bangalore plant uh which we acquired at investment of 2100 CR and we are investing another 21100 crores for its Revival so some capex is in that and uh as you are aware we Advanced our Net Zero Target for scope one and scope two uh 100% from 204 to 2035 and we have drawn a road map which will entain an expenditure of 38,000 CR by 2035 so that will also feature in our annual kex and besides we are planning to put up a uh world scale ethane cracker a new Greenfield ethane cracker uh work is uh the feasibility of which is being worked out and if it gets approved then definitely it will entail a lot of kex going forward okay I’ll come to Ethan in a moment but um a sort of lay man’s question uh you’re laying a lot of pipelines even this year you talked about you’ve described at least five under uh under way uh what is the uh I mean how do you set up a certain pipeline I mean is it is it demand Le is it uh project Leed so depending upon the requirements because as you are aware as I mentioned honorable pm has a vision of increasing the natural gas share from 6% to 15% that will not happen unless the pipeline Network reaches each part of the country that is necessary not only to service the City Gas Distribution Network the whole of India is now authorized except for Andaman lak and ladak so we have to reach the natural gas pipelines as near as possible to the City Gas Distribution networks but it is also necessary this network is also necessary to service the industrial customers so so there are lot of uh uh maybe fertilizer plants or power plants or Steel Industries or refineries or petrochemicals which will need these uh pipelines for natural gas consumption is those those factories so we have to lay these pipelines to service them now how these pipelines are put up uh now no natural gas pipeline can be put up by any entity at its will there is a authorized agency which is petroleum and natural gas regulatory board which is a regulator for natural gas SE who basically invites expression of interests from entities uh and based on that uh there can be a bidding route or there can be a nomination so some of the pipelines which are which Gail has executed or are is executing are based on nomination and some we have one in the bidding rout only so that UI which pngrb floats is based on assessment of the demand uh by them and at sometimes the entities can also approach pngb to issue an eui depending upon their own assessment of the demand in a particular area and and that’s an interesting point because the original H VJ now haa vijaypur jagdishpur pipeline when it was set up it was looking mostly at industrial use today it’s become mixed as you said so between industrial and consumer how do you see uh let’s say demand and even I mean one on the demand side and from your side the supply side and how pipelines could be laid so of the total natural gas which is consumed in the country uh about uh 1/3 goes to fertilizers uh because fertilizers all UA plants use natural gas but then we do not see much uh um upside on the fertilizer side because it is largely saturated and we do not see more and more fertilizer plants coming one or two plants are coming but not much uh about uh 1/4 is consumed in City Gas Distribution Network where we see a huge potential and the City Gas Distribution Network the consumption in the City Gas Distribution that is rising very handsomely and in fact of all the geographical areas which are authorized the work on many of the geographical areas is still to start because the natural gas pipelines have not reached those City Gas Distribution areas so I we see a huge potential in the city gas uh distribution demand uh another area which can be very good is power unfortunately of the 24 or 25 gwatt of gas- based power plant cap capacity which is existing in the country not more than about 8 to 10 mega gwatt is getting utilized and rest all plants are sitting idle I can say on an average 15 to 20% gas no because the gas is not viable for them as you are aware in the power sector the G the power is sourced based on Merit order dispatch systems that means any Source any plant which can supply gas as which can supply power at the least cost is requisition now naturally at these prices of gas which have become very strong after the Ukraine Russia War at these prices the gas- based power is not viable and does not qualify in the Merit order dispatch system so we are we are sort of constrain natural gas industry is sort of constrained because gas is not being used in the power plant capacity which is already there and no more gas based power plants are coming up because of this limitation so there the limitation is there and then there is a huge potential in in uh Industries like petrochemicals and refineries but again based on the cost consideration gas is not making uh good inroads in that those sectors also so we believe that uh since India has also declared its ambition to be Net Zero by 2070 we believe that there should be a road map and certain industries especially the polluting Industries must be mandated to use natural gas because natural gas is at least 50% less pollutant so they should be mandated to use natural gas for their uh purposes and that will good a good Philip similarly for power we believe that considering the uh Net Zero Target of the country and considering that Coal Power is very very polluting I believe there should be mandate for power sector also to use natural gas that should give good strength to the natural gas economy and also to environment but is is it the is it is there a sort of dichotomy of sorts because industrial demand is muted or facing let’s say or is a is fall sort of is susceptible to high prices uh which may obviously go up and down but on the other hand retail including for vehicles is very strong and there actually seems to be a problem because there is more demand and less Supply uh as you are aware that for uh C City Gas Distribution for two sectors that is domestic PNG and CNG which goes into the vehicles the prices are sort of uh sub administered or subsidized for domestic PNG we get 100% allocation of the APM priced gas which is at $6.5 per uh as of now and going forward it can raise by 25 cents a year in two years and thereafter the road map has to be laid further for CNG uh the domestic gas allocation has decreased because of more cgds now coming into action and lesser domestic gas availability so still it is about 50% domestic gas location to the cgt areas so that ensures that they are able to price their output that is CG for vehicles and domestic PNG for domestic connections at a lesser price and hence they are able to compete with the com alternative fuels but do you see for example uh again coming back to uh pipe natural gas to homes that you could potentially see higher realizations or maybe charged more because people appreciate the convenience uh I mean I can say that as a user uh and and uh therefore is becomes I mean that whole sector becomes more lucrative for companies like Gil yeah definitely because for domestic gas uh it is easier it is extremely convenient because you do not have to worry about it’s getting exhausted and uh refill and it is extremely safe natural gas is lighter than air so it is safer than LPG which is denser than air and accumulates on the case of leakage in the lower areas so because of these consideration I believe more and more consumers want uh domestic PNG connections so we are very sure that with the expense of C City Gas Distribution networks and uh perhaps better allocation of natural APM price natural gas to cgd sector this sector should take off the present limitation is as I mentioned the domestic gas availability and also City Gas Distribution networks have to expand the natural gas connectivity has to reach that that is a limitation but then it should take off the constraint also is of the LPG prices as you are aware the LPG prices uh to the BPL families definitely subsidized and lot of state governments have also been rolling out their own subsidies for LPG consumers and LPG prices otherwise also internationally are little weaker at this point in time so it DP is finding it extremely challenging to compete with LPG but hopefully because of the advantages of DPG in terms of convenience in terms of safety I believe consumers will definitely opt uh for DP connections going forward so uh let me take a slightly different tag so uh on a normal day when you look at your the map of all your pipeline so what are the F what are the uh data points that you’re usually tracking the most crucial for us is the Hydraulics of the PIP Lanes actually because uh there are certain consumers who do not want G gas at a pressure lower than a particular pressure and at the same time there are other areas where so the pressure the hydraulics in the system has to be maintained and we have similar to water acci yeah definitely uh but uh water is liquid and pressure does not play that much role here natural gas is in gaseous state in the pipelines and hydrolics are extremely important so on a daily basis this is a uh this is a very very critical role of our gas management centers National Gas Management Center at our NOA office and Regional gas man management centers at dozens of other other centers it is very crucial for them to ensure that the Hydraulics are properly maintained to ensure the convenience of the consumers uh mostly industrial and also to ensure the safety of the operation and they also look into various other aspects like accounting and gas is coming from uh outside for example we import from Qatar and we are producing so where does that feed into your network mostly now this is also interesting for those who are new to Natural Gas sector gas wherever it is extracted is in gaseous form and it is only for transporting between the continents on SE that it is liquefied at say supposing we are importing from Qatar or from us so the gas the which is getting produced is in gaseous form for transporting it overseas it is liquefied at that port and then filled in the LG tankers and then it reaches the port of importation in India which is now many ports the H is the biggest we have hazira we have our dhol we have Mundra Kochi enor and damra so at these terminals the tankers come and then at these terminals the gas is again regasified and then it is called regasified LNG so regasified liquefied Natural Gas which is then injected into the pipelines and then it gets transported across the pipelines to the consumers got and what about the gas that’s produced locally again which is produced locally is inserted in the gas in the G in the pipelines in the gous form within India where would that be mostly that is in Bombay High which is transported to uran and then it is in Assam it is in Rajasthan it is in Andra Pradesh it is in tripura it is in many centers but that gas is not liquefied it is injected in the pipel wherever connectivity is there whereever connectivity is not there again I’m proud to say that Gail installed country’s first small scale liquified natural gas facility at vijapur uh to demonstrate that the gas which is in stranded Fields can be liquified and then transported in liquid forms to various demand centers so we have put up such facility and we plan to put up more facilities right so let me come to uh a couple of questions on the economics of gas um and this is more a future question how do you see that playing out as in we we talked about India trying to increase its uh contribution of gas to the energy mix and we are uh I mean I know we fighting to stay at the same position but that’s only because demand the whole p is growing quite fast as well uh how do you see the economics uh uh we were very hopeful that with more and more um uh LNG the natural gas possibility uh because of Shale Revolution uh the gas prices will cool down but uh first there was a Ukraine Russia War uh which sort of constrained a lot of Supply Russian supplies and then thereafter the pause which was imposed by Biden Administration in us uh perhaps uh derailed all that hope uh so because of which the prices are ruling at these levels which are at on landed cost basis is the it is somewhere around $155 to $16 per mb2 as of now which is highly priced gas uh but with Mr Trump coming now as the uh US president and with h his uh sort of conviction that more oil and gas should be produced to ensure energy uh Security in the country and definitely to generate revenue for USA also uh we believe that now going forward perhaps there will be more oil and gas available especially gas will be available as far as our context is concerned and the prices will be softer but then that that cannot happen immediately because uh for that pause to be lifted for new projects to get approved and the extraction then happens it will definitely take 2 to 3 years time so we believe 25 26 uh will definitely be very very constrained for gas supplies hopefully 27 onwards we can expect some softness in the natural gas prices provided those projects do come up and also we believe that uh with uh now Mr Trump trying to uh resolve the Ukraine Russia conflict uh though it has again veren last day uh but if that conflict can be resolved then perhaps more Russian gas will be available to world and that can also have impact in softening the prices of natural gas if that happens definitely it will be good for the natural gas economy and especially for India considering that we import 50% of natural gas for our consumption but tell us about you know uh you talked about h i mean the one of the biggest challenges being to maintain pressure uh which is a technology aspect what are some of the other technology aspects that you’re uh working on looking out for I mean or I mean and also maybe is there a role for a startup kind of ecosystem to help you in some of your Ambitions as Guild definitely there is lot of uh things which are happening and lot of scope for even in startups in this field so one I told you about sslg so this is definitely this is the first plant which we have established in India and definitely there’s lot of a scope for that uh Second is that uh green hydrogen is in demand uh especially for the exporting country and those who export and you commissioned a plant recently we have recently commissioned an electrolyzer green hydrogen electrolyzer at our vijapur plant U and this is in fact the country’s first megawatt scale electrolyzer it’s a 10 megawatt electrolyzer producing 4.3 tons per per day of hydrogen uh which translates to 1.4 ktf capacity uh and now this n this hydrogen has to be transported through pipelines now uh considering that hydrogen has an adverse impact on the Metallurgy uh considering its brittleness uh so some lot of research is going on in this area and in fact Gail is also collaborating with iur with El with Reena of UK to assess the impact of hydrogen on the steel metery so a lot of work can be done in these areas also uh to take benefit of all this we have done two things one we have decided to set up our own r& facilities all along we did not have one or R&D and we were working with cisr Labs uh for various s research works we have decided to set up our own R&D plant second what we have done uh in uh recently uh we have uh increased our startup funding which was 100 crores till now to 500 crores uh to take benefit of the startup ecosystem in the country and to promote that ecosystem in the country so that more and more young innovators can take help of Gail’s Punk scheme which is a startup scheme and draw funds from its scheme uh to support the industry in their needs so would would one of the companies you invest in be involved and you said that you know trying to make pipeline stronger to carry hydrogen uh or resist would that be a technology or this would be a technology definitely this there this can be but then this our Punk initiative startup funding scheme that does not restrict anybody only to the areas in which we work it can be any area it can be in AI it can be a process related it can be manufacturing related it can be gas related or any other industry related also so there is no bar and we promote more and more innovators to take most interesting project that you’ve seen or you liked we have lot of products one is regarding the uh uh say solution at the dispensing stations where uh uh the the Vehicles which come can be identified uh we can roll out CRM customer relationship management with them uh and there are lot of other similar things we have done and uh in the nowadays new and new innovators in fact are innovating lot of things and we take want to take advantage of those schemes so the India energy week uh starts soon so uh it’s been a twoe uh two to threee Journey now so two kind of questions so one is is what do you hope to take away from it and uh what’s the experience been from previous uh previous energy weeks as well yeah as a natural gas company I would like the entire Forum to discuss the need for progressing towards uh Net Zero uh to address the climate crisis uh through which we are sort of advancing the decisions which the largest economy has taken and its telling effect on the climate situation and what is the perhap perhaps the course correction which the world should do uh what locally we should do to improve gas consumption especially for power and industries uh so these all aspects should be discussed so then so that we have a considered Net Zero Journey because I believe that it is not possible to progress towards uh Net Zero situation unless we address address uh the demand of natural gas as a transition fuel at least and the need for renewable energy uh in place of perhaps fossil fuels uh at least polluting fossil fuels even if not Ms or hsd which are used in transportation field there are a lot of other industrial fuels which are definitely much much polluting uh we need to find solutions to code because we know we have a huge domestic source and definitely no country would like to uh sort of waste a domestic source which is available in Bounty so what can be an alternative use of coal so that at least that demand of coal for power sector can be displaced by natural gas without compromising the availability of coal so I believe these areas should be discussed in ener and definitely we have then business meets with our business partners uh to take forward the business deals Etc so uh suppose you meet and I’m sure you’ll meet a peer of yours as in an similar or maybe larger uh gas company production distribution company what would be the first question you would ask them uh definitely we besides uh business deals Etc of increase for to ensure energy security for the country we would like to have more deals but besides that we will definitely like to know about their net zero plans and the newer Technologies we which they are implementing in their own business area so that we can take examples from their experience and then Implement here in India in our industry Mr Gupta thank you so much for speaking with me thank you thank you [Music]