BPCL: Changing With The Times
Bharat Petroleum with its diversified offerings has managed to sail through the tough times during the current global slowdown. According to Motilal Oswal Securities, Bharat Petroleum has various new developments working for it. Under the supervision of Managing Director D Rajkumar, BPCL has attained new benchmarks, making it a perfect fit for the BW Real 500 ranker. “BPCL has also decided to diversify into petrochemicals in a big way to tap the immense potential of the market,” Rajkumar said. “As a strategy, all future expansion plans of BPCL Group refineries are oriented towards production of petrochemicals, both commodity and niche derivatives. I am confident that soon BPCL will be a frontrunner in this space to deliver enhanced performance,” he said, adding the company’s strategy is to diversify simultaneously into gas and petrochemicals. Assuming that renewable energy will overtake fossil fuels in the long run, oil and gas majors will have to find ways to improve their performance for survival. Sabyasachi Majumdar, ICRA Group Head for Corporate Ratings, said: “We expect to increase the share of RE in the all-India (power) generation to 10 per cent by FY20 and further to 13 per cent by FY22, based on capacity addition forecasts.” Being a smart player, BPCL has already started focusing on its gas resources. It has drawn up ambitious plans to become a significant player in the gas business, establishing its footprints across the entire gas value chain. In the long-term, BPCL is expected to have a focused presence in the downstream gas business and ensure demand security in the sector. Upscaling of its marketing network and capacity build-ing to improve its efficiency has resulted in improved performance. Bharat Petroleum Corporation announced the rating actions by various rating agencies as under — the change in the sovereign rating of India has changed the outlook from Baa2 (Stable) to Baa2 (Negative) in respect of senior unsecured debts-foreign currency. Further, Moody’s while retaining the rating as Baa2 (Negative) has put the rating on ‘review for downgrade’ considering the disinvestment plan. Crisil, on the other hand, placed long-term rating of AAA (Stable) in respect of non-convertible debenture and bank facilities-long term on ‘Rating Watch with Developing Implications’ considering the disinvestment plan. One of the renowned Indian rating agencies the CARE has placed long-term rating of AAA (Stable) in respect of Non-convertible debenture on ‘ Rating Watch with Developing Implications’ considering the disinvestment plan. Further, Fitch is continuously monitoring the developments with regard to the sale of government’s stake in BPCL along with transfer of management control to strategic partner. In February 2019, the petroleum giant had announced plans to raise Rs 20 billion during the financial year through private placement of unsecured non-convertible debentures subject to market conditions. The debentures are proposed to be listed on debt segment of the BSE and NSE. The sustainability front has also done good for them as per HPCL incorporate sustainable practices for each of our key sustainability development issues with defined targets and indicators. The company is aiming to enhance energy and operational efficiency, improve processes and technologies; thereby allowing it to minimise our impact on the environment and subsequently varied stakeholders.
GAIL ferries LNG in trucks over 1,700 km to fuel gas demand in east
In a first, state-owned gas utility GAIL India Ltd is ferrying imported LNG in trucks from Gujarat coast to Bhubaneshwar in Odisha as part of a government push for a gas-based economy to reduce emission and carbon footprint. With gas pipelines yet to reach most parts of eastern India, GAIL has hired specialised cryogenic bullet trucks to transport imported liquefied natural gas from Dahej in Gujarat to Bhubaneshwar, where it is used as CNG to fuel automobiles and piped gas as cooking fuel in kitchens, company Chairman and Managing Director Ashutosh Karnatak said. LNG is environment-friendly natural gas turned into liquid at minus 160-degree Celsius for ease of transportation in ships and trucks. “We started transporting LNG through trucks from Dahej to Bhubaneshwar and have broken-even on the business,” he told PTI here. It takes about a week for the LNG truck to move from west coast to the east and on reaching Bhubaneshwar LNG is regasified or converted back into its gaseous state at an LNG Satellite Station, which was set up at a cost of Rs 10 crore. Following regasification, gas is moved in cascades to CNG dispensing stations and piped natural gas fuelling points. Gas so supplied is cheaper than alternate fuels such as diesel. LNG can also be used as a fuel directly in trucks and buses but there are only a handful of vehicles currently operating in the country using such fuel. “Gas is a happy fuel. It not just cuts vehicular emissions (caused by use of liquid fuels such as diesel) but also is an environment-friendly replacement for coal,” he said. The government is targeting raising the share of natural gas in India’s energy basket to 15 per cent by 2030 from the current 6.2 per cent. Karnatak said the use of natural gas for generating power and producing fertilizers as well as fuel in steel and aluminum plants, besides city gas operations such as CNG to automobiles and piped cooking gas to households can help achieve the target. Globally, natural gas constitutes 24 per cent of primary energy consumption. In Gujarat, the share of natural gas in its energy basket is 25-26 per cent because of a network of pipelines that takes the fuel from import or production source to consumption points. Gas pipelines in India are presently concentrated in west and north, and GAIL is now laying new lines to the east, north-east, and south. It will complete the ambitious Pradhan Mantri Urja Ganga project, involving laying of a 2,655 km pipeline from Jagdishpur in Uttar Pradesh to Haldia in West Bengal, Bokaro in Jharkhand and Dhamra in Odisha by the year-end, he said, adding a pipeline in the south will also be expedited. Karnatak said in absence of a national gas pipeline grid, transporting LNG through trucks has become a viable option. “There has been demand from city gas operators in places such as Bhopal and its neighboring Mandideep, Indore, and Mangalore, where there are no pipelines to take gas, for supplying the fuel in LNG trucks,” he said. The government is planning a network of LNG fuelling stations along the 6,000-km golden quadrilateral highways connecting the four metros, he added. GAIL is putting together a plan and persuading city gas distributors, gas suppliers, financiers, fleet owners, and truck manufacturers to help build an ecosystem for LNG-fuelled vehicles in the country. “As many as 24 locations have been identified to set up LNG fuelling stations,” he said, adding trucks and buses can ply up to 800/1,000 km on a full-tank of LNG. A shift to LNG-powered trucks from diesel will cut pollution and turn Indian highways quieter.
Gas exchange will be operational this year itself, says regulatory board chief
The Chairperson of the Petroleum and Natural Gas Regulatory Board (PNGRB), Dinesh Kumar Sarraf, is confident that the country’s natural gas exchange will become operational in 2020 itself. “We have made substantial progress on the gas trading hub,” he told BusinessLine in an interview. On natural gas prices, Sarraf said that they are expected to remain soft due to abundance of supply. Excerpts: What is the status of the natural gas trading hub? Crisil has been appointed for recommending the structure of the trading hub, including drafting the regulations required for operationalising the hub. We would now need to initiate the process of issuance of the regulations, including consultation with the stakeholders. We will initiate this process once we have the government approval on creation of the natural gas trading hub. Before this, the government also appointed another consultant — KPMG — for recommending the pre-requisites and enablers as well as the way forward for establishing the gas hub. It would be operational during 2020 itself. Is the gas infrascturcture here well developed? We have 16,800 km of operational natural gas pipelines and another 14,000 km under various stages of construction, in addition to some under bidding. In the next few years, we should have about 35,000 km of gas pipelines. Most of the existing cross-country gas pipelines are well connected to form the natural gas grid. We require many more gas pipelines to continue strengthening the gas grid given the size of our country. It is not necessary that the grid has to be completed before the gas trading hub is created, as development of the grid is a continuous process, which is a function of creation of further demand. In fact, once the gas exchange starts functioning, it would create more gas demand and thereby further push for more pipeline to come…as I said, it’s a continuous process. What role will PNGRB play in the gas hub? We are focussing on how to increase gas consumption in the country through strengthening of infrastructure and bringing more transparency in the gas markets; the creation of a gas trading hub is an important step towards that. From a regulatory stand point, PNGRB’s role in the gas exchange is likely to be akin to Securities and Exchange Board of India’s role vis-a-vis the stock exchanges, or the role of the Central Electricity Regulatory Commission (CERC) in the case of power exchanges. In essence, PNGRB’s responsibility would be to regulate the gas exchange to ensure its smooth and transparent working for establishing a transparent and vibrant gas market. Will there be separate gas exchange companies similar to the power exchanges in the country? Yes, there would be some companies which would operate the gas exchange like in the securities and power markets. These companies would be authorised to operate the gas exchange. PNGRB’s role would be to monitor and regulate the working of the exchange. On price, the function of the exchange would be discovery of natural gas price. What is your outlook for natural gas availability and price? Presently, the prices of natural gas are low; today, the gas price in the US market is at its 4-year low. Prices of LNG are also ruling quite low — the LNG spot market is around $4.5 per million British thermal units (mBtu). The projections for the LNG prices even in the mid-term to long-term are on the softer side. LNG is expected to be available in plenty as new LNG liquefaction plants are coming up. The demand side is expected to be softer as China has constructed new gas pipelines across its Russian borders, reducing its demand in the LNG market. On the other hand, crude prices are expected to remain either at the current levels or increase slightly. Because of these two things, comparatively speaking, gas has been and would remain cheaper as compared to crude oil. This opens up an excellent opportunity to the consumers to migrate to the use of natural gas from the liquids. In addition, the country could save on foreign exchange. Besides gas is more environment friendly. On the policy front, lower gas prices provide a window to the government to deregulate gas prices. What is the progress on setting up ‘city gas distribution (CGD) geographical areas’? During the financial year 2018-19, we authorised 136 GAs (geographical areas) under the 9th and 10th bid rounds in addition to 16 other GAs of previous rounds and those of GAIL under Section 42 of the PNGRB Act. In total, we have presently 227 GAs spread over more than 400 districts. With this, about 71 per cent of Indian population and 53 per cent of the geographical area are covered by the CGD authorisations. Construction of physical infrastructure would be spread over eight years, but the time has already started ticking. How many compressed natural gas (CNG) stations would be completed in 2020 itself? The entities which were awarded geographical areas in the 9th and 10th rounds have already started commissioning CNG stations. The industry has committed to complete 8,181 CNG stations in 8 years in the 9th and 10th rounds. Of these, about 1,500 should be completed in the financial year 2020-21 itself. More CNG stations are also coming up in the GAs awarded prior to the 9th round. Based on the industry’s commitment, we expect the number of CNG stations to go up from 1,900 in December 2019 to about 3,500 by March 2021.