GAIL plans to double revenue in five years: Chairman
GAIL is planning to double its revenue and expand profit by 50% in five years, aided by a planned capex of Rs 1 lakh crore in new pipelines, city gas and petrochemicals projects, chairman Manoj Jain has said. GAIL, which recorded a profit of Rs 6,000 crore on a revenue of Rs 75,000 crore in the last fiscal year, expects contributions from transmission and gas marketing to rise in its overall revenue over the next five years. “Transmission should be a larger pie as compared to today because revenue-wise gas prices may not be that high. Marketing, trading will also be slightly bigger, but petrochemicals, we feel that, since other players are also coming, the market will have more capacity and our share in the market may be slightly lower. Within in the company, petchem should be in the range of around 25% or so,” said Jain, who took over as chairman and managing director last week. At present, transmission, gas marketing and petrochemicals contribute almost equally to the company’s revenue. Besides growing the business, the priority would be to raise employee satisfaction so that there is more loyalty and motivation for them to contribute, Jain said. GAIL will need about a year to hive off its pipeline business into a subsidiary once the Cabinet has approved such a proposal, Jain said. Collapsing gas prices in the spot market is the biggest risk today for the company, Jain said. “Gap between spot and long-term is widening and that‘s a risk for those volumes which are not tied yet,” Jain said. GAIL has multiple long-term contracts for gas with suppliers in the US and Russia and a sharp fall in spot market makes it harder to sell expensive long-term gas to customers. GAIL has committed customers for much of its long-term volumes. About 2 million tonnes of its US liquefied natural gas (LNG) volumes aren’t tied yet. So far, GAIL hasn’t faced trouble from any significant customer and is able to sell all its long-term LNG. The company has also been offering spot gas to long-term customers to help them lower overall cost of their fuel. Over the next five years, GAIL plans to spend about Rs 40-45,000 crore in laying 7000 km of new gas pipelines, Rs 10,000 crore in expanding petrochemicals capacity and Rs 40,000 crore in building new city gas infrastructure, Jain said.
GAIL readies Rs 1 lakh crore war chest for gas grid, petrochemical expansion
State-run GAIL has lined up a war chest of over Rs 1 lakh crore for expanding petrochemical capacity and network of gas pipelines — the latter with the objective of widening the reach of clean-burning fuel to help cities across the country breathe easy and reduce the economy’s carbon footprint. “We have planned a capital expenditure of Rs 45,000 to Rs 50,000 crore on laying pipelines, Rs 10,000 crore on petrochemical capacity expansion and another Rs 40,000 crore for city gas distribution (CGD, or CNG and PNG services) business,” the company’s new chairman Manoj Jain said on Monday. The investment will be spread over five years. The utility is adding 7,000 km of pipelines to its 12,160-km network to integrate the eastern, northeastern and southern regions into the country’s gas grid to open doors for CGD services. This is part of the government’s bid to raise the share of natural gas in India’s energy basket to 15 per cent by 2030 from over 6 per cent, Jain said. GAIL currently markets two-thirds of the 160 mcmd (million cubic meters per day) of gas consumed daily. The expanded infrastructure is aimed at widening the gas market. Since domestic production meets 50 per cent of the demand, rising at about 5 per cent, GAIL is also investing in expanding capacity to import gas in ships — or LNG. “We have awarded the contract for construction of a breakwater at Dabhol (LNG import terminal in Maharashtra) to L&T and this should get completed in two-and-half-years. The completion will help operate the terminal at its full capacity of 5 million tonnes per annum,” Jain said. Pipeline projects at hand include the ambitious Urja Ganga project to take gas to Bihar, West Bengal, Odisha, and Jharkhand as well as Kochi-Kootanad-Bangalore-Mangalore line; and Indradhanush North East Gas Grid. Besides pipelines, GAIL is also expanding city gas distribution (CGD) networks for retailing of CNG to automobiles and piped natural gas to household kitchens, he said, adding investments are also planned for the expansion of Pata petrochemical plant in UP as well as converting a LPG recovery unit at Usar in Maharashtra into 5,00,000 tonnes Polypropylene plant. GAIL is looking to put up 400 CNG stations and give out a record 10 lakh piped natural gas (PNG) connections to household kitchens in the next 3-5 years. The company is building a 2,655-km gas pipeline from Jagdishpur in Uttar Pradesh to Haldia in West Bengal, Bokaro in Jharkhand and Dhamra in Odisha. Jagdishpur-Haldia & Bokaro-Dhamra Natural Gas Pipeline (JHBDPL) project, also known as the ‘Pradhan Mantri Urja Ganga’ project, was inaugurated by the Prime Minister in July 2015. GAIL has commenced city gas operations in all the six geographical areas (GAs), including in Patna and Bhubaneshwar, that was awarded to it along the Urja Ganga route, Jain said. The pipeline will be extended to Guwahati by laying an additional 750-km line. At Guwahati, it would interconnect with the upcoming 1,500-km ‘Indradhanush’ pipeline network conceived to operate in the northeast region by the public sector oil and gas majors. GAIL will also lay a 600 km Srikakulam-Angul natural gas pipeline.
Centre will take a call on hiving off GAIL’s transmission business: CMD
The Centre will take a call on hiving off public sector enterprise GAIL (India) Ltd’s transmission business into a wholly owned subsidiary, according to the company’s Chairman and Managing Director Manoj Jain. “The marketing and petrochemical business will remain with the parent company, while the transmission business will be hived off into a separate but wholly owned subsidiary by GAIL. This will be done per the directives issued by the Centre,” Jain told reporters here. “The Union Cabinet is to take a final call on the directives to be issued. GAIL will be able to execute this division within a year of the decision being taken by the Centre,” he added. In response to a query on the proportion of revenue attributable to the new subsidiary, Jain told BusinessLine: “The new subsidiary will have an around 15 per cent share of GAIL’s revenue and around one-third share of the bottomline.” The subsidiary structure will be similar to that of GAIL Gas, another wholly-owned subsidiary of the company. While GAIL Gas is tasked with implementing city gas distribution projects, the new subsidiary will operate in the transmission business. On whether the transmission subsidiary will be subsequently listed as a separate entity, Jain said that will be decided upon at a later stage. He also said the transmission business will have a larger share of the company’s profits, with gas prices appearing to remaining subdued in the medium term. Natural gas price Commenting on the price of natural gas, Jain said the gap between spot and long term price is widening. The company is looking at it and will take a call at an appropriate time, he added. He was responding to queries on the possibility of renegotiating existing long-term contracts that the company has signed. On the adjusted gross revenue (AGR) demand raised by the Department of Telecommunications (DoT), Jain said GAIL is hopeful that the company will not have to pay the amount sought.
GAIL says sustained cheaper spot LNG prices are the biggest risk
GAIL (India) Ltd sees the falling spot price of liquefied natural gas (LNG) as the biggest risk to its business, its chairman Manoj Jain said on Monday. Spot prices of LNG in Asia hit a record low around $3 per million British thermal units (mmBtu) this month, making supplies of gas under previously agreed long-term deals unattractive for some price sensitive customers in India. GAIL over-committed to new LNG volumes through long-term deals with the U.S. and Russia earlier this decade when supply was scarce and buyers rushed to secure deals. Spot prices at that time were in the double-digits. “The biggest risk is about the present prices of gas…The gap between spot and long-term is widening and that is a cause of concern for us,” Jain said as he addressed the media for the first time since becoming chairman last week. He said GAIL had resold most of its LNG purchases under the long-term deals but up to 30% was still an open position. “The prices are down in the spot (market) and if it takes a longer period to reach to a viable level then there would be significant risk”. GAIL has deals to buy 5.8 million tonnes per annum (mtpa) of LNG from the U.S. and up to 2.5 mtpa of LNG annually on a delivered basis from Russia’s Gazprom. The landed price of LNG under the deal with Gazprom is currently around $7.5/mBtu. GAIL renegotiated its contract with Gazprom in 2018, and the Indian oil minister at end-2017 told lawmakers that the company was looking at renegotiating contracts with U.S. companies. “We are looking at it and at an appropriate time we will make a commercial call,” Jain said, when asked if his company would renegotiate deals with the U.S. and Gazprom. “There is a need to realign the long-term contracts looking at the current situation”. Prime minister Narendra Modi wants to increase the share of gas in India’s energy mix to 15% by 2030 from about 6.2% now. However, inadequate infrastructure, including pipeline and gas import facilities, have curbed gas demand. GAIL expects India’s annual gas demand growth to double to 6%-8% in 3-4 years by which time new gas pipelines will be laid to connect industries and households, Jain said, adding cheaper spot LNG has already attracted some power plants to the cleaner fuel. GAIL and its joint ventures will invest 1.05 trillion rupees ($14.61 billion)over five years, with about half of that spent on laying around 7,000 kilometers of new pipelines, Jain said. It expects its 5 mtpa Ratnagiri LNG terminal to operate at full capacity in 2022 when a breakwater is built. The terminal currently operates at 2 mtpa capacity.
ExxonMobil, Indian Oil and Chart Industries to Pioneer Virtual Gas Pipelines for India
GTLS) signed a Letter of Cooperation with ExxonMobil India LNG Limited, an affiliate of ExxonMobil, and Indian Oil Corporation (“IOCL”) focused on pioneering virtual pipelines to accelerate gas access in India. Virtual pipelines deliver liquefied natural gas (“LNG”) by road, rails and waterways not connected by physical pipelines. In early 2019, Chart signed a Memorandum of Understanding with IOCL to promote the development of the LNG Market in India, focusing on modular liquefaction, regasification applications, LNG bunkering, fueling stations and alternative LNG mobile transportation including ISO containers. This Letter of Cooperation expands the reach and potential scale within a significantly growing country that has committed to clean energy options. “We believe this collaboration with ExxonMobil, a major LNG supplier with a local presence in India, coupled with our ongoing work with IOCL will accelerate India’s ability to offer a cleaner energy solution within the growing cities and networks,” said Jill Evanko, Chart’s President and CEO. “We are excited to offer our cryogenic equipment to support what each party in this collaboration believes will accelerate clean energy progress while doing so with localized equipment manufacturing in India.”
Soon, city gas distributors may not have to tie up supplies for 5 years
The downstream regulator is planning to waive a key condition for city gas distributors — of signing natural gas purchase pacts within 180 days from the award of licence — in response to companies’ reluctance to go for such deals amid a global supply glut that has led to a sharp decline in prices and amplified volatility, said people aware of the matter. The idea behind mandating licensees to compulsorily tie up supplies was to ensure security of supply and smooth services. But the US shale revolution and construction of several gas export facilities worldwide over the past few years have made supplies plentiful and cheaper, prompting Petroleum and Natural Gas Regulatory Board (PNGRB) to revisit this condition. Soon, city gas distributors may not have to tie up supplies for 5 years “Forcing them to tie up gas for five years at the beginning of the licence period won’t be in the commercial interest of city gas licence holders. They should have flexibility in sourcing gas,” said a person familiar with PNGRB’s plans. The removal of such restriction will enable city gas distributors to better respond to market situations and serve consumers better, he said, speaking on condition of anonymity. The proposed move would help several companies that won licences in the ninth and tenth rounds of city gas auction held in the past two years. Indian Oil, BPCL, HPCL, Adani, Torrent and AG&P were the biggest winners in the last two rounds in which 136 licences, covering nearly half of India’s population, were awarded. India imports about half of the gas it consumes. City gas companies get cheap local gas for distribution to homes and vehicles, but depend mostly on imported liquefied natural gas (LNG) for serving industries and commercial establishments. The current PNGRB regulation requires that the licence holder should “enter into and submit to the board, a natural gas sale agreement (GSA) or heads of gas sale agreement (HOA) or memorandum of understanding for sale of natural gas (MoU) with producer or marketer of natural gas for the proposed city gas distribution network project, in a transparent manner and on an arm’s length basis for a minimum period of five years, within 180 days from the date of the authorisation”. The minimum volume of natural gas for which such a pact can be entered into is equal to the expected consumption in five years based on the work programme promised during the bid.
Iran will be able to produce 1 bcm of gas per day from next month: Oil minister
Iran will be able to produce more than 1 billion cubic meters (bcm) of gas per day once the final platform is installed at the South Pars offshore field, its oil minister was quoted as saying on Monday by the official IRIB news agency. South Pars, which Qatar calls North Field, is the world’s largest gas field and is shared between Iran and Qatar. “Of the two last platforms at South Pars, one was installed today and the next platform will be installed before (March 20),” Iran’s Oil Minister Bijan Zanganeh said. “And so we will have all the platforms of the 27 phases of South Pars, which will enable us to produce more than 1 billion cubic meters of gas per day.” Separately, Zanganeh said that coronavirus is to blame for price fluctuations in the oil market, according to SHANA, the news site of the Iranian oil ministry. Twelve people have died and 61 have been infected with the virus in Iran, Tehran’s health ministry said on Monday. Several countries in the region have closed their borders with Iran and imposed air travel restrictions after people infected with coronavirus arrived from the Islamic Republic. Despite the air travel restrictions, Zanganeh said that he would attend a meeting of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna next week using Iran Air