his concept of competition (read co-opetition) and his very own "cake theory". Excerpts: The company's tagline reads "India's No.1 gas company". Will the tagline need to be changed given the kind of competition that is coming in?
GAIL is a dominant company and we will continue to maintain our dominance with our massive expansion plans in three focus areas "" pipeline transmission and distribution, petrochemicals and city gas distribution. In the last strategy meeting a few months back, we decided on these three areas, plus on some global presence. We will continue to maintain our dominance. There is no doubt about that.
How big is the challenge from RIL?
Why do you ask about RIL specifically? With the gas sector opening up to other players, it is a challenge before GAIL. But considering our experience, expertise and also competence, we consider this a very good (growth) opportunity. We have about 6,500 km of high-pressure trunk pipeline. As of now, only 55 per cent of our pipeline capacity is being used. If I provide interconnectivity with other players, and get more gas, capacity utilisation will increase, and that serves our purpose. Considering the new availability of gas in the country, we have to build new pipelines. We are going to add seven-eight new sectors "" about 5,500 km of new pipeline at an investment of Rs 20,000 crore "" and we are going to provide interconnectivity with RIL.
Is GAIL going to be the main architect of the National Gas Grid? As and when it comes up, will it be GAIL owning 80 per cent while RIL will have 20 per cent, or will it be some other ratio?
You can't analyse it this way. It is very difficult to quantify. Suppose a national integrated gas grid is there "" GAIL will have 12,000 km (6,500 km of existing pipeline and 5,500 km of new ones). Then RIL will have a pipeline from Kakinada to Ahmedabad, and to, say, the Chennai side. And maybe the GSPC pipeline will come. All I can say is that we will be the largest. Nobody can take away the dominance of GAIL. We know how to operate pipelines better than anybody in India.
But GAIL was the company which was to implement the National Gas Grid. Has GAIL curtailed its plans to accommodate RIL?
If you are not able to get the full cake, what is the option before you? The option is to get the maximum share of the cake. This is what we are doing.
Reliance is your largest emerging competitor now. Is your strategy one of co-opetition "" you compete in certain sectors and you cooperate in others?
My concept of competition is completely different. My concept is that you have to cooperate with the competitor. You have to collaborate with the competitor. And then you have to compete. If you are ready to cooperate, collaborate and compete, then the customer will benefit.
That seems to be a tough thing to do "" to collaborate and compete.
That is what we are doing. We have MoUs with RIL, ONGC and even IOC for pipelines, petrochem, city gas distribution, knowhow and training, and so on.
Are these your top three competitors "" Reliance, IOC and ONGC?
I will say they are my partners in gas development in India. Reliance has large quantities of gas. They need to evacuate the gas. We have that capability. So, we are partners. Similarly for ONGC's Mahanadi gas, they would require the gas to be evacuated and we have the pipeline. We will join hands.
Looking at the growing importance of petrochemicals in your overall business, is it possible that at some stage, petrochem could become the flagship business?
Last year, 55 per cent (of revenue) came from gas transmission and distribution and 30 per cent from petrochem (and about 6 per cent each from LPG production and LPG transmission). We are augmenting petrochem capacity but pipeline transmission will continue to be our largest contributor. Of the overall capex of Rs 30,000 crore planned in the next five years, Rs 20,000 crore is in pipelines, with the balance in exploration and production and in city gas. GAIL has also applied for city gas in 230 cities along the catchment area of our pipelines.
You are looking at a three-fold increase in turnover to Rs 50,000 crore by 2011. What are the risks along the route to Rs 50,000 crore?
If all the available gas goes dry in India, that is a risk (laughs). The K-G basin gas is coming. The Mahanadi gas is coming. The pipelines are there and the customers are there. Where is the risk? There is no risk. Rs 50,000 crore is a highly realistic number.
Since there is no clarity on what subsidies will be in the future, doesn't that cloud earnings?
The subsidy is more or less in the same range. We don't expect it to increase but at the same time, you must consider that this is linked to socio-economic considerations and inclusive growth. We can't deny it as part of our social responsibility.
Do you see the market headed for a new and higher benchmark price for retail gas, after the approval of RIL's gas price?
If you see the pricing stricture in India, the price varies from $2 per million British thermal unit (mBtu) (the controlled price), to $3.86 per mBtu for regassified-LNG at Dahej to $3.3 per mBtu at Ravva I to $4.3 per mBtu at Ravva II to $4.75 per mBtu for PMT and $8-10 spot price for LNG and then there is the recent $4.20 per mBtu RIL price. This price discovery by the empowered group of ministers for the K-G basin gas has been a systematic and very good exercise in India. It maintains the sanctity of the production sharing contract. So, where is the disappointment?
This happens in any transition type of marketing and after some time, when the market has moved towards maturity, prices also move towards maturity. That stage will take many years in India. We feel that demand will continue to be higher than supply in India. Presently demand is constrained.
What do you think is going to be the median to which gas pricing will converge?
It is very difficult to say. It should be between $4-5 (per mBtu). Gas customers in India are very conversant with cheap prices, and they compare this with coal prices.
What went wrong in Myanmar, if anything?
We tried a lot. There was no lack of effort from our side. The minister went, so did the petroleum secretary.
So, we've lost the pipeline?
Don't be so pessimistic. We have a 30 per cent share in Myanmar gas (A1 and A3 blocks). Tomorrow more gas can be ours "" OVL has gone to another field "" so why lose hope?
