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The government is keeping the industry guessing on pricing of domestic natural gas but for the country’s biggest marketer Gail India it is business as usual. In an interview with Shine Jacob & Jyoti Mukul, B C Tripathi, chairman and managing director, Gail India, says the option of imported gas may be feasible only for commercial and industrial customers and peaking power purposes. Edited excerpts:
Gail has tied up LNG all over the world, would the Indian market be able to absorb that kind of pricing? How do you visualize the gas scenario in India?
There is no doubt that the Indian market is price sensitive as 70% of gas goes to the two price-sensitive segments like fertilisers and power. These two sectors have a huge implication as far as the government Budget and lower strata of the society is concerned; therefore the demand is price sensitive.
Whatever level we keep the domestic gas price, a certain portion of gas has to be met through imports. Today, almost 30-35% gas is being imported. I visualize that time is not too far when 50% of the domestic gas demand should be met through imports, probably in the next five years.
Question is how much of this will be consumed by power and fertilisers. In terms of power, chances are less, they may be using this for a peaking or top up purposes. As against the current supply of 150 mmscmd, in the next five years it should easily go to 250 mmscmd, depending on how the new fertilizer plants would come up.
What is the status of Kochi terminal? Have you been able to tie up with companies on gas supply?
Kochi terminal is likely to be commissioned sometime in July. Initially, the terminal was about 2.5 million tonne capacity and the pipelines were to be laid with in Kerala only, with supplies to BPCL refinery, FACT Fertiliser plant and to NTPC Kayamkulam.
Since the capacity was increased to 5 MT later, the second phase of pipeline will be extended to Banglaore and Mangalore. The work is going on for this and it will take at least one-and-a-half years as there are a lot of local issues in Kerala as well as Tamil Nadu. We will be able to solve it soon.
Regarding gas tie ups, for Gorgon gas which is set to come to Kochi by 2015, we have no tie ups. Initially, we signed a gas sales purchase agreement (GSPA)with NTPC, but later it backed out. Today, there is no such GSPA signed. The first base will be running on a spot or mid-term gas, will start supply by November. About 1.7-1.8 MMSCMD of spot gas will be consumed around that area initially. All those players are on naphtha now, gas is still cheaper than naphtha which is around $22-23 now. If you buy gas from spot will be somewhere $-15-16.
What about you other LNG terminal plans?
We are already looking at the third terminal somewhere in the coast of Orissa and West Bengal, for which the study is going on now. It will be too early to comment. It will also depend on market, infrastructural facilities and cyclone impact the area.
Moreover, an Andhra Pradesh Gas Distribution Company and Gail Gas are jointly coming up with an floating storage and regasification unit (FSRU) at Kakinada. It just got the approval from the state government. It may see an investment of about Rs 1000 crore and we are currently in the process of getting environment clearances.
Ratnagiri power plant was forced to shut down due to no gas supply from KG-D6. How would you operate the power plant there?
Ratnagiri has been allocated small quantity of gas from some ONGC fields. It is true that the supply from KGD6 is zero now. Now, they are running at a 1200 MW capacity, with a current supply arrangement of 5.5-5.6 mmscmd. This they will be running for 10-15 days and again they will stop. The gas supply arrangement is extended up to 3-4 June 2013.
The LNG terminal at Dhabol is operating at 1 million tonne capacity. Already six cargos have come and it will remain closed during the monsoon. The next cargoes will be coming in October-November-December like this. As far as breakwater is concerned, all the disputes in the Supreme Court has been ruled in our favour now. We will be going for a bidding.
So, within two years, we will be having proper breakwater. By 2015, the terminal will be in full capacity even in the monsoon. On an annualized basis we will be running at a capacity of over 3 MT from next year onwards.
Going forward, by 2016-17, by the time our supplies from other sources comes up. This terminal will be scaled up to 7.5 MT capacity. That will be our next activity at Dhabol.
Regarding Ratnagiri power plant, isn’t there a profitability issue?
There is definitely a question mark. Rather than running it at half note, it is better to run it for 1200 MW for few days and close it for a few days, in order to service loans. The permanent alternative is reforms in power sector. What will happen if gas prices go to $8 per mmBtu. You cannot land up in a situation where even domestic prices are not affordable for power plants.
Terminal is already there. If other beneficiaries able to lift power at that price, we can run Ratnagiri on LNG also.
What is the status of Gail’s petrochemical expansions?
Currently, our Pata plant is producing 4,50,000 tonnes per annum and plant is running in full capacity. We want to increase our overall petrochemical portfolio to 1.6 million tonnes by financial year 2015-16, with an investment of about Rs 10,000 crore.
This include setting up of a second plant at Pata with the same capacity with an investment of Rs 8,000 crore and it would be commissioned by December this year or early 2014.
The Assam Gas Cracker Project, in which we have 70% equity and have 100% marketing rights, will also be commissioned by December this year, here also we are investing Rs 1000 crore and in Opal project also our equity part would be around Rs 1,000 crore.
