Putting in place a strategy and taking calculated risks, while maintaining the stature of a public sector enterprise, has been the mantra that GAIL (India) Ltd has been following.
Accorded Maharatna status on February 1, the company now has greater flexibility in taking decisions and its board has enhanced powers to approve investments.
B.C. Tripathi, Chairman and Managing Director, GAIL, shares with
On the changing gas market in India:
Today, gas as a sector looks promising. In GAIL, we had the will and ability to accept and take the changing challenge, but were conservative. In 2009, we devised a system to operate. It started in a small way, and today we are trading gas. (Trading office in Singapore for sourcing LNG and trading LNG and petrochemicals. The first LNG cargo has been sold and we are likely to sell the second cargo. GAIL is looking at expanding trading business in the US.)
On gas sourcing:
The main aim is to get gas into India. Last year, we imported 24-25 cargoes. This year, we are targeting 26 cargoes. With the commissioning of the Dabhol LNG terminal, we are looking at playing a bigger role in the gas sourcing business, either through long-term, short-term/spot, or through equity participation.
We are also looking at expanding the Dabhol LNG terminal from 5 million tonne per annum (mtpa) to 7.5 mtpa in the next two years, along with putting in place the breakwater facility at the terminal. The final intent is to take the Dabhol capacity to 10 mtpa.
On shipping plans:
As the company prepares itself to source more gas, the obvious step is to venture into the shipping business to get these cargos. We will see whether we will have our ships or charter ships. But, we do intend to have six to seven ships. What is crucial for any project is the pricing and timing.
On gas price:
In the international market, the gas price will remain more or less at the same level. I don’t see it softening, and there are two reasons for this: people are still not confident how nuclear power will sustain and crude oil price will continue to be volatile. Therefore, people will like to play in gas.
This situation will lead to both supply and demand increasing at the same pace. Of course, there will be a balance of demand and supply. I see gas price around $14/mmbtu. But, with this, I also feel that mixed indexation could be happening as far as gas trading is concerned.
US gas price versus domestic price:
Today, there is no basic premise to talk about gas price, as there is no linkage. I feel that if domestic producers in deepwater don’t find it viable to sustain business at current rates, they have to be compensated, so that it becomes a profitable venture for them.
It would be difficult to say what linkage price of US traded Henry Hub or UK’s National Balancing Point could have. Remember, these are not producer price, but traded price. And one doesn’t know how many hands these have exchanged. Today, no exports from the US to India take place.
But, to link and argue that US shale gas price is cheaper – there has to be indexation. Mixed indexation, talked about in the Rangarajan report, should be reviewed from time-to-time.
On gas from US to India and possible swapping:
The gas from Sabine Pass Liquefaction, LLC, a subsidiary of Cheniere Energy Partners, LP, US, will come in 2016-17. We do not know what will be the Henry Hub price then.
We are talking about gas swapping. But, gas swapping is not only linked with price. It is also to be seen how one optimises the shipping. The next six to eight months, when we starting talking about shipping the gas, we will also talk about swapping. Besides, we are looking at more volumes at Henry Hub price. Once this is firmed up, we will talk about our ships or charter hire.
On gas buyers’ club:
Indexation of gas is the need of the hour. We want to invite all major buyers, discuss and form a club that will give buyers the powers to do collective bargaining for LNG prices. Today, we do not have a proper hub in India or any other part of Asia, where no proper gas trading takes place. This is what the suppliers are taking advantage of and linking gas price to the highest fuel. So, we want a forum that could convince the supplier side.
Core competence pipeline:
We are synchronising investments in pipelines. With the expected gas volumes in the range of 190 mmscmd through GAIL’s network in the next five years, the average utilisation is expected to be around 75 per cent, considering a total capacity of around 250-300 mmscmd by fiscal 2016-17.
The expected growth in volumes is largely driven by anchor customers like power and fertiliser. This growth has to come from integration of new markets along new pipelines like Dabhol-Bangalore, Kochi-Kanjirkode, Jagdishpur-Haldia, Dadri-Bawana-Nangal, Chainsa-Jhajjar etc., which are gradually shifting to natural gas, provided the delivered gas price is economical.
Hence, price sensitivity of gas is also one of the issues for better utilisation of pipelines. Also, lower domestic gas availability is a major threat for capacity utilisation. Last, but not the least, is the challenge from insufficient LNG import/regasification infrastructure in the country.