Shell upbeat on LNG biz in India; to expand facilities

Mumbai-born Yasmine Hilton, Chairperson, Shell Group of Companies in India, is aware that her task ahead may not be easy, as policy decisions in India are largely governed by politics.

“In a Petroleum Ministry meeting, I was the only woman among 30-odd men,” says Hilton, probably the first woman to head an energy company in India.

In a chat with Business Line , Hilton says for her “the challenge would be to integrate various business of Shell in India and look for business opportunities that meet the global criteria for investment. Good corporate social responsibility activity is another area.”

Shell will strive for “anything, which can bring cheap, cleaner energy to India and fits with what the Government needs and what Shell’s capabilities are.” India needs innovation and technology to get more from its existing reserves and more opportunity to burn cleaner fuel, she adds.

The core capabilities of Shell are upstream technology (oil and gas exploration), downstream technology (refining and retailing), and now gas business (liquefied natural gas).

LNG

LNG is the right story for Shell in India, says Hilton. Shell’s 3.6-million tonnes a year Hazira re-gas terminal is being expanded to 5 mtpa. It is expected to become 5 mtpa in 2013. “We want to take this to 10 mtpa. We have the knowledge and capability to do that,” she adds. On the East Coast, Shell is setting up a floating storage and re-gas facility of 5 mtpa with provision to expand to 10 mtpa with an Anil Ambani Group company and Kakinada Port. The “target is to deliver 10 mtpa LNG to India,” Hilton adds. Shell, at present, is not looking at selling compressed natural gas in the domestic market, but Hilton did not rule out seeing it as a business possibility.

For its proposed East Coast terminal, the company, to begin with, plans to source LNG by itself. “But we will go by what the regulation says. If the regulation says 20 per cent shall be available through open access, then we will offer that and work on that,” Hilton added. Gas sourcing for the Kakinada project will be done through Shell’s global trading outfit. “Whether it is spot or term or from Australia, Qatar, Mozambique, will be decided by them,” Hilton says.

Pipeline

On mid-stream activity (building pipeline networks for gas transportation), Hilton says “We could look at building a network. You never say never. But, is it our core competence? Is it what we have done in the other markets in the world? We do it (midstream activity) where we need to do it.”

Retailing & Refining

Asked about investments in downstream — oil retail and refining — Hilton says “Look at the current business environment in downstream. We are the only international company which has the licence to do 2,000 service stations in the country. But, we have only 68 sites open today. We need a level playing field to expand in India. We have not grown as fast as we would have liked to.”

The only reason for Shell not shutting retail business, unlike some other private players, is that “we are not here for short-term play. We are here for the long term and having a network here allows us to learn about the Indian customer,” she says.

She feels subsidies are something not specific to India, and adds that a way has to be found so that business does not suffer, while the rightful people get the benefits.

“Change in India has started. I do recognise that there is an economic decision and a political decision. Subsidies are killing us. But, to politicians, this (subsidy withdrawal) would be unacceptable. Besides, it is not correct to ask a poor person to pay the daily (market) price. One has to find a way out. The Aadhaar programme could be one such way. Everyone pays the market price, and those who cannot, get subsidy.”

She says Shell “would like petroleum products to be brought under the GST (Goods & Services Tax) regime, as will make the sector more transparent.

On refining, Hilton says “when we see the need, we would be more than interested in having a better positioning in India to service 2,000 petrol stations. So it is like ‘chicken and egg’, they go together. But I definitely do not rule it out.”

Shell has not been aggressive in upstream business. “We always looked at the NELP rounds. But have not found anything that has attracted us,” says Hilton.

Exploration

The company is interested in the next policy change that allows open acreage. “We think that would be more interesting. Open acreage means we can bid for the area we want,” she adds.

Besides open acreage, a set-up where better risk reward sharing and better acknowledgement of technology expertise is present definitely interests Shell. The Government has been talking about a new regime and Shell has given its inputs.

The company will explore what open acreage offers and then assess the product sharing contract (PSC).

“We will see if the PSC properly recognises the risk versus reward. It needs to reflect the level of investment the company will make and the reward. It has to be fair,” Hilton adds.

She says while evaluating a deepwater bid, technology should be given higher rating. The tender should be so structured that you invite the companies that have the expertise.

“Why invite 200 companies when you know only four might be able to do work. Get the balance right on the value a company can get through its expertise, technology versus the cost right,” she points.

On where India stands on her company’s global business map, Hilton says “Shell is investing $30 billion in new investments – 80 per cent in upstream and 20 per cent in downstream. We (Shell India) have to compete for those dollars with other Shell outfits. My job is to position India to the Group and get some of the funding into India.”

richa.mishra@thehindu.co.in