Swan Energy Limited (SEL) is developing an LNG Floating
Storage & Regasification unit (FSRU) in Pipavav, Gujarat,
with a capacity of 4.5mn metric tonne p.a. (mmtpa) of LNG
imports. This would be used to source gas requirements for
the company’s energy initiatives. SEL’s Chief Executive
Officer (CEO), P Sugavanam, speaks to Neeraj Dhankher
on his outlook on the LNG industry in India and the
company’s future plans in this segment. Excerpts:
Please outline your outlook for the
LNG sector in India. We have seen
that this is an emerging area in the
oil and gas segment as domestic
gas production has hardly kept
pace with burgeoning demand.
The demand projection for gas is not our
cup of tea. We don’t do it. It has been
done by many others so we normally
follow that. So we have not done any
specific study on demand supply. We
are sure that gas is dearer in India and it
cannot come through any other means
than LNG. All pipelines that we are
talking about, whether Turkmenistan-
Afghanistan-Pakistan-India (TAPI),
Iran-Pakistan-India (IPI) etc is going to
be a tough call unless we improve our
relations with the neighbours. So if gas
is not going to come in gas form, then
the next form is only LNG. India can
never be self sufficient in gas, definitely
not. With that being the case, we
have to import gas.
But with better incentives to
explorers in form of a higher gas
price, don’t you feel that domestic
gas production can indeed be
spruced up?
It (domestic gas production) will
definitely go up with new gas pricing,
but it will never be sufficient for India. It
can be only 30 to 40 per cent maximum
of consumption.
With the new
government
signalling its
intention on
unleashing
reforms in
other energy
segments
such as coal,
don’t you feel that
increase in domestic
coal production will compensate
gas requirement to some extent?
As of today, no one is talking about
environment. Everybody wants to only
boost up the industry. So a day will come
when your GDP grows by more than 8
per cent and then, again, there would be
talks about environment. That time gas
will be talked about again. As of now,
share of gas in overall energy basket is
about 8 per cent to 9 per cent and it will
go up to 20 per cent surely.
The PNGRB had earlier come out
with its guidelines with respect to
registration of LNG terminals
which mandated that some
part of a terminal’s capacity
should be available for
open access. What are your
comments on the same?
It (open access in LNG terminals)
is feasible, but the only thing is that
where there are lot of new investments
being done, people are expecting equity
gas. So all those who are not into gas
trading as of now need regas terminals.
Definitely, third party terminal is a
very good business. It is possible. But
without the support of government and
public sector, it is not going to be that
easy as of now.
With the new government
at the Centre, what are
your expectations for the
energy sector?
There will be lot of changes and
things are definitely going to improve.
Narendra Modi is a far sighted man so hopefully, lot of policy changes will be
there especially in oil and gas sector. If
you see, much before the gas policy of
Central Government came in, Gujarat
had announced its LNG policy where
40 mt import of LNG is coming only in
Gujarat. That is a forward looking policy.
With that being the case, a lot of boost
will come in gas business definitely.
Do you feel the need for regulating
LNG industry in India as of now?
As of now I don’t think they are going
to regulate LNG except for what they
have done so far. Regulation will come
in when more terminals are going
to come up. As of now, integrated
terminals are there mostly and they
are able to utilise their own terminal.
But when more number of terminals
come up as third party terminals then
regulation is a must. For example, in
case of laying of gas pipelines earlier,
PNGRB came very late and only
now they have started regulating the
gas pipelines. Similarly, with more
number of LNG terminals coming in,
probably that is the time to regulate,
not in initial stage.
What infrastructure constraints
are being faced at present when
it comes to evacuating LNG
from terminals?
There are problems. In east coast, there
are no pipelines, except the East-West
pipeline owned by RGTIL. Another
one is being done by GSPC from
Mallavaram in Andhra Pradesh to
Bhilwara in Rajasthan. Today, Gujarat is
one state which has developed its own
gas pipelines of about 3,000 km, and they
are talking of 13,000 km overall in India.
That is the kind of infrastructure they
have developed.
How did your company venture
into LNG tolling terminals?
It has got a long history. We were
more concerned with environmental
problems and we wanted to convert
some of the coal-based thermal
power plants to gas-based. That time
gas prices were around $5 to $6 per
mmbtu. A combination of local price
of $4 and $7-8 of imported gas and
60:40 ratio or 70:30 ratio, it was
feasible to generate power. But with
increase in gas prices, that has gone
in the backyard and we are going only with tolling terminals.
You are already in the process
of developing an LNG Floating
Storage & Regasification unit
(FSRU) in Pipavav, Gujarat with
a capacity of 4.5 mmtpa of LNG
imports. What is the update on
the project? Also specify your
future plans in this regard.
This project will be operational in
2017 at a cost of $700 million. In the
energy sector, this is the only project as
of now. Probably, we may go for one
more floating terminal if the demand
picks up. Otherwise, the current project
will be expanded to 10 mmtpa. We
have got permission from environment
ministry for 10 mmtpa. So we will
expand this project’s capacity first. The
expansion can be completed in a period
of one year, whenever required. After
that, in case there is more demand, we
will put up further.