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National gas grid will soon become a reality, B C Tripathi, Chairman & Managing Director, GAIL (India) Limited

11 Oct 2012

Steering a gas distribution company of the size and magnitude of GAIL is not an easy task. Being a public sector undertaking, not only has GAIL been vested with the responsibility of transporting gas to various parts of the country to meet the goal of energy security, it is also required to stay competitive so as to be answerable to its stakeholders. GAIL’s Chairman & Managing Director, B.C. Tripathi, talks to Neeraj Dhankher on some key issues facing the gas PSU. Excerpts:

The Gas Sales and Purchase Agreement (GSPA) for Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline has been signed, but a lot of thorny issues still remain. Do you think the project will become a reality?

We believe the TAPI project will become a reality. Road shows that took place recently in Singapore, New York and London,  have received encouraging response from 14 potential partners, including seven international oil companies for potential consortium leaders and another seven from financial institutions. This will culminate in selection of an implementation partner. The Inter-Government Agreement and the gas pipeline framework agreement signed by each of the participating countries is already in place. GSPA has already been signed between the buyer and the seller. Once the consortium leader is finalized to implement the TAPI project, host government agreement amongst others will be signed which will expedite the process of project implementation.

Do you think the idea of pooling RLNG with domestic gas for the power sector is a workable one? What will be GAIL’s role in this regard?

The concept of pooling of RLNG with domestic gas is aimed at enhancing the affordability and availability of gas for prospective customers. The applicability of pooling to specific sectors and its benefits will depend on the pooling mechanism to be followed and government policy in this regard. GAIL being the leading natural gas marketer, can facilitate successful implementation of the pooling mechanism. In case of power sector, pooling will facilitate level playing field for new power plants and encourage creation of new power generation capacity based on this low-carbon and efficient fuel. Further it will encourage distributed power production across country resulting in avoidance of grid /power failures such as the one witnessed in recent past.

What is GAIL’s stand on gas swapping? What are your suggestions to make the swapping mechanism smoother?

GAIL has played a pioneering role in seeding and developing gas market in the country through various measures, and gas swapping is one of them. Gas swapping can help in meeting the requirements of prospective customers not connected to gas sources/trunklines. However, the swapping arrangement needs to ensure that the gas reaches prospective customers in a cost effective manner. A customer friendly Tax / VAT regime will further enhance the effectiveness of swapping. GAIL has already put in place gas swapping to meet the requirements of customers in the state of Andhra Pradesh.

What is the status of the proposal to set up a national gas grid? How is the proposal likely to benefit the country and what are the major challenges?

The concept of a national gas grid was mooted by GAIL to connect various demand centres with different gas supply sources. Wider trunk line connectivity across the country is beneficial for developing planned usage of gas and new market development. At present, pipeline infrastructure development in the country is being monitored by the downstream regulator i.e. PNGRB.GAIL’s existing pipeline network of over 9,500 km covers northern to southern part of the country, and this is being expanded to around 14500 km over the next 4-5 years. After the completion of these projects, GAIL would have a transportation capacity of around 300 MMSCMD. With other pipeline operators also implementing their pipeline projects, the entire country will be connected by a gas grid within a few years.

What do you think will be the likely impact of the PNGRB-IGL verdict on the CGD sector?

At this stage it would not be appropriate to comment as the matter is sub-judice.

By when is the Jagdishpur-Haldia pipeline likely to be completed? Do you think you can tie up enough gas as well as customers to make the project financially viable?

It is proposed to implement the project in four phases synchronised with the availability of gas and coming up of the consumers. The main customers comprise new and existing fertilizer plants under the revival scheme proposed by the government. Power plants, steel, petrochemical and city gas distribution projects are expected to come up along the pipeline. The power, fertilizer and industrial projects will serve as anchor loads for this pipeline and ensure its financial viability. Other industrial customers will come up in due course of time in synchronisation with gas availability and implementation of the pipeline project.

By when do you plan to submit financial bids for buying a stake in RGTIL? What are the reasons for going ahead on the proposal and what benefits are envisaged?

We keep examining various opportunities from time to time. At this stage, it may not be possible to comment upon any particular proposal.

Is GAIL looking to tap new markets, other than Middle-East, for securing LNG on a long-term basis, such as the USA?

Yes. GAIL has already signed a long term LNG sales and purchase agreement with Sabine Pass Liquefaction, LLC, USA for supply of 3.5 million tonne per annum (mtpa) LNG over 20 years. We have also signed mid-term and short-term gas sourcing agreements respectively with GNF for 36 cargoes over three years and with GDF for 12 cargoes over two years. We are simultaneously looking at other gas value chain opportunities in different parts of the globe.

What has been the government’s response to GAIL’s proposal for waiving customs duty on import of LNG by companies other than those producing power?

GAIL is awaiting a positive response from the government in the matter.

GAIL seems to have set its eyes firmly on expanding its CGD business in the South. How much investments have been earmarked for CGD expansion, along with the time-frame?

GAIL’s wholly owned subsidiary, GAIL Gas Limited, is keenly looking at city gas distribution projects in the states of Kerala, Karnataka, Tamil Nadu, and others. These are in initial stages and will pick up pace depending upon factors such as input cost of gas, support from local authorities and the regulatory framework. Mostly, these CGD projects will be taken up through JVs/alliances with state governments or strategic partners. For this purpose, investments will not be a constraint. Agreements with several state governments are already in place. GAIL Gas is planning for project conception and roll-out accordingly. 

At the same time, GAIL has been authorized to lay various trunk pipelines, which requires us to supply gas to the industries and customers falling in the catchment area of the pipeline within 50 Kms or so.  GAIL is making efforts to expedite connectivity to various consumers. 

Do you plan to lay any new gas/product pipelines in the near future?

There are several proposals in this regard. Currently, we are implementing trunk gas pipeline projects such as 1430 Km long Dabhol – Bangalore Pipeline and 1130 Km long Kochi- Koottanad – Bangalore / Mangalore Pipeline. Besides, pre-project activities for other key projects like 1550 km Surat- Paradip natural gas pipeline are also going on. We plan to expand the existing LPG pipeline from Jamnagar to Loni from the existing 2.5 mmtpa to 4.5 mmtpa and are also looking at interconnectivity with various bottling plants of oil marketing companies to provide better service.

(InfralineEnergy thanks B.C. Tripathi, Chairman & Managing Director, GAIL (India) Limited for sharing his valuable insights with our readers. The column 'In-Conversation', is a platform to engage experts from various sectors to share their views on the different transformations happening in the Indian energy sector.)