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Prabhat Singh, Director (Marketing), GAIL

15 Feb 2014

GAIL (India) Limited has once again been in the thick of things owing to increased liquefied natural gas (LNG) demand in the country. Having signed a 20-year terminal service agreement with the Richmond, Virginia-based Dominion to lift 2.3 million mt per year of LNG from its Cove Point project, along with a contract with Cheniere Energy to import 3.5 million mt per year of LNG from the Sabine Pass terminal in Louisiana, the company is on the lookout for prospective customers to market the contracted regassified-LNG (R-LNG). GAIL’s Director (Marketing), Prabhat Singh talks to Neeraj Dhankher about the company’s gas marketing plans. Excerpts:

Do you feel there is enough demand for imported LNG in India? What are your plans in this regard?

We need to move forward as a business organization. Fertilizer, power etc is taking time to decide. There is enough material that can be absorbed by all these. Indian customers have committed and we are in the process. But we still have not gone to the market. We are now making the move and trying to tie up all kinds of options that we have. We now have a flavor of the demand pattern across the country. We are now moving into the market. Just wait for a month or two and you will hear a lot of options being signed by us.

How much volume are you planning to sell from the US in India?

We plan to sell the entire volume i.e. 6 mmt. There is a huge demand in India. There is no reason for us to believe that we will not be able to sell here. Around 1 mmt will be marketed through our Singapore subsidiary. We are also looking to develop the company because there is an international flavor which is coming in. So we need to think international. Today the world reserves are there and we need to exploit them. How we do that is a challenge along with how we develop our competency because we in GAIL do not have those competencies to go internationally and trade. We are working on that at the moment.

But why are Indian companies slow in warming up to this idea of taking imported gas?

That is because the policy is still taking time. Already five fertilizer plants have been cleared (to buy R-LNG). That means around 12-13 million cubic metres of gas i.e. around 3 mmt will be absorbed. So there is no dearth of demand in this country. Let us not misquote and create a situation that it is not being sold in India. There is more demand. In two to three months we will sign a lot of contracts. We wanted to give this gas to fertilizer and power sector first. Out of 6 mmt, how much will be sold to power and fertilizer sector, respectively? If the policy comes up, all 6 mmt will be sold to them. Look at the KGD6 gas today. Not even a molecule is going elsewhere other than these two sectors. Still, there is dearth of gas in these sectors.

There have been reports that GAIL will be excluded from subsidiary-sharing. How much saving do you expect from that?

That is wishful thinking. We want it to happen. Whatever we used to pay as subsidy will be our saving. Last year we gave around `3,100 crore as subsidy. All that will come back as a saving.

Please outline your LNG import plans for the next fiscal.

At this point, we have contracts already in place for around 1.5 mmt. We will also be buying around 30-35 cargoes from the spot market which is nearly 2 mmt. We are trying to maintain our customers and create more customers for the gas which will come in 2017-18 from the US. Already, RasGas is supplying 7.5 mmt of gas.

What is the update on Dabhol LNG terminal?

On 15th January 2014, a cargo was to be unloaded at Dabhol. Work on breakwater is in progress. A tender has been floated and is expected to be awarded shortly. Only recently, it has come out of court and is free from all encumbrances. But there is no gas for the power plant and we are fighting another battle of not allowing it to become a non-performing asset (NPA) because Dabhol is itself going through a phase where you have to pay the lenders. So there are major issues which are being talked about and breakwater is one of them. But we need to survive first to make the breakwaters.

What capacity is Dabhol LNG terminal operating at today?

Capacity wise, it is operating at around more than half i.e. 2 to 2.5 mmt out of 5 mmt.

Petronet LNG, in which GAIL is a stakeholder, commissioned the 5 million mt per year Kochi terminal in August 2012. But the terminal has since been operating at below 20 per cent capacity because of low offtake from its customers and lack of pipeline connectivity. What is the update?

Kochi terminal, where we have 30 per cent stake, is operating at nominal level. Fertilizer major, FACT and Kochi refinery of BPCL are sourcing gas along with some other small customers. Around 1 mmt of gas is being sold now to them.

What are the plans to ramp up capacity at Kochi LNG terminal?

Phase-I of connectivity has happened and Phase-II connectivity is still on as there are issues in Tamil Nadu over laying of the pipeline. Even in Kerala there are issues. So efforts are continuing but it will be ramped up. It is also important that both FACT and BPCL ramp up their capacities to nearly 2.5 to 4 mmt. FACT is facing some fund issues for its working capital.

Apart from the US, what all markets are you looking at for LNG?

We are looking at all markets. Anybody who gives us cheap gas.