India’s fuel firms are given ambitious targets, particularly the one to increase natural gas contribution to 15 per cent of the total energy mix. But Prabhat Singh, MD & CEO, Petronet LNG, believes firms have become wiser and are seizing the opportunity to ensure they offer last-mile connectivity.
Petronet will have enhanced capacities and move towards the coveted 20 million tonne production mark, Singh tells Sunitha Natti
What will be the fallout of the US-Iran tensions?
Today, what has happened fortunately is, we are (globally) endowed with a great amount of oil
and gas resources, well-diversified across geographies. Otherwise, if you see what’s really happening today globally where Iran is an issue, Saudi Arabia has been attacked six times, Venezuela, Libya and even Nigeria are having their own problems.
The US also is actually running down on the inventory. So it’s a sure recipe that prices of oil per barrel would be at $130-$140 anyway. But despite all this, it’s barely crossing $70-$71, which actually indicates if there’s a balance that has suddenly come into the market.
Or it could be that there are other mechanisms, which are pushing more material into the system...so I’d think this is the great time for oil and gas (industry) to make the best of what they should and focus on building infrastructure, allowing last-mile connectivity.
Given it’s an opportune time, are investments materialising?
If you look at India, significant investments on infrastructure happened recently such as city gas distribution (CGD) networks aggregating Rs 1.2 lakh crore. Then there’s an effort to complete the national gas grid project, and so many gas terminals are also coming up.
There’s a bent of mind as well as positive action because within eight years if you don’t spend Rs 1.2 lakh crore (earmarked for CGD), you need to pay penalty for that. What more push can the government give? The best example is considered upstream activities when there was a time you are unable to get FIDs (final investment decisions) because there were no long-term contracts signed.
But now people are doing it through their own balance sheets because they are realising that if they don’t take their oil and gas and sell it quickly, someone else will. It has become a wise market today. To that extent, you also see liquified natural gas plants coming up. For instance, nearly 100 mn tonnes of LNG plants are expected in the next 2-3 years. The bottom line is, everything is positive at this juncture.
But isn’t there a demand contraction?
There hasn’t been any slack in demand, but the anticipated increase in demand hasn’t happened as expected. In the calendar year 2018, we’ve imported 22.5 mn tonnes of LNG, in 2019 it’ll be over 23 mn tonnes and in 2020, I think it’ll be around 24 mn tonnes, which isn’t much, but as infrastructure comes up, demand will pick up.
How about the fertilizers sector?
Fertilizer plants that have already been sanctioned to be put up indigenously, that amount of demand of say about 10 to 10.5 mn cubic meters of gas would basically happen in the next 3 or 4 years time or whatever it takes for fertilizer plants to come up. But that’s final and beyond that you don’t need more fertilizer plants. So it’s not too big a demand, but whatever is there has been captured.
How’s Petronet’s expansion taking shape?
At Dahej plant (Gujarat), we already have tanks, and a third jetty is in the pipeline. We are looking at moving towards the 20 mn tonne mark and to that extent we also have to do something with regasification, which is still to happen. Within these parameters, there’s a certain percentage, like we have been already operating at 110-112 per cent capacities, and the tanks and jetties which are coming up will be supplementary.
What’s the progress on making LNG a mainstream fuel?
It’s going in the right direction. I think, we have already started with two LNG buses each at Dahej and Kochi. They are operational, picking employees in shifts, but it’s only a step to say that it’s possible.
Therefore, when you look at the demand for trucks and heavy-duty long-distance trucks, demand is anywhere between 8-9 mn tonnes. Besides, we’ve already picked up the Delhi-Mumbai highway and another 20 locations, where we are going to put up these LNG outlets as a proof-of-concept.
We’ve identified nearly 4,500 km of national highways, where this is going to happen and therefore on a phase-I, II and III basis, starting from 20 to maybe 100 and then 500 locations will be added. Phase 1 will roll out within a year’s time and next 100-500 will take another 1.5 to 2 years.
Basically, the second phase should happen by say 2022-2023 and further expansion beyond that depends on how the market takes because the ecosystem needs to be developed with retail outlets and operating OMCs.
Is the Kochi plant going as per plan?
We are fortunate that we are doing over 1 mn tonne production and the plant is now delivering operating profits. The Kochi-Mangalore pipeline too is being commissioned, perhaps by March, which will further increase its capacity utilisation to about 30 per cent from roughly 18-20 per cent today. This increase should materialize by next financial year.
Can you update us about the overseas ventures?
In Sri Lanka, we are very competitive in our bidding. Right now, we have put all our commercial numbers in place and once the project’s approved, it’ll be up in say at least 26-30 months. Similarly, in Mauritius, we have something in the pipeline, while in Bangladesh, we are back in the process after a change in location.