A 3,000-km Expansion Pushes GAIL’s Pipeline Network Into A New Phase
In this week's The Core Report Weekend Edition, Govindraj Ethiraj speaks with Sandeep Gupta, Chairman & MD, GAIL about India’s gas major is rapidly expanding its pipeline grid while betting on AI to boost efficiency, cut costs and future-proof its energy network.
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Mr. Gupta, thank you so much for joining me today.
Yeah, thank you. Thank you.
Welcome. So, you know, you've got a map, it's actually just behind you, but we can't turn now, of GAIL network and pipeline network. So what's changed in that in the last year? We met about a year ago. So what's changed in the last one year?
A lot, actually. GAIL is expanding its network on a pan-India basis. And many new pipelines have been laid and have already been commissioned, gasified or are likely to be gasified very shortly.
So a great part of the country is now covered with our natural gas network. So if I can be precise in the answer, then our Srikakula-Mangul pipeline was gasified sometime back and now we are working on the spur lines to feed certain industries. And that is also nearing completion.
The Mumbai-Nagpur-Jawalpur-Jhalsuguda pipeline, which is a long pipeline serving Maharashtra, Madhya Pradesh and Odisha, is also nearing completion. In fact, some parts are already gasified and at some points there is some work going on, but that is also likely to be commissioned very shortly. If we talk about the eastern part of the country, our Jagdishpur-Bokaro-Dhamra-Haldia pipeline is also complete except for the Kolkata-Haldia and Dhamra-Haldia sections, which are pending because of certain issues of land acquisition or fisheries, etc.
But we are likely to complete that also very, very soon. And as you are aware about IGGLs, our group company, so that is also expanding its network in the eastern part, northeastern part of the country. So we have expanded our presence not only in the natural gas infrastructure, but otherwise also our USAR project of petrochemical is at a very advanced stage and hopefully within this calendar year, the next calendar year, we will commission it.
And at Mangalore, the PTA plant which we acquired through NCLT process is also nearing completion and we should hear about the commissioning date very shortly.
Okay, so I'll come to the petrochemical part in a moment. But on the pipelines, if you talk about two big pipelines or two significant pipelines that you're adding and almost added, what would you say is the percentage addition to the existing pipeline network in this year alone?
I think the pipelines which are, which have been completed and which are getting commissioned is roughly about 3000 kilometres and that is on top of about, say about 16,000, 17,000 kilometres. So that is the proportion.
More than 10%?
Yes, definitely, definitely to about 20%, about 20% the pipeline.
And that seems to be a jump in terms of previous years?
Yes, definitely. The extent of work, actually the initial projects happened, the HVJ pipeline of 1800 kilometres and then the HVJ long ago. In fact, in the last few years, lot of new pipelines are getting commissioned.
We acquired also authorisation for several new pipelines. And in fact, we have in hand authorisation for Gurdaspur-Jammu pipeline, the work on which is going on. We have the authorisation for expansion of DUUPL pipeline, the work on which is again underway.
The Kochi-Kodinad-Mangalore-Bangalore pipeline, which was the Tamil Nadu section of which was stuck, that is also nearing completion, that will also get commissioned very soon. And besides that, we have obtained authorisation for certain LPG pipelines also, expansion of our Jamnagar-Loni pipeline also. And one big thing which I forgot to mention earlier is the completion of the breakwater project at Dabhol, which was long awaited and which will now see the monsoon tankers arriving at Dabhol, which was not available earlier.
So, this is the old Enron, then coming Rasnagiri power plant. Okay. So, in these, the new pipelines that are being raised, I mean, I'm going to try and link it to the macroeconomic picture as well.
But before I do that, what is the source of the gas that's flowing into some of these new pipelines? And who are the newer users, if so?
So, we have a very well diversified portfolio, we are importing from Qatar, we are importing from US, we are importing from Australia. And besides that, we have many portfolio contracts. We have about 16.5 million metric tonne of portfolio out of about 27 million tonne all imported in India. So, a land share of that imports is with GILT. These, besides that, we have entered into certain new contracts also like certain quantities have been tied up with Qatar Fresh and certain new portfolio contracts have also been lined up. And we were in the market and now again, we have revived that.
So, we will be lining some new volumes also. As far as which sectors they are serving, the primary demand growth centre is the city gas distribution. And that is growing at a phenomenal speed.
If we compare with 1920 to 2425, the increase is about 30% in domestic PNG connections and about 20% in the CNG volumes. So, city gas distribution remains the biggest beneficiary of this growth. And in fact, the driver of this growth.
And through city gas distribution network, a lot of commercial establishments and a lot of industrial establishments are also using this gas. So, this is one area. The second biggest area is the fertiliser plants.
There in the past, in the recent past, only a few new fertiliser plants had come up which use gas. But now, with completion of our Mumbai-Nagpur-Jhansugada pipeline, we are taking up the fertiliser ministry because we are interested in two fertiliser plants where we wanted to invest 100% investment in those fertiliser plants. So, work on those two approvals for those two plants is also underway.
So, this is about fertiliser. Then the next consumption centre is power, where we are again constrained because the gas at the present prices is not viable for the power sector. And there is a huge potential if some kind of regulatory environment is there to reduce the pollution in the country, then gas can find a very good use in the power sector also.
Besides that, refineries are using, petrochemical plants are using instead of naphtha, they are using gas for feedstock. And going forward, there will be usage in the steel sector as well as data centres perhaps also. So, a lot of sectors are getting benefited because of this natural gas availability.
Right. And when you talked about city gas distribution, you said it's the fastest growing and the largest chunk or just the fastest growing?
Both. It is both. It is fastest growing as well as the biggest user of the natural gases at present.
Right. And today, of course, all of India is not covered on the city gas distribution.
It is. In fact, the entire India, the entire India, except for the islands, that is Andaman, Nicobar or Lakshadweep, the entire country has been authorised by Petroleum and Natural Gas Regulatory Board into 307 geographical areas. Everything has been authorised.
The work on most of the areas is underway. There are certain areas where the work is going on and the supplies have not yet started because they are either not connected to the pipeline or perhaps it is not viable to transport gas through cascades. So, but very soon, the authorisation is complete at the entire country.
The usage also will start in all the geographical areas.
And when you say usage, you mean retail or industrial or?
It is both. It is domestic PNG, it is CNG in the vehicles, it is commercial establishment in those geographical areas as well as industrial users in those geographical areas.
And so, I live in Mumbai. So, I'm used to pipe natural gas for a while now. I mean, many years now. So, and most of the places…
Three decades now.
Three decades, yeah. So, many of the houses or places I've lived in, I've had them, but that's not the case in many other parts of the country. So, what's the vision here?
The vision is that the entire country now that it is authorised and now that we are expanding our pipeline network. So, we want to lay the pipeline as near as possible to all the geographical areas. Naturally, the authorisation has to come from PNGRB.
We cannot lay the pipelines at our own, but we are taking up with them. PNGRB is also interested in laying the network. So, they will authorise some entity.
If it is not done, somebody else will be authorised based on the bidding price. So, we want the entire country to be covered by the grid lines so that natural gas is available to the users, whether it is CGD or other industries. So, that is our vision.
Right. So, let me come to the balance sheet. I mean, as a chartered accountant, I'm sure you spend equal or if not more time looking at the numbers.
So, tell us about what that map looks like. I mean, as things stand in terms of revenues, the tariffs that you're able to charge and you would like to charge.
Look, my belief is and I believe that should be the case everywhere. Infrastructure must precede consumption and we are largely an infrastructure company. So, it is our responsibility being a government company also that the infrastructure is provided in the entire country and we should not wait for the consumption to pick up and then only we should lay the infrastructure.
Now, with this belief, definitely whatever we are spending in terms of our capex on the natural gas pipelines will not get translated into revenues or profits immediately. But we have a great future going ahead. Second, we are largely a service company.
So, our margins are not that good as would be for any trading company or other company. So, it's largely a fixed income kind of thing based on the tariffs which are provided for these pipelines. But I believe we have a very good return matrix and going forward with increase in the consumption of the gas, our balance sheet will further grow from the current strength.
Okay. So, as you fund future expansion and you did say that GAIL is in an accelerated phase of growth right now compared to previous years because of all these new pipelines that you're laying out plus a lot of city gas distribution networks that are falling into place. So, how is this all going to be funded?
We have a very strong balance sheet. Our debt equity ratio is abysmally low. So, almost less than 0.25 to 1. So, we have great strength in sourcing the funds. We have internal generation also and we have a lot of leverage to borrow more funds. So, fund is definitely not a concern for us.
In fact, we have been after the regulator to authorise more and more pipelines to us. You may be aware that lot of pipelines which were authorised to other entities are stuck. No progress is happening on that.
We have been telling them to authorise, deauthorize them and authorise that to us as well as identify new routes where GAIL can lay the pipeline. So, we do not have any concern as far as funding is concerned. We have enough resources at our disposal.
So, let me take a step back because I wanted to come to Petchem. But before I come to Petchem, as you look ahead at 2026, what is GAIL’s overall vision looking like in terms of the various verticals of energy that you are present will expand into? You talked about fertilisers, for example, and petrochemicals and other areas that you feel including renewable which will add value to the company's growth.
So, as far as physical assets are concerned and our expansion is concerned and our presence in various sectors is concerned, we are working on almost every area besides natural gas, pipelines or marketing which was our mandate when we were established. We have grown much, much beyond that. We have our presence in not only as a supplier, but also as an investor into fertilisers, into power.
We have our own petrochemical facility which we are expanding to a great extent. So, but then our main revenue earners, if I can say in the terms of profits is the transmission and then the marketing. So, you can say that maybe 45% each is the contributing to our profit after tax and the rest are contributing only 10%.
So, our main focus always remains on expanding the transmission network and doing what is necessary for marketing of natural gas sourcing and marketing of LNG. So, these remains our main focus areas.
Correct. But when you invest in let's say petrochemical or fertilisers or let's say alternate energy, what's the sort of blueprint that you're following? I mean, it's not a new blueprint, but I'm saying for someone who's trying to understand what is GAIL about?
We are a natural gas leader of the country. So, our mandate was to provide natural gas infrastructure in the country. We are working on that mandate.
But then in the entire value chain of natural gas, we do not want to miss out on any of the segments, any of the uses. So, that is why I'm saying we are besides supplying natural gas to fertilisers and power, we are also presenting fertiliser and power and in petrochemicals besides owning our own petrochemicals, we are into LPG extraction and supplying that LPG also and in LPG transmission also. Again, we are expanding our LPG transmission capacities.
Besides that, we are now present in renewables also. We have a portfolio of 145 megawatt, 118 of wind and balance of solar, which again in a couple of years time we want to increase by about 300 megawatts. So, we are taking due actions.
As you are aware that we have declared our net zero target. In fact, from we advanced from 2040 to 2035 and we have laid a roadmap in which involves an investment of about 38,000 crore in this period up to 2035. And definitely to achieve that net zero lot of actions we have to take.
So, we are working on that actions that provides electrification of certain equipments, providing electricity to those consumption centres through renewable sources. So, we are taking various actions to fulfil this mandate. So, we want to be present in every sphere of energy segment and in the usage areas of natural gas.
When you talked about electrification, are you talking about the compressors as well? Okay, yes. So, and what's the kind of, I know that you're replacing your gas compressors with electric compressors and these are the compressors used to push the gas along.
Yeah, these are big compressors, these are imported compressors. So, we are working on with the suppliers with the OEMs to see to what extent the conversion can happen and whether it will be viable or not. But we have done a test case and we are confident that it can be done.
And why is it, not why, I mean how much of a cost is it on the operating side and what would you save if you switch to?
We will do everything. In fact, I mentioned you we have a roadmap to spend 38,000 crore. Okay, so this is. I must tell you and I'm glad to inform you that none of this investment will give me a yield which is lesser than our hurdle rate. So, besides meeting our net zero target, we will also ensure that all these projects are viable in itself. Okay.
Now, my question was more from an environment point of view. Since it's, if you're switching from, let's say, gas compressors to electric compressors, I'm assuming you're also doing it for.
Yeah, definitely, definitely. This part of our net zero plan, where we'll be replacing the carbon emissions by sourcing, by sort of arranging that power through renewable sources.
Got it. Okay, so let me talk about something interesting that may have happened from your perspective. So, if you look at the last year, there are a lot of technology changes that have happened in oil and gas.
And I'll come to geopolitics in a moment. But what would you say is something that you found very interesting or exciting that you've seen, either technology or operations or something else?
If I may name one technology, perhaps it is AI, Artificial Intelligence. And again, I am very glad to inform you that we launched the Sancha project, which is conservation and it was conservation of money or profits. So, we launched this project, where the overtone was artificial intelligence.
So, we wanted to do various projects, various use cases, whereby by use of AI, we can improve the performance of our various… Like pipelines and… Yes, definitely.
It can be maybe advanced process control in the petrochemical plants or LPG processing facilities. It can be improvement in hydraulics or line pack management in our pipelines. So, all such areas, and I'm glad to inform you that with a very paltry investment in the consultancy, we are estimating net present value benefit of about 600 crores out of these initiatives itself in a matter of maybe two to three years where these all will get fructified.
Besides that, since I said that AI is one technology where I'm very excited about. So, we are training all our 5000 employees, 5000 plus employees on AI, the first phase of which is already over. So, we ultimately target to make 50 to 75 AI champions in the company, who will then drive the various projects using the AI in their own spheres of work.
So, I believe AI is very, very exciting.
What's the average age of the champions?
Our average age of Galleons is 41 years. And I would not say, if I can conceive this at my age for the company, I believe there would be many 41 plus also would be making this happen.
Okay. And in the projects that you talked about, what's a standard project in terms of AI application and outcomes right now?
I believe the advanced process control using AI in our petrochemical plants and management of our hydraulics and line pack for our natural gas pipeline should be the biggest to use cases, as per me, as per the present assessment. Okay.
And as you look ahead, what are the areas where you feel AI or an AI-like intervention can help either improve efficiency or outcomes?
On the contrary, I do not see any area which cannot get benefited by AI. This is the kind of possibilities which are emerging because of AI.
What about in classic vertical, not verticals, but let's say in accounting, HR?
Definitely, a lot of benefit. In fact, we are already reaping that benefit. There are a lot of use cases.
I would not seem like to single out anyone, but there are a lot of use cases in HR, in finance, in marketing, in petrochemicals, in gas, in every sphere we are seeing, there are a lot of use cases. And in fact, a couple of days back, we were reviewing our this particular project where we are training 5,000 plus employees on AI. The employee in the first phase of training and only about out of 5,000, they have presently only about 3,700 have taken this course, they have proposed about 800 plus use cases themselves.
So, this is the extent of interest which is getting evinced from them.
And this is technical plus non-technical?
Definitely, all the areas. And executives plus non-executives.
Right. And so, there's no fear of AI?
Definitely not.
Many places there?
Definitely not. Because now people are very clear that they have to learn AI, they have to make use of AI if they want to be relevant for the work.
Govindraj Ethiraj
Okay. So, let me ask you about linked aspect, which is data analytics. How is that changed or changing as your pipeline network grows?
And what are the newer kinds of data that you're able to use or extract and apply them?
Sandeep Kumar_GAIL
In fact, as I mentioned, there can be a whole lot of use cases, but like one of the use cases, which one person out of this training suggested is a collection of the data through AI, through our line, natural gas pipelines to identify the spots. There is one intelligent pigging, which is already happening. Working on that data, he could identify the probable 25-30 spots which could be vulnerable in those pipelines.
So, this is one example which came to my mind immediately, but there are a whole lot of use cases out of AI in every sphere of work.
Got it. Okay. So, let me come to the geopolitics, but not the politics, but the geopolitics.
So, I mean, a lot of supply, there's been a lot of supply shifts and might continue and we don't know. So, how is it for a galleon, if that's the right term, in these times?
Fortunately, we have sources. As I mentioned, we are sourcing a large quantity from Qatar, from US and from Australia. Fortunately, these sources were not affected and the supplies, I believe they will not be affected in future also.
And besides that, we have portfolio contracts. We had one after Russia-Ukraine war, we had one instance where one of these suppliers defaulted alleging force majeure, where we challenged it and now the supplies are resumed out of that contract also because it was essentially a portfolio contract. So, as of now, we do not, I do not see any supplies getting disrupted given the kind of sourcing we have as of now.
We had challenges in bringing the tankers through Suez and then we had to route through Cape. So, that in any case…
Suez is practically shut now, isn't it?
It is practically. So, that definitely prolonged the shipping time and also certain costs. But then we had to manage, there was no other alternative.
But as such, we do not see any problem in sourcing natural gas. Existing volumes or future volumes also. There is a lot of gases coming in Qatar as well as US.
So, my question really is, so for a country like India, so you're saying that whatever happens in 2026 or later, there are enough sources of gas and we have the ability to source it from wherever at a reasonable cost. Definitely. Including the transport.
And we do not, for your information, since you mentioned about cost, maybe you are perceiving that the US LNG moving to India is very costly. We do not bring all US LNG to India. We do swaps.
We sell US LNG because it is on FOB basis. We sell US LNG to Europe and source gas from Middle East to India. So, we do swaps and effectively reduce shipping costs to a great extent.
So, and trading is a newer thing for GAIL? No, no, it is not. In this form?
No, no. We have been doing swaps for a very long time. In fact, the US supplies started from 18. We have been doing swaps since then.
So, if you were to look ahead, would you see LNG trading itself being more, I mean, as an area of greater emphasis?
Yes. We established our Singapore subsidiary, which is GAIL Singapore, for trading purposes only. And they are transacting about 25 to 30 or 35 cargoes every year for GAIL as well as for other entities.
And we want to scale it up to higher levels. So, definitely GAIL has a plan to do more LNG trading going forward.
And how do you see prices, not the price specifically, but the movement of prices? If you were to look at the last couple of years, yes, they've been stable. But if you look ahead, and that's why I want to bring back the trading question, do you see that oil players or energy players in India, for example, have to be more alert and adept at responding to prices, including using more sophisticated instruments?
Definitely, definitely, because the kind of volatility we are observing now, whether it is gas or other commodities also, the traders which are managing these desks naturally have to be very, very agile. And they have to have their ears and eyes open, because a lot of changes are happening very frequently. And that is the job of any trader.
So, I believe they are trained for that and they will do their job to the fullest satisfaction.
Got it. So, let me come to India Energy Week. So, you're a kind of coordinating leading public sector unit in the India Energy Week this year too.
So, two questions. So, what is it that you would like to take away from it? And what is it that you would like to share or showcase?
So, first, what we like to share, basically, we want to project the work which GAIL is doing for the country and GAIL’s ability in various spheres, whether it is natural gas or petrochemicals or newer energy sources. We want to showcase our presence not only in India, but to the world. And we will also be scouting for opportunities wherever it is available globally.
And from the participants, whether they are from India or from abroad, we want to collaborate with them, see the opportunities, identify the opportunities for collaboration, whether it is for supply of natural gas or supply of equipments or supply of certain other chemicals, etc., or any joint venture partnership or any funding opportunity. So, we will be interacting with various bankers, various suppliers, where natural gas suppliers and various Indian entities also in all these spheres. So, this is a platform which provides us access for collaboration with Indian parties as well as international players.
Right. So, I just go back to two aspects that you mentioned. One is, of course, fertilisers and the forward investment.
And you also talked about data centres from a power point of view, because worldwide data centres are now eating up a lot of power that is being generated and plants are being set up only to feed that. How are you seeing those and other areas as expansion or diversification, if that is the right word, for GAIL as you look ahead?
So, fertiliser, definitely, as I mentioned, we are given to understand that to substitute the imports of urea, which is happening presently, perhaps 7 to 8 more urea plants have a scope to come up in the country. So, I mentioned to you about two fertiliser plants where we are interested, one in Maharashtra and another is Chhattisgarh. Those will definitely attain finality.
Besides that, and there are other applicants also. So, those 7, 8 plants will get established by GAIL or by others. As far as data centre is concerned, it is in infancy as of now in India.
But the kind of work which is happening in India in the area of AI, we believe there is a lot of data centres which will come up very soon and definitely to fulfil their power requirement. Till the time the battery energy storage systems are viable, I believe they will look for a stable power source because RTC will not be available for renewable power. So, I believe gas will definitely find a place in providing power to them through gas-based power plants.
Right. Last question. So, you know, last time I asked you, what is one of the things that you look at to understand the health of the company?
And you had said that it's really a or the monitoring plant where you can see what the gas pressure is like and where it is. Is there something that you've added to it? Has that changed in any way?
At this point in time, I will say that if I see my team, the team GAIL, excited, I think that is enough for me. And I believe they are. Okay.
That's wonderful to hear. Thank you so much for joining me. Thank you.
Thank you.
