Sanjay Kumar, Director (Marketing), GAIL as a Speaker at 11th CGD Conference Cum Exhibition

And I think all of you know Hindi, you understand Hindi perhaps. So this is a rare occasion when my three gurus are sitting here. First, Dr. Negi, he himself said he has been working since '88. Then A.K. Singh sir and Rajiv Mathur sir are sitting here. Plus this conference is also so unique. I see Amar in the audience. I mean, it is very rare that I see Mr. Jayade in the audience. I also see Rajat Gupta, from whom I used to buy a lot of gas, and a person who worked with me all my life, Kaviraj, went and sat with them.

The context is related to CGD companies. Before that, let us understand what is LNG. LNG is 410 million tons that people bought and sold last calendar year. And out of the 410 million tons of LNG sold worldwide, 25-26 million tons came to India. So you can think that not even 10% of LNG, about 6-7% of the global LNG, we consumed. This particular conference is related to CGD. So in CGD, there are 307 geographical areas, out of which approximately between 125 to 250, pipeline supply has started. So they are all enabled for piped gas. As JP Mishra ji was saying, we can also do it in liquid. In all other GAs, LNG is going in liquid form. They have installed an LNG system to convert LNG into CNG and sell it or sell gas. But before doing all this, it is essential to understand how LNG will come.

So in India, out of the 200 million cubic meters of gas consumed, about 100 million cubic meters is LNG and the other 100 is domestic gas. This domestic gas of 100 million cubic meters, its target and estimates are about 130-135 million cubic meters per day, which will go up in the next 4-5-6 years, after which it will mature. That means production is unlikely to go up. These figures we have noted from the investor presentations of the national oil companies. So, and if the country has to grow, then in the base case scenario, people say that consumption of 300 to 350 million cubic meters per day is possible in the next 7 to 10 years. Majority of that will be only CGD companies. Because in fertilizer, out of 200, 60 million cubic meters is being consumed, and there are no new fertilizer plants on the anvil, so fertilizer consumption will stay at that level. CGD consumption can very easily go up to 100 million cubic meters per day from 41.1, which was the consumption in the month of February and March. So from 41 to 100 million cubic meters, which will be the consumption of the CGD sector, whether it is CNG, DPNG, industrial commercial PNG, etc. So the APM and non-APM gas, for whose allocation there is so much fuss every two-three months, some allocation changes and then companies' shares start falling or rising or running. So that gas is very limited. It will be about 15 to 20 million cubic meters including new well gas. So the remaining requirement of CGD entities has to be met through LNG only.

But LNG is a different kind of business. It's a bulky business. The cargoes that come are 80, 90, 100 million cubic meters of gas cargoes. Their price is 40 million dollars, 50 million, 60 million dollars. So about 15-20 years ago, actually about 12 years ago, we started that in one LNG cargo, there could be five buyers, three buyers, two buyers. So with two buyers we did many transactions. We also do with three and four. In that, the seller sells different parts of LNG to different people. When you do an LNG contract, it is quite a variable contract. It has plus 5% minus 5%. And you have to take the liquid in a tank. So first you buy LNG with a split bill of lading. I am saying this for entities that are small entities. Big companies like Adani, Think Gas, AG&P, IGL, MGL, they can possibly very easily go into the LNG field in three, four, five years, but for small companies it will be quite challenging because when you buy LNG and then you put it in the tank, the tank owners, the biggest owners, the creators of this industry, are A.K. Singh sir of Petronet LNG Limited. They have a capacity of 22 million tons at Dahej, 5 million tons at Kochi, and they are talking about 5 million tons for Gopalpur. So you can imagine that in the country, a single company will have a capacity of 32.2 million tons. When they come to speak, you should ask whether you will give evacuation for more than 30 days, 40 days. Some people are getting 100 days evacuation today. But when a big company like ours goes to talk to sir, we get evacuation of 15 days, 10 days, 12 days. Sometimes we agree for 30 days, sir. But the small CGD companies that have come to this conference, they have come thinking that it is Negi sir's conference, we will learn something. It will help us in our business, in our professional activities. So for them, when you put LNG in the tank, you also have to take out the LNG. Because unless there is a turnover, unless they rotate the volume, they will not make money. So your first challenge will be how many days of evacuation you need. Accordingly, you will be able to buy a very small quantity in the form of LNG. Because if you go for a sizable volume of LNG, you will always face this trouble because your customers are the general public, whether someone is running a car on CNG or someone is consuming gas in a factory or a commercial entity. Their demand is totally related to nature, related to festivals and weather, etc.

Today, particularly today, I want to tell you that in our month, 10 to 12 cargoes come to Indian ports. We have sold one of our two cargoes, and we are on the verge of selling the other cargo to someone else because none of the power plants are taking gas. Very little gas is being consumed. Although we had planned that in May and June, and all of us had planned. I think probably Shell would have also planned, the other buyers, Indian Oil would have also planned that some gas would be sold to power plants. But nothing like that happened. And there is lots of rain all across the country and we are not able to consume that volume. So our entire tank got topped up. The same situation can happen with smaller CGD companies also. Once you do that, after that you will need to go to a pipeline operator so that the gas reaches your GA. Nowadays, our IGX's Mediratta ji is doing a great job. They provide you a delivery supply. And that is why their volume is also increasing. They sell up to 3, 4, 5, 7 million per day on their exchange. I mean, he is only an exchange delivery exchange. But it's a very commendable role that they are playing. So after doing all these things, you will get LNG in your GA. Suppose your GA is, for instance, Bikaner. So you got gas in Bikaner. Now after that, you will have to sell that. You will have to compete with alternate fuels. Somewhere there is diesel, somewhere petrol. Where your commercial and industrial establishment is, you will have to compete with fuel oil. You will have to compete with LPG. The big CGD companies, some of them have a very good business in alternate fuels. They have a tremendous business in LPG. Indian Oil, BPCL, HPCL. They have a huge business in fuel oil. Some companies also sell petcoke. All these things are competing with your gas.

So if you think of buying LNG on a long-term basis, you will have to think, as a CGD entity, whether I will be able to sell this long-term LNG tomorrow or not. If not, you will have an option to sell it on an exchange or find another buyer. In this way, you will have to develop capabilities. The entire system today, whether it is the ministry, the regulator, and the big entities, they are working in this direction, they are trying to help smaller companies start consuming LNG, buying LNG. And if you cannot do all this, there are people like us. We are GAIL. We sell gas. We will give you an RNL formula, or Indian Oil, Bharat Petroleum. On IGX also, it has started selling on formula. But whenever you buy from me or from IGX, everyone has a marketing margin. A small margin. So at the end of the day, after five and ten years, all these CGD entities will also have this ambition. Their ambition will be that they would like to buy LNG directly from the international market. And until that happens, you have the options of buying LNG from different players who are kind of aggregators and an exchange and such situations.

So Mishra ji took a lot of time. I wanted to go to the basics. I think I covered the entire chain: the CGD entity bought LNG, stored it in the tank, regasified it. You all must know the charges. After that, you booked capacity in the pipeline and then the gas reached there. In all contracts, there is some take-or-pay and use-or-pay. You have to keep these things in mind. So what is the indicator? Finally, what to do? Don't take so much headache. I will work in the spot market. I will book gas for a week, book capacity for a week, or take from the exchange. Because those people also book capacity. The market evolves in this way. These are early days for our CGD entities, and gradually these systems will develop. By the time all of us retire, perhaps this market will be so developed that people in their homes, in your domestic PNG, you will be able to consume different types of gas from different suppliers. This happens in some countries, and it is often believed that the infrastructure remains the same, but the gas inside can come in different ways, from different sources. One thing is given: domestic gas, we are not so geologically blessed. Domestic gas does not have much scope according to the current projections. So LNG is the future, and I am quite sure that we will grow gas from 6% to 15% through LNG. Thank you very much.