Acknowledgement

It gives me great pleasure on bringing out the project report entitled, Marketing
strategy of GAIL (India) Ltd. for its products and identifying areas of
improvement.
I wish to express my sincere thanks to Mr. Partha Jana, GM,GAIL for his
valuable suggestions and unflinching support. He picked interest in me to handle the
project and encouraged my work every time. It would have been difficult for me to
complete the project without his expert and experienced views.
I also wish to express my sincere gratitude to Mr. P. !amkrishna,
"r.Manager(Mktg.) and the whole Marketing epartment for their thorough
support and cooperation throughout my training period. !heir invaluable knowledge
and advice guided me towards the completion of the project.
"inally, I would like to thank all my friends and associates whose suggestions
and criticism made a scope for the betterment of this report.
#itendra $umar
%&'()
!egistration #o. $%&$&&'((
*+',
"ynopsis
&)I, -India. ,imited is /avaratna %*0 under the administrative control of 1inistry of
%etroleum and /atural &as. It is primarily engaged in to /atural &as marketing and
transmission activities. !he company operates and maintains about 2,333 kilometers of &as
!ransmission pipelines in the western, southern, and eastern regions of India. &)I, -India.
,imited also offers various petrochemical products and services, which primarily include
films, injection molding, master batch, rote molding, and extrusion coating4 and produces
li5uefied petroleum gas and allied products, such as propane and pentane. In addition, it
offers telecommunications products and services4 supplies naphtha tankers4 and engages in
retail gas business that includes %iped /atural &as distribution, as well as +ompressed
/atural &as -+/&. distribution to transport sector.
Approach and Methodo)ogy
6 !he analysis is based on the study of the existing marketing practice at
&)I,.
6 +ollection of primary data7information regarding the marketing strategy in the form
of interviews.
6 +ollection of secondary data from reliable internet sites for competitor survey and
latest trends in gas marketing.
6 8eaching out to &)I,9s branch offices like &%!+, &!I to collect data about
&)I,9s current trends.
6 !he current market trend was compared to the historical data and then the
recommendations were given.
6 *tudying relevant official &)I, documents to understand the
organi:ational functioning.
Ana)ysis of GAIL
&)I, has ambitions to be a highly efficient integrated gas company, with interests
from field development and production, through national transmission and imports, to
distribution and allied industries such as petrochemicals. !hese ambitions are not
limited to India, as &)I, is building a portfolio of international upstream and
downstream gas assets. It dominates domestic infrastructure and gas purchasing from
domestic suppliers. ;ith huge potential for growth in Indian gas demand, &)I,
should be able to deliver sustained longterm revenues and earnings appreciation.
* +* ,-.I /* "-MMA!0
&)I, -India. ,imited, a /avartna +ompany is a central %*0 under the administrative
control of 1inistry of %etroleum and /atural &as, which was incorporated in <=2> for
transportation of /atural &as as core business. )s on date, &)I, is operating 2333 $ms of
&as %ipelines across India and has a market share of 2?@ in India. &)I, expanded its
business to ,%&, %etrochemicals, !elecom, +ity &as 'istribution, %ower and
Axploration of BilC &as. !urnover to the company for the year D3<3<<is 8s.ED,>?=
+rores.
In India there is demand of about D23 11*+1' of /atural &as and supply is about <=3
11*+' and there is demand supply gap of about =3 11*+1'. !herefore there is lot of
scope in the growth of /atural &as transportation business. Having a strong distribution
network or in &)I,9s case, a comprehensive pipeline network forms a vital part of its
marketing strategy.
!ype of business &)I, is in and the dynamic and forward approach of &)I, management
C working culture embedded into majority of various working level officers would
instill confidence in any stakeholders mind that &)I, will proactively modify
course7approach to excel in the upcoming competitive scenario in India.
.A1L* 23 ,2#.*#."
,hapter .it)e Page #o.
& Introduction E
$ 8eview of ,iterature 2
4 *tudy on &)I,
E.<. +ompany )nalysis <>
E.D. Indian /atural &as *ector F development C outlook <G
E.E. &lobal gas market overview <2
E.>. Anergy market overviewIndia <=
E.?. +ompetitive ,andscape D3
E.H. /atural gas demand DH
E.G. /atural gas marketing DG
E.2. +ontracts D2
E.=. &as pricing in India E?
E.<3.&as demand supply projection ?D
E.<<.&)I,9s pipeline network ?=
E.<D.%etrochemical marketing HD
E.<E.+ity gas distribution 2?
5 8esults C 'iscussion =D
' +onclusion C *cope of further work =H
6 8ecommendations for improvement ==
( 8eferences <3<
7 Anne8ures
Anne8ure & 9 &as transportation tariffs in India <3D
Anne8ure $ 9 &as 1anagement *ystem <32
Anne8ure 4 9 $ey conversion factors <<<
Anne8ure 5 9 ,ist of abbreviations used <<=
,hapter:&
Introduction
,ompany "napshot
&)I, -India. ,imited operates as a gas transmission and marketing company in
India. It primarily engages in natural gas marketing and transmission activities. !he
company operates and maintains approximately
2333 kilometers of regional pipelines in the western, southern, and eastern regions of
India. &)I, -India. also offers various petrochemical products and services, which
primarily include films, injection molding, master batch, rote molding, and extrusion
coating4 and produces li5uefied petroleum gas and allied products, such as propane
and pentane. In addition, it offers telecommunications products and services4
supplies naphtha tankers4 and engages in retail gas business that includes piped
natural gas distribution, as well as compressed natural gas fuel for transportation
purposes.
"urther, the company, through its joint venture, &ujarat *tate Anergy &eneration, ,td.,
produces power utili:ing natural gas. )dditionally, &)I, -India. engages in
exploration and production activities. It holds participation interests in <D
exploration blocks, including D /A,%I blocks,
H /A,%II blocks, D /A,%II blocks, and D "armin (locks. !hese blocks span from
on land to deep offshore in ;est +oast and Aast +oast of India. It also involves in
li5uefied natural gas import and re gasification, transportation of re gasified
li5uefied natural gas -8,/&., and marketing of 8,/&.
&)I, -India. has joint venture agreements with (harat %etroleum
+orporation ,imited4 &overnment of 'elhi4 (ritish &as %lc4 Indian Bil +orporation
,imited4 Hindustan %etroleum +orporation, ,td.4 &overnment of 1aharashtra4
and Bil and /atural &as +orporation ,imited.
!he company was formed in <=2> under the name &as )uthority of India
,imited and changed its name to &)I, -India. ,imited in D33D.
/ision, Mission and 2;<ectives of GAIL
,orporate /ision
(e the leading company in the natural gas and beyond with global focus, committed
to customer care, value creation for all stake holders and environmental
responsibility.
,orporate Mission
!o accelerate and optimi:e the effective and economic use of /atural &as and its
infrastructure to the benefit of national economy.
,orporate 2;<ectives
!he primary corporate objectives of the company areJ
6 !o focus on all aspects of the gas value chain including exploration,
production, transmission, extraction, processing, distribution of natural
gas and their related processes, products and leveraged services.
6 !o achieve all round excellence in endeavor towards services for the nature
and the people F !he 0ltimate +ustomer.
6 !o relentlessly strive to exceed the expectations of the customers, both
internal and external, and stakeholders by endeavoring to create superior value
through the use of bestinclass standards of operations, technologies and
practices related to safety, health and environment.
6 !o use technology stretched to its limit.
6 !oeenable all aspects of business as far as possible.
Gas Marketing
&)I, sells around ?< @ -excluding internal usage. of /atural &as sold in the
country. Bf this, EG@ is to the power sector and DH@ to the fertili:er sector.
&)I,Ks vast operations and projects includeJ
6 2333 kms of /atural &as highpressure trunk pipelines. )dding another
about ?333 $ms of /atural &as %ipelines in next > years, some are under
implementation.
6 !runk %ipelines with the capacity to carry <?? 11*+1' of /atural
&as across India. )dding another capacity of <E3 11*+1' in next > years.
6 *upplying nearly G3 million cubic meters of /atural &as per day as fuel to
power plants for generation of about ?D33 1; of power, as feedstock for gas
based fertili:er plants to produce about << 11!%) of urea and to over ?33
other small, medium and large industrial units to meet their energy and process
re5uirements.
6 &)I,9s D,233 km long Ha:iraIijaipur#agadishpur -HI#. pipeline and H<3
km 'ahejIijaipur pipeline -'I%,., between them, cater to all the gas based
power plants, fertili:er plants, and industries along the entire ;est/orth
corridor of India.
!hey also provide access to their pipelines, to third parties, for the transmission of
/atural &as. +urrently &)I, transports about 2 11*+1' of /atural &as on behalf
of various shippers.
,ity Gas istri;ution
&)I, was the first company in India to pioneer +ity &as 'istribution project. In
addition to marketing /atural &as through !runk and 8egional !ransmission systems,
&)I, has formed joint venture companies to supply gas to households, commercial
users and the transport sector. ;ithin the short span of <3 years, &)I, has
expanded its +/& business from one company -1ahanagar &as ,td.. in India to eight
companies in India and four companies abroad.
&as supplied by &)I, to retail gas distributors serves more than G.3 ,akhs
automobiles as +ompressed /atural &as -+/&. and over G.?3 ,akhs households as
%iped /atural &as -%/&. in the cities of /ew 'elhi, 1umbai, Iadodara, Iijayawada,
Hyderabad, $anpur, )gra, ,ucknow, %une, $ota, *onepat, Indore, (areilly. &)I,Ks
+ity &as 'istribution initiatives are not confined to India. It has established its
presence in the +/& and +ity &as arenas in Agypt through e5uity participation in
"ayum &as, *hell +/& and /atgas4 and has ac5uired a stake in +hina &as Holding to
pursue +/& opportunities in mainland +hina. &)I, plans to develop +ity &as markets
worldwide in collaboration with global oil and gas majors.
Petrochemica)s
"or &)I,, petrochemicals were part of its master plan for vertical integration
and utili:ation of every fraction of natural gas &)I, uses natural gas as the
feedstock for the manufacture of H'%A7,,'%A. Instead of setting up its plant in
western India -1aharashtra and &ujarat. as was traditionally the case, they opted to
base it in northern India, looking at the large consumer base and demand for plastics.
In doing so, they were able to provide impetus to the regional petrochemical
downstream units to expand their production capacity in view of the proximity of
source of raw material.
In view of difficulties being faced by consumers in changing scenario of market
liberali:ation and opening up of economy to global competitions, &)I, has decided to
revise and modify in terms of gas supply agreements.
However, in the recent past it was further experienced that with the growing market
globali:ation and competition, further corrective and relief measures re5uired to be
extended to other terms and conditions, as the current policy and terms7conditions in
the gas supply contract being somewhat one sided is not able to address problems to
the actual position of gas supplies and market conditions.
%resently &)I, is the major player in natural gas supplies. However there are other
players who have come into the market of natural gas supplies. It would not be long
that these players streamlines their contractual terms and conditions which consumers
may feel to be more attractive. 'ue to years old policy being followed by different
functional groups as an inflexible set of rules to handle the grievances of the
customers, &)I,9s image is at stake.
!herefore &)I, needs to address the changing scenario in more proactive manner
and at same, address long pending customer grievances. !his is how &)I, can endure
competition.
Approach and Methodo)ogy
6 !he analysis is based on the study of the existing marketing practice at
&)I,.
6 +ollection of primary data7information regarding the marketing strategy
in the form of interviews.
6 +ollection of secondary data from reliable internet sites for competitor survey
and latest trends in gas marketing.
6 8eaching out to &)I,9s branch offices like &%!+, &!I to collect data about
&)I,9s current trends.
6 !he current market trends was compared to the historical data and then the
recommendations were given.
6 *tudying relevant official &)I, documents to understand the
organi:ational functioning.
,hapter:$
8eview of ,iterature
"r o m t h e 1 e m o r a n d u m o f 0 nd e r s t a n di n g b e t w ee n 1 o % C / & a n d
&)I, -Ind ia . ,td 32 3 =, i t wa s fou nd ou t th atJ
!he maximum realistic /atural &as 1arketing projections have been derived
based on domestic gas 7 8,/& availability trends during the year
D3323= C D33=<3 -anticipated.. !hese are as followsJ
Axcellent Iery &ood &ood "air %oor
!B!),-1arketing. 2G.33 2E.>G G=.>D G?.EG G<.ED
!B!),-!ransmission. <<>.2< <<3.G> <3?.E> ==.=> =>.?>
!he targets for natural gas will be subject to correction depending upon the actual
5uantity and 5uality of /atural &as received from B/&+ 7 BI, 7 #I 7 %etronet ,/&
,imited7*pot ,/&.
GAIL's Customer Satisfaction Index
+ustomer satisfaction Index aims to translate the customers feedback to improve
operational performance, product and service 5uality. "or the purpose of
calculating +*I, &)I,Ks activities have been divided into following five business
segmentsJ -i. /atural &as, -ii. %etrochemicals, -iii. ,i5uid Hydrocarbons, -iv. ,%&
!ransmission, -v. &)I,!A,
+*I "eedback form has been developed for each business segments product wise.
"eedback form is in the form of 5uestionnaires and is released through 5uarterly
campaigns. +ustomers fill in the feedback form online through internet access.
)verage Luarterly +*I of each (usiness area mentioned is calculated across &)I,.
;eighted average is then calculated based on the percentage contribution of each
(usiness area to &)I,Ks overall turnover. !his ;eighted )verage is reported
5uarterly as &)I,Ks over all +*I.
I n th e r e v ie w r e p or to f / o v e m b e r D 3 3 E b y ! + * ,th e b ac k g ro u n d s o f & ) I , 9 s ac tiv iti e s w e r e
p rov id e d a s f o ll o w sJ
&as )uthority of India ,imited -&)I,., one of IndiaKs leading %ublic *ector
Anterprises, is the largest gas transmission and marketing company in the +ountry.
!he activities of the company range from gas marketing and distribution through trunk
and regional systems, to retailing of natural gas to gas processing for production and
marketing of ,%&, ,i5uid Hydrocarbons and %etrochemicals.
!oday &)I, owns and operates over 2333 km of pipeline and has about 2?@
market share in the natural gas business in India. )lso, more than half of the total
0rea production in India is gasbased, out of which &)I, contributes more than
=3@, thus making a significant contribution to IndiaKs agriculture sector.
&)I, is one of the largest ,%& producers in India, with a li5uid hydrocarbon
production -including ,%&. exceeding < million tones per annum, and it operates the
countryKs largest &asbased ,%& extraction plant. &)I, has now introduced the
concept of ,%& pipelines in India, and is currently operating the worldKs longest
<,D?3 km exclusive ,%& pipeline from &ujarat in western India to ,oni near /ew
'elhi in /orth India. !he project cost is 8s <D.? billion.
&)I, also possesses a vast telecommunication network, which contributes
significantly to the high level of system reliability of operations, online real time
communication and monitoring higher productivity. &)I, project offices have
been set up at the places where the plants, complexes etc. are located.
"or the past five years the company has been winning the KAxcellent %erformance
)wardK from the Indian &overnment. &)I, has its Head5uarters at /ew 'elhi
and the various branch and project offices are located all over India.
&)I, is diversifying in new business areas like wind and solar power and actively
scouting for opportunities in gas based power generation projects. &)I, successfully
commissioned a wind energy power project of >.? 1; capacity in $utch 'istrict of
&ujarat for captive consumption at +ompany9s installations at &andhar, *amakhiali
and $andla in &ujarat. &)I, is planning to set up over <<? 1; of wind based
renewable power projects at investment of nearly 8s G33 crore in various states.
#e= 1usiness Initiatives
&)I, has been reorienting its business approaches and strategies in view of the
emerging competition and entry of formidable national and international players.
&)I,, therefore, is primarily focusing on three major aspects as its short7medium term
strategyJ
6 *ourcing of gas.
6 Axpansion of existing markets and development of new markets
6 Axpansion of existing pipeline infrastructure as well as
development of new pipeline facilities
6 ;ind power projects
2perationa) *8ce))ence
Bperations and 1aintenance of plant and e5uipment plays a pivotal role in the
growth and development of an industry. In the &as Industry where millions of cubic
meters of gas per day are transported through crosscountry pipelines, Bperations and
1aintenance -BC1. assume significant importance. BC1 of pipelines and plants
helps ensure a highly reliable and operationally safe system, providing not only un
interrupted supply of gas to consumers, but also maximi:ing the throughput.
&)I,Ks emphasis is not only on maximi:ing production and sale of natural gas but
also to achieve this with least consumption of energy. Avery effort is centered on
energyefficient operation of the plants, machinery and processes.
!he BC1 arm of &)I, is constantly making efforts to improve upon its performance
in this area. )vailability of the bestdedicated telecommunication7*+)') facilities in
the country has been fully utili:ed for online monitoring of machine7process
parameters along the pipeline. Bbserve, 'etect, )naly:e, +ompare and Improve are the
watchwords for operations on daytoday basis.
8e v ie w i n g t h e In f r a l i n e j o u r n a l J / at u r a l g a s i n I nd i a D 3 3 G , i t w a s f o u n d
t h a t &)I , i s a b o u t t o l a y f i v e n e w / a t u r a l & a s p i p e l i n e s , t h e y a r e J
<. 'adri(awana/angal.
D. +hainsa&urgaon#hajjhar
E. #agdishpurHaldia
>. 'abhol(angalore
?. $ochi$ootanad(angalore71angalore.
Implementation7+onstruction activities have begun in above mentioned
pipelines in phases except #agdishpurHaldia %ipeline.
,hapter:4
"tudy on GAIL
4.&. ,ompany Ana)ysis
&)I, has ambitions to be a highly efficient integrated gas company, with interests from
field development and production, through national transmission and imports, to
distribution and allied industries such as petrochemicals. !hese ambitions are not
limited to India, as &)I, is building a portfolio of international upstream and
downstream gas assets. It dominates domestic infrastructure and gas purchasing from
domestic suppliers. ;ith huge potential for growth in Indian gas demand, &)I,
should be able to deliver sustained longterm revenues and earnings appreciation.
">2. Ana)ysis
6 "trengthsJ
<. +ontrols gas transmission infrastructure4
D. 'ominates gas processing4
E. 1ajor petrochemicals involvement4
>. &rowing international portfolio4
?. *hare of ,/& import projects.
6 >eaknessesJ
<. ,imited financial or operational freedom4
D. +ost and efficiency disadvantages4
E. ,ack of upstream gas exposure.
6 2pportunitiesJ
<. %otential for efficiency gains4
D. !ransmission system upgrading7expansion4
E. %etrochemicals capacity expansion4
>. *trong domestic energy demand growth.
6 .hreatsJ
<. 8ising investment re5uirement4
D. +hanges in national energy policy.
Market Position
*taterun &)I, is responsible for the operation of IndiaKs largest gas transmission
network -at 2,333km. and a <,DH=km ,%& pipeline. !he firm is also one of IndiaKs most
active foreign investors. &)I, owns and operates seven gas processing facilities with
an aggregate production capacity of
<.Emn !%) of ,%&, %ropane, %entane and *odium (en:ene %hosphate -*(%..
&)I, operates the countryKs largest gasfired petrochemicals complex, with an
installed %olyethylene -%A. capacity of ><3,333 !%). &)I, is setting up another %etro
+hemical +omplex through subsidiary in )ssam with an installed capacity of
D23,333 !%). !he firm holds stakes in +ompressed /atural &as -+/&. projects in
1umbai, 'elhi, $anpur, %une, (areilly, ,ucknow, )gra, 0jjain, 'ewas, $ota and
)ndhra %radesh as well as two projects in Agypt and one project in +hina. &)I, is a
partner in a <?H 1; gasfired power plant operated by the &ujarat *tate Anergy
&eneration ,td, as well as the %etronet ,/& consortium that will deliver ,/& to the
Indian market. Bver the past few years, &)I, has diversified into the domestic
AC% sector, holding stakes in << blocks in India and one in 1yanmar.
"trategy
In a recent interview with a news agency, &)I, stated that it planned to invest
I/8?bn during the next five years to purchase e5uity stakes in foreign gas companies
and overseas exploration work. !he Indian firm is interested in picking up an e5uity
stake in AgyptKs #i)e /a))ey ,orporation and exploration concessions in (ra:il, the
%hilippines and 1yanmar. &)I, is also exploring the viability of a subsea gas pipeline
link between an offshore gas field in 1yanmar to India.
Latest eve)opments
#uly D33G saw &)I, declare its interest in buying an e5uity stake in the 0*M<3bn !rans
*aharan pipeline. !he planned >,E33km gas pipeline, which will run from /igeria
through /iger and )lgeria, will have a capacity of D3
E3 bcm and is scheduled to come on stream in D3<?. &)I,Ks representatives have
already met officials from /igeria and )lgeria in (russels to discuss involvement in the
project. &)I, has also signed a deal with B/&+ to pool resources to maximi:e output,
transportation and marketing of gas.
&)I, was due to ink a deal with *hell to gain access to *hellKs Ha:ira ,/& terminal for
import purposes on a toll basis. !he two firms plan to build a 0*M<3mn pipeline that
will connect the terminal to &)I,Ks 'ahej0ran pipeline, thereby rendering Ha:ira a
part of &)I,Ks nationwide gas grid, the largest transmission network in the country.
(oth sides stand to benefit from the proposed project, with India having facilitated
access to gas imports and *hell gaining access to &)I,Ks domestic gas clients,
especially those in the northern markets.
4.$. India #atura) Gas "ector 9 eve)opment and 2ut)ook
6 'eregulation of domestic gas prices has been gradually gathering
momentum with the &oI, after a delay of nearly five years, effecting an
increase in prices in #uly D33? for core sector consumers and deregulating
prices for other consumers. 8,/& has also been successfully marketed by
the offtakers, and private7#I producers have been able to revise prices upwards.
(ecause of these developments, nearly ?3@ of the market today is buying gas at
market determined ratesNa significant change when compared with the scenario
in the recent past.
6 !he price of 8,/& supplied by %,,, the main supplier in the Indian markets
at present, is also expected to undergo a significant change beginning #anuary
D33=, when the currently existing cap is lifted and prices get gradually aligned
with the #++ prices. !he incremental ,/& to be sourced in the Indian market is
also expected to be available at higher prices than contracted hitherto, given the
tight demandsupply levels for ,/& current and envisaged in the global market.
6 8egulatory policies governing the gas sector are with the appointment of the
regulator under the %/&8(.
4.4. G)o;a) Gas Market 2vervie=
6 !he world had <2<.>H trillion cubic meters -tcm. of proven natural gas
reserves at endD33H, according to the (% *tatistical 8eview of ;orld Anergy,
#une D33G. 0nlike oil, where H<@ of global proven reserves are located in the
1iddle Aast, there is a broader distribution of gas reserves across the globe, with
><@ situated in the 1iddle Aast and E?@ in Aurope and Aurasia. !he )sia
%acific and )frica regions have 2@ each of the remainder, with /orth )merica
and ,atin )merica each holding >@.
6 &lobal gas consumption has grown by nearly DG@ over <==HD33H,
compared with oil demand growth of <G@ over the same period.
6 /atural gas is used for several purposes and applications. !he two principal
sources of demand are the industrial and residential sectors, which accounted for
E?@ and EE@ of global gas consumption in D33?, according to the International
Anergy )gency -IA).. 'emand from the commercial and public services sectors
accounts for around <E@, <3@ is used as feedstock for the petrochemicals
industry and around H@ is used in transportation.
6 In addition, as investment in li5uefied natural gas -,/&. increases and the global
,/& trade develops, the gas market may begin to look more like the oil market
over time.
6 !he worldwide trend observed over recent years of a shift from oil to gas
fired power stations, the growing use of gas in enhanced oil recovery -AB8.
processes and unconventional oil production, and global efforts to reduce gas
flaring will underpin rising demand.
4.5. *nergy Market 2vervie=9 India
6 India is the worldKs fifthbiggest energy consumer and continues to grow rapidly.
It is the thirdbiggest global coal producer, but has limited supplies of oil and
natural gas.
6 Bil accounts for about E?@ of IndiaKs total energy consumption, with its share
of the mix having risen from E3@ earlier this decade. IndiaKs ?.H=bn bbl of proven
oil reserves -(% *tatistical 8eview of ;orld Anergy, #une
D33G. represent just 3.?@ of the worldKs total, with 1umbai High being the
biggest producing field. !he 'ecember Bil C &as #ournal survey reports
reserves lower at ?.HDbn bbl. IndiaKs average oil production level -total li5uids.
for D33H was 23G,333b7d.
6 In terms of natural gas, India accounts for 3.>@ of global reserves and just over
<@ of production. )gain, most of the gas resides in 1umbai High. 1ajor natural
gas discoveries by a number of domestic companies hold significant medium to
longterm potential, with !e)iance Industries, 2i) ? #atura) Gas ,orporation
-B/&+. and Gu<arat "tate Petro)eum -&*%+. all reporting significant
deepwater finds.
6 !he oil and gas sector is dominated by stateowned enterprises, although
the government has taken steps in recent years to deregulate the industry and
encourage greater foreign participation.
6 IndiaKs stateowned B/&+ is the largest oil company, dominating the up stream
sector and accounting for roughly three5uarters of the countryKs oil output during
D33H, according to Indian government estimates.
6 !he Indian government has introduced policies aimed at increasing
domestic oil production and oil exploration activity. )s part of this effort, the
1inistry of %etroleum and /atural &as crafted the /ew Axploration ,icensing
%olicy -/A,%. in D333, which permits foreign companies to hold <33@ e5uity
ownership in oil and gas projects. Iery few oil fields are currently being
operated by IB+s.
6 !he Indian 2i) ,orporation -IB+. is the largest stateowned company in the
downstream segment, operating <3 of IndiaKs <G refineries and controlling about
three5uarters of the domestic oil transportation network. !e)iance Industries, a
private Indian firm, opened IndiaKs first privately owned refinery in <===, and has
gained a considerable market share.
6 !here is a focus on greater gas, nuclear and hydro use in the energy mix,
although coal will continue to dominate during the forecast period to D3<<.
4.'. ,ompetitive Landscape
$ey players India Bil and &as *ector
6 B/&+ ,imited
6 Bil India ,imited
6 Indian Bil +orporation ,imited
6 (harat %etroleum +orporation ,imited
6 Hindustan %etroleum +orporation ,imited
6 +hennai %etroleum +orporation ,imited
6 1angalore 8efinery and %etrochemicals ,imited
6 $ochi 8efinery ,imited
6 +airn Anergy
6 8eliance Industries ,imited
6 %etronet ,/& ,imited
6 *hell
6 &ujarat *tate %etroleum +orporation
"he)):"ummary
*hell India is active in lubricants, ,%&, petrochemicals and solar energy. It has moved
into the ,/& business and has also received permission to set up a network of D,333
service stations. (harat *hell ,td -(*,. is a ?<J>= #I that produces and markets a
range of *hellbranded lubricants in India through (%+,Ks retail outlets, authori:ed
dealers and to industrial customers. (%+, agreed to sell its >=@ stake to *hell in
"ebruary D33G. *hell &as -,%&. distributes ,%& in western and central India, while
*hell *olar markets solar powered home lighting units in rural districts of *outh India.
*hell has also opened the 0*MH33mn ,/& terminal in Ha:ira, &ujarat. +apacity will be
doubled to ?mn tpa in two yearsK time and there is scope for a further expansion to <3mn
tpa if the market continues to expand. However, volumes have so far been below
expectations as the government seeks to secure cheaper ,/& contracts.
Petronet L#G:"ummary
%etronet ,/& was set up by the government of India to import ,/& and set up
domestic ,/& terminals. !he companyKs major shareholders include &)I,, B/&+,
IB+, (%+, and Ga@ de "rance. !he #I signed a D?year *%) with !as Laffan L#G
Ltd -8asgas. in <=== for the import of G.?mn tpa of ,/& starting in D33>. %etronetKs
first ,/& terminal, a ?mn tpa facility located in 'ahej, &uj arat, started up operations in
#anuary D33?. !he #I is also planning to construct a second D.?mn tpa terminal in
$ochi, $erala, but the project has been delayed until the end of D3<3. !he key partners in
%etronet are reportedly seeking to sell their interests or seek a winding up of the %etronet
India business.
G"P,: "ummary
In )ugust D33G, Gu<arat "tate Petro)eum ,orporation -&*%+. published a shortlist of
eight IB+s that are interested in ac5uiring a D3E3@ stake in $& B*/D33<73Ethe
'een 'ayal blockin the $rishna&odavari -$&. basin. &*%+, whollyowned by the
&ujarat state government, discovered gas in the $& basin in #une D33?, where it
estimates gas reserves to be around ?HHbcm, alongside un5ualified volumes of
crude oil. !his is the second time &*%+ has shortlisted a number of IB+s to ac5uire an
interest in the project. +urrently, &*%+ holds an 23@ interest in the field, with +anadaKs
Geog)o;a) !esources and IndiaKs Ju;i)ant *npro owning the remainder.
2#G,
" t re n g t h s
6 0nrivalled exploration portfolio4
6 ,eadership in domestic oil and gas supply4
6 &rowing downstream oil presence4
6 &rowing international portfolio.
> e a k n e s s e s
6 ,imited financial or operational freedom4
6 +ost and efficiency disadvantages4
6 'eclining output from mature assets.
2 p p o r t un it ie s
6 Huge cost cutting potential4
6 Higher recovery rates from existing fields4
6 0ntapped domestic oil and gas potential4
6 *trong domestic energy demand growth.
. h r e at s
6 8ising investment re5uirement4
6 ,ongterm decline in oil production4
6 +hanges in national energy policy.
Market Position
B/&+ is the Indian governmentKs main upstream vehicle in what is a largely state
controlled oil and gas sector. !he government owns G>.<>@ of the company, which
accounts for approximately H< @ of IndiaKs crude oil output and
G< @ of natural gas production. It is also diversifying into refining and oil distribution,
while attempting to build an international upstream asset base. B/&+ now owns
2=@of 1angalore 8efinery and %etrochemicals ,td -18%,., which operates an
<=>,333b7d refinery in southwestern $arnataka *tate. !he company has received
authorisation to open a network of H33 service stations, while 18%, was granted
approval in "ebruary D33> to set up ?33 retail outlets. It is E3@ partner to +airn India in
the important new 8ajasthan oil discoveries and has made substantial gas discoveries in
recent months, located mainly offshore in the $& basin.
Aindustan Petro)eum ,orporation Ltd (AP,L)
" t re n gt h s
6 *trong refining and distribution position4
6 *ubstantial retail expansion planned.
>eaknesses
6 ,imited financial or operational freedom4
6 +ost and efficiency disadvantages4
6 ,ack of full integration benefits.
2pportunities
6 *ubstantial cost cutting potential4
6 8efinery upgrading7expansion4
6 Axtension of retail network4
6 *trong domestic energy demand growth.
. h r e at s
6 8ising investment re5uirement4
6 "uels competition from IB+s and Indian groups4
6 +hanges in national energy policy.
Market Position
H%+, is the second largest integrated refining and marketing group in India,
accounting for around DD@of the countryKs refining capacity. !he 1umbai refinery has an
installed capacity of ?.?mn tpa, while the Iisakhapatnam facility has a
G.?mn tpa -<?D,333b7d. capacity. It has a minority stake in the =mn tpa 18%,, although
it recently agreed to sell its stake to the unitKs majority owner B/&+, and also has an
interest in the %etronet ,/& consortium. %roducts are distributed throughout a network
of approximately G,=3= retail outlets.
Indian 2i) ,orporation Limited (I2,L)
" t re n g t h s
6 +ountryKs biggest oil refiner4
6 ,eading fuels distributor4
6 1ajority owner of oil infrastructure.
> e a k n e s s e s
6 ,imited financial or operational freedom4
6 +ost and efficiency disadvantages4
6 ,ack of integration benefits.
2 p p o r t un it ie s
6 *ubstantial cost cutting potential4
6 8efinery upgrading7expansion4
6 Axtension of retail network4
6 *trong domestic energy demand growth.
. h r e a t s
6 8ising investment re5uirement4
6 "uels competition from IB+s and Indian groups
6 +hanges in national energy policy.
Market Position
*taterun IB+ is the countryKs largest commercial enterprise. It holds a E3@ share of the
refinery sector, the countryKs largest retail and oil pipeline networks and a ?H@share of
the fuels segment. !he company owns and operates <3 of the countryKs <? refineries
with a total processing capacity of <.Dmn b7d, e5ual to an approximate >3@ market share.
It also operates the countryKs largest retail network of over 2,333 service stations,
=D aviation fuel stations and G2 ,%& bottling plants, which are served by <2D bulk
storage terminals, installations and depots. 1arket share in the fuels segment is
approximately ?H@, with the inclusion of the D,GH? service stations belonging to its
affiliate I(%. IB+ also operates the countryKs largest network of crude and product
pipelines -G,333km. with a total transport capacity of >E.>?mn tpa.
,ompetitors in the petrochemica)s ;usiness are9
<. 8eliance %etrochemicals
D. Haldia %etrochemicals ,td.
E. Imports
4.6. Gas "upp)y And emand
In terms of natural gas, the region in D33G consumed an estimated >><bcm, with demand
of HGGbcm targeted for D3<D, representing the strongest growth globally -H?.DG@
between D33H and D3<D.. %roduction of an estimated E?3bcm in D33G should reach
?3<bcm in D3<D, but implies net imports rising from an estimated
=<bcm per annum in D33G to <GHbcm in D3<D. !his is in spite of many )sian gas
producers being major exporters. #apanKs share of gas consumption in D33G was an
estimated <=.2>@, while its share of production is minimal. (y D3<D, its share of gas
consumption is forecast to be <?.EG@.
4.(. #atura) Gas Marketing
/atural gas marketing is a relatively new addition to the natural gas industry, beginning
in the mid<=23Ks. %rior to the deregulation of the natural gas commodity market and
the introduction of open access for everyone to natural gas pipelines, there was no
role for natural gas marketers. %roducers sold to pipelines, who sold to local distribution
companies and other large volume natural gas users. ,ocal distribution companies sold
the natural gas purchased from the pipelines to retail end users, including commercial
and residential customers. %rice regulation at all levels of this supply chain left no
place for others to buy and sell natural gas. However, with the newly accessible
competitive markets introduced gradually over the past fifteen years, natural gas
marketing has become an integral component of the natural gas industry. In fact,
the first marketers were a direct result of interstate pipelines attempting to recoup losses
associated with long term contracts entered into as a result of the oversupply
problems of the early <=23s.
!he role of natural gas marketers is 5uite complex, and does not fit exactly into any one
spot in the natural gas supply chain. 1arketers may be affiliates of producers,
pipelines, and local utilities, or may be separate business entities unaffiliated with
any other players in the natural gas industry. 1arketers, in whatever form, find buyers
for natural gas, ensure secure supplies of natural gas in the market, and provide a
pathway for natural gas to reach the enduser.
Assentially, marketers are primarily concerned with selling natural gas, either to
resellers -other marketers and distribution companies., or end users. Bn average, most
natural gas can have three to four separate owners before it actually reaches the end
user. In addition to the buying and selling of natural gas, marketers use their
expertise in financial instruments and markets to both reduce their exposure to risks
inherent to commodities, and earn money through speculating as to future market
movements.
4.7. ,ontracts
%hysical trading contracts are negotiated between buyers and sellers. !here exist
numerous types of physical trading contracts, but most share some standard
specifications including specifying the buyer and seller, the price, the amount of
natural gas to be sold -usually expressed in a volume per day., the receipt and delivery
point, the tenure of the contract -usually expressed in number of days, beginning on
a specified day., and other terms and conditions. !he special terms and conditions
usually outline such things as the payment dates, 5uality specifications for the natural
gas to be sold, and any other specifications agreed to by both parties.
At GAIL, there are three different types of contracts for the Gas to be marketed:
<. )%1 +ontract
D. 8,/& +ontract
E. %1! +ontract
PM. contract:3eatures
*),A )/' %08+H)*A B" &)*
*ellers agree to deliver, on a 'aily basis, to the (uyer one hundred percent -<33@.
of the 'eliverable Iolume of *ales &as at the 'elivery %oint and the (uyer,
provided the &as is made available and tendered for delivery by the *ellers, agrees
to take and purchase, on a 'aily basis, one hundred percent -<33@. of the
'eliverable Iolume of *ales &as provided, however, that *ellers, at *ellers9 sole
discretion
!he 'eliverable Iolume on the date of execution of this +ontract is <G.E
11*+1' e5uivalent to OH<G,2?G 11(!07 'ayP which 'eliverable Iolume
shall vary every Luarter based on the 'elivery %rofile. !he use of 11*+1' in
this +lause D.<-c. is for the purpose of reference only.
Aach of the *ellers shall, severally sell their respective %articipating Interest
share of *ales &as to the (uyer in the 5uantities set forth in this +ontract and the
(uyer shall purchase from each *eller that *eller9s %articipating Interest share of
*ales &as and pay for such *ales &as in accordance with the terms of this
+ontract.
'uring the +ontract %eriod, if there is any )dditional &as from the %anna
1ukta and 1id C *outh !apti "ields that becomes available for sale then the
*ellers shall use reasonable endeavours to sell and deliver such )dditional &as
to the (uyer and the (uyer shall use reasonable endeavours to purchase and
receive the same, at the 'elivery %oint at the *ales &as %rice.
Bn any 'ay, the (uyer may nominate for delivery at the 'elivery %oint a 5uantity
of *ales &as up to the 'eliverable Iolume.
In the event that the *ellers are compelled to shutdown the *ellers9 "acilities
or curtail production for reasons arising out of the (uyer9s inability to take *ales
&as at the 'elivery %oint due to any unforeseen circumstance or an event of
"orce 1ajeure, then the *ellers shall not only be discharged of its obligation to
deliver /ominated 'aily Luantity on such 'ay-s.
Buarter)y .ake or Pay Buantity
6 "or each Luarter there shall be a Luarterly !ake or %ay Luantity.
6 !he aggregate of 'eliverable Iolume for each 'ay in the Luarter4 less Luarterly
*hortfall Luantity for that Luarter4 less !he 5uantities of *ales &as which the
*ellers were prevented from supplying or the (uyer was prevented from receiving
*ales &as due to "orce 1ajeure during that Luarter4 less !he 5uantities of *ales
&as which the *ellers were prevented from supplying or the (uyer was prevented
from receiving *ales &as due to %lanned 1aintenance during that Luarter4 less !he
5uantities of *ales &as which the (uyer rejects as being Bff *pecification &as.
Buarter)y .ake or Pay 2;)igation
If in any Luarter the ac t u a l 5uantity of *ales &as including 1ake 0p &as less
)dditional &as taken by the (uyer -the Actua) Buarter)y Buantity or ABB.
is less than the Luarterly !ake or %ay Luantity -such deficit being the eficit
Buantity., the (uyer shall pay to the *ellers an amount e5ual toJ -Luarterly !ake or
%ay Luantity Q *ales &as %rice. minus -)LL Q *ales &as %rice. "or the purposes of
calculation of Luarterly !ake or %ay obligation, the applicable *ales &as %rice shall be
the !apti &as %rice.
P!I,* A# 1ILLI#G
!he (uyer shall pay each of the *ellers for each 11(!0 of &as on /HI basis
delivered and taken hereunder from the 1id C *outh !apti "ields, a price calculated on
a Luarterly basis of the 1id C *outh !apti %*+ -the !apti &as %rice., which is
incorporated by reference in this +ontract, at a price not exceeding 0*
M?.?G711(!0 being the ceiling price under the terms of the 1id and *outh
!apti %*+ and price not exceeding 0*
M?.GE711(!0 under the terms of the %anna1ukta %*+.
!he *ales &as %rice is calculated excluding taxes and levies. !he (uyer shall
reimburse each of the *ellers any tax -inclusive of sales tax and7or I)!. payable
by each of the *ellers to the &overnment, a *tate &overnment or local authority, on
account of the sale and 7or transfer of title of *ales &as to the (uyer at the 'elivery
%oint. "or the avoidance of doubt, royalty payments under the %*+s shall be
borne by the *ellers. )ll costs downstream of the 'elivery %oint shall be borne by
the (uyer.
32!,* MAJ*-!*
8 e li e f J If by reason of "orce 1ajeure, the *ellers or the (uyer are7is rendered
unable wholly or in part to carry out their or its obligations under this +ontract, then
the liability for failure to meet the obligations of the %arty concerned, as long as and to
the extent that the obligations are affected by such "orce 1ajeure, shall be excused.
If such event or series of events of "orce 1ajeure is not remedied or mitigated
pursuant to discussions between the *ellers and (uyer within E3
'ays of the meeting between the *ellers and the (uyer, then the +ontract may be
terminated at the discretion of the %arty not claiming "orce 1ajeure, following a E3
days notice prior to termination, which notice may only be given after E3 'ays of the
aforesaid meeting.
' u t y to 1 i ti g a t e A ff ec t s o f " o r c e 1 a j e u r e J ) %arty claiming "orce 1ajeure shall
exercise reasonable diligence to seek to overcome the "orce 1ajeure event and to
mitigate its effect on the performance of its obligations under this +ontract and
resume performance of obligations as soon as practicable once the effect of the event
of "orce 1ajeure ceases to exist. !he %arty affected shall promptly notify the other
%arties as soon as the "orce 1ajeure event has been removed and no longer prevents it
from complying with the obligations, which have been suspended and shall thereafter
resume compliance with such obligations as soon as possible.
"-"P*#"I2# A# .*!MI#A.I2#
!he *ellers have not received from the (uyer due payment in accordance with the
terms of this +ontract towards the *ales &as and7or the Luarterly !ake or %ay
Luantity in full -and not merely in part. within the periods specified. I" )/R B" !HA
%)8!IA* +ommits any breach of a material term of this +ontract, and, if that breach is
capable of remedy, fails to remedy that breach within thirty -E3. 'ays of notification
from the *ellers of that breach. "ails to pay to the *ellers a sum due and payable
under this +ontract, within E3 'ays from the date it was due for payment. (ecomes
insolvent or bankrupt or makes a composition or arrangements with its creditors.
1erges with another entity where the surviving entity has not assumed in full the
(uyer9s rights and obligations under the +ontract.
APM ,ontract: 3eatures
6 In this type of contract, the prices of gas transmission are regulated by the
government of India.
6 *hipper pays the transmission charges every fortnight.
6 *hipper also pays the charges towards spur line.
6 !he authori:ed and the unauthori:ed overrun charges are also payable for a
fortnight.
6 )s for billing and payment, the transporter shall deliver electronically, an
invoice as soon as possible to the shipper.
6 "orce 1ajeure remains the same as the %1! +ontract.
6 !hese contracts last for more than <3 years.
6 0ntil the termination of the agreement, the amount of the bank guarantee
as mentioned above shall be as per the amount given in the exhibit for respective
contract years and the shipper shall renew the bank guarantee <? days before its
expiry.
!:L#G ,ontract: 3eatures
6 Aither party may propose to extend the agreement beyond the basic period by
giving notice one year prior to the expiry of the agreement.
6 !he agreement duration is generally for <3 years.
6 *eller and buyer are aware that gas under this agreement and other gas can be
supplied through the same pipeline in a commingled form.
6 "or each contract year, there is )nnual !ake or %ay Luantity
-)!B%L. which will be taken and paid for or paid for if not taken by the buyer.
6 !he )!B%L shall be =3@ of the annual contracted 5uantity.
6 !he buyer shall during each contract year, pay for the )ctual 5uantity of gas
taken or for =3@ of )!B%L for the relevant contract year.
6 !he price of the gas includes basic custom duty, purchase tax and exclusive
of all other taxes, duties and statutory levies. *ales tax, entry tax, any other taxes
and duties shall be payable from time to time.
6 !he buyer has to pay to the seller within E business days after the receipt
of the fortnightly payment statement or seven days for the )!B% whichever is
applicable.
6 !ermination occurs if buyer fails to pay a sum for sixty days or fails to take gas
for a continuous period of three month.
6 !he same occurs if the seller fails to supply gas for a period of three months.
In a nutshell, the variables which actually distinguish the contracts areJ
<. /ame of the contract.
D. +ontract effective date.
E. +ontract expiry date.
>. *upply pressure
?. *hut down
H. !%! charges
G. (illing
2. %ayment duration
4.C. Gas Pricing In India
#atura) Gas Pricing
<. )t present, there are broadly two pricing regimes for gas in the country,
i.e., gas priced under )%1 and non)%1 or free market gas. !he price of )%1
gas is set by the &overnment. )s regards non )%17free market gas, this could
also be broadly divided into two categories, namely, imported ,/& and gas
produced from #I fields. ;hile the price of ,/& imported under term contracts
is governed by the *%) between the ,/& seller and the buyer, the spot cargoes
are purchased on mutually agreeable commercial terms. )s regards #I gas,
its pricing is governed in terms of the %*+ provisions. )t present, out of the total
gas supply of =? 11*+1' in the country, approx. ?? 11*+1' is )%1 gas
and rest is non)%1 gas -D3 11*+1' #I gas and D3 11*+1' 8,/&..
)%1 gas, which comes from the existing fields of B/&+ and BI, given to
them on nomination basis by the &overnment, is on the decline4 while it forms
about H3@ of the total gas available at present, its share is likely to come
down to around <?D3@ by D3<<<D while the 5uantities under 8,/& and #I
production will go up.
D. 1ackground of APM Gas Pricing
$.& Gas Pricing Prior to &CC(
It was decided by the &overnment to fix the prices of natural gas on cost plus
methodology in <=2H the price of natural gap was fixed at 8s.<>3371*+1 by
&overnment w.e.f. E3<<=2G. *ubse5uently, on the recommendation of the
committee under the chairpersonship of 'r. Iijay , $elkar, the price of natural
gas was revised to 8s.l,??371*+1, w.e.f. <<<==D, with provision to increase
the gas price by 8s. <3371*+1 p.a. up to 8s. <2?371*+1 by <==?.
$.$ Gas Pricing >.*.3 %&.&%.&CC(
D.D.< Bn the recommendations of an expert committee on /atural &as pricing
under the +hairmanship of *hri !.,. *ankar, the &overnment decided to shift
gas pricing methodology from cost plus basis to import parity pricing.
)ccordingly, the following pricing mechanism was put into effect from Bctober
<, <==G.
D.D.D !he gas prices were linked to the cheapest alternative li5uid fuelJ
"uel Bil basket -)verage of four fuel oils, vi:.. +argoes "B(, 1ed basis,
Italy -<@ sulphur.4 +argoes +I", /A; basis )8) -<@ *ulphur.4 *ingapore,
"B(, H*"B <23 cst -E.?@ surplus.4 and )rab gulf, "B(, H*"B, <23 cst
-E.?@ sulphur.. with progressively
increased fuel oil parity as given belowJ
0ear D of 3ue) 2i) Parity (2ther
than #.*.)
<==G=2 ??@
<==2== H?@
<===D333 G?@
D.D.E !he +onsumer %rice was, however, subject to a ceiling of 8s.D,2?3 per
1*+1 and a floor of 8s.D,<?3 per 1*+1. !he consumer price of gas was
intended to be reviewed after E years with a view to achieve <33@ "uel Bil
%arity pricing over >th and ?th year, i.e. in D3333< and D33<3D. However,
this did not happen and the price of 8s.D,2?371*+1 continued till
E3.3H.D33?, which was about
E>@ of the then fuel oil prices.
$.4 Pricing Mechanism =.e.f. %&.%(.$%%'.
D.E.< !he consumer price was revised to 8s.E,D3371*+1 for the following
categories of consumers. It was also decided that all the )%1 gas
-estimated at around ?? 11*+1'. will be supplied to only these
categories.
a. %ower sector consumers
b. "ertili:ers sector consumers
c. +onsumers covered under court orders
d. +onsumers having allocations of less than 3.3? 11*+1'.
D.E.D It was decided that the price of gas supplied to small consumers and
transport sector -+/&. would be increased over the next E to ? years to the
level of the market price. ;ith effect from 3H.3H.D33H, the )%1 gas price to
small consumers and +/& sector has been increased to 8s.>H32 7 1*+1.
D.E.E It was decided that the gas price to the consumers other than those
stated in para D.E.<, which were hitherto getting gas at )%1 price through
&)I, network, would be market determined.
*8isting Producer Price ? ,onsumer Price
1ajority of &as produced by B/&+, known as )%1 gas, is currently sold to
&)I, of the price regulated by the &overnment. This price at which ONGC sells
gas to GAIL is known as producer price !he price of this gas does not vary state
wise7offshore areas, instead varies for /orth Aast +onsumers and &eneral
+onsumers -other than /orth Aast +onsumers.. The price at which GAIL sells
the gas procured from ONGC! is called consumer price
E. Pricing of !:L#G
) contract was signed with 8asgas, Latar for supply of ? 11!%) ,/&
-e5uivalent to about <2 11*+1'P by %etronet ,/& ,imited and supplies
were commenced from )pril D33>. !he price for ,/& has been linked to
#++ crude oil under an agreed formula. However, the "B( price for the period
up to 'ecember D332 has been agreed at a constant price of MD.?E711(!0.
!his price translates to 8,/& price of ME.2H711(!0 ex'ahej terminal.
In order to make the price of 8,/& affordable, A&o1 has decided in the
meeting held on <<.<.3G for pooling of prices of ? 11!%) 8,/&
presently being imported from Latar with the price of new 8,/& being
imported on term contract basis. !his 1inistry accordingly issued orders on
H.E.3G, in consultation with 1inistry of ,aw, in compliance with the decision of
A&o1. !he pool price ex 'ahej of 8,/& for various consumers would
be about 0*M
>.=D711(!0.
>. Pricing of Gas under Pre:#*LP Production "haring ,ontracts : PM.
and !avva J/ Gas
>.< %roduction *haring +ontracts were executed by &BI with 8avva consortium
and %1! consortium on Bctober D2, <==> and 'ecember
<D, <==> respectively. %*+s contain the following pricing provisionsJ -in
M711(!0.
-<@ *ulphur.4 *ingapore, "B(,
H*"B <23 est -E.?@ surplus.4 )rab
gulf, "B(, H*"B, <23 est -E.?@
sulphur..
8avva %rice linked to average of "uel Bil
for preceding <D months -E@7E.?@
*ulphur residual fuel oil of
*ingapore, "B(. 8otterdam (arge
and 1ed "B(.
<.G? E.33 )prK=G
>.D In terms of %*+ for %1!, the ceiling prices are to be revised to
<?3@ of =3@ ".B. basket -average of the preceding <2 months., after
G years from the date of first supply. !hus, the revision was due w.e.f. #une D33>
for !apti and "ebruary D33? for %anna 1ukta. !he %1! gas prices have
since been revised. ;hile %1! sells >.2 11*+1' of gas themselves for
the balance 5uantity of about H 11*+1', &)I, paid S ME.2H711(!0
during D33?3H and is paying S
M>.G?711(!0 w.e.f <.>.3H based on countermatching the price offered by
prospective consumers in response to the bid floated by the consortium.
However, this gas is being supplied by &)I, to power and fertili:ers sector
consumers along H(# at )%1 price and adjustments being made through the gas
pool account mechanism in terms of the pricing order of D3.H.D33?. !his pricing
order states that owing to the existing supply linkages and operational
re5uirements, it may well happen that the customers entitled for )%1 gas get
physical supplies of gas produced by the joint venture or from suppliers other
than B/&+7BI, at market price and vice versa. ;ith a view to operationalise
the aforesaid decision, the &as %ool )ccount mechanism would be
utili:ed, with the inflow into the pool account coming from )%1 gas sales to
consumers not entitled for )%1 gas at market price and outflow would be for
purchase of non)%1 gas to supply to the consumers entitled for gas at )%1
price. !his arrangement would be subject to the ceiling of existing available
)%1 gas from B/&+ and BI, -about ?? 11*+1'..
J/ Price formu)a 3)oor
Price
,ei)ing
Price
,ommencement
of gas supp)ies
%1! %rice linked to a basket of
international average of
preceding <D months "uel Bil
prices -+argoes "B(, 1ed
basis, Italy -<@ sulphur.4
+argoes +I", /A; basis )8)
D.<< E.<< #uneK=G!apti
"ebK=2%anna
1ukta
>.E In case of 8avva, the revision of ceiling price is due after ? years from the
date of supply and the revised ceiling price is to be negotiated between the
(uyer and the *eller in good faith. !he price revision for 8avva was due w.e.f.
)pril D33D. !he price revision has been effected w.e.f. #uly <, D33? and
&)I, has been paying S
ME.?3711(!0 since then. !he share of this gas going to )%1 consumers is
being charged by &)I, at )%1 price, with adjustment through gas pool account
mechanism. !he total 5uantity of this gas is around < 11*+1'.
!he following table sums up the prices of some of the most important fields in
the country -mostly shortterm and in small 5uantities.J
Prevai)ing gas prices under various P",s (Ju)y $%%()
!he prevailing prices as per signed contracts under various %*+s areJ
#ame of
1uyer
Appro8imate Euantity Price 1asis
Panna:Mukta ? .apti
&)I,
?.G 11*+1' from
<.>.D33?
M E.2H711(!0 "ixed %rice
? 11*+1' from M >.G?711(!0
<.>.D33H for D years
&*%+,
&&+,,
I%+,, 8II
>.H 11*+1' from
<.>.D33? to 1arch D33H M >.32711(!0 "ixed %rice
&*%+,
&&+,,
I%+,, 8I,
<.2 11*+1' from
<.>.D33H to 1arch D332 M ?.G3711(!0 "ixed %rice
!orrent
%ower
3.= 11*+1' from /ew
revised plan of development
-/8%B'. &as scheduled
from *eptember D33G -total
expected gas production from
/8%B' is ?.?
11*+1'.
M >.G? 11(!0 "ixed %rice
80I0/,
<.? 11*+1' from /8%B'
&as scheduled from
*eptember D33G
M >.H3711(!0 "ixed %rice
&&+,
<.H? 11*+1' from
/8%B' &as scheduled from
*eptember D33G
M ?.G3711(!0 "ixed %rice
!avva
&)I,
<.<3 11*+1' from existing
discoveries of 8avva
< 11*+1' from
*atellite field
M E.?3711(!0
effective from <st
#uly D33G
M >.E3711(!0
effective from
*eptember D33H
"ixed %rice
Lakshmi ? Gauri
&*%+ 3.<? 11*+1'
M ?.?3711(!0
#uneK3G
"ixed %rice
&%A+ 3.= 11*+1'
M>.G?711(!0
/ovK3H
"ixed %rice
&&+, 3.? 11*+1'
M >.H3711(!0
#uneK3H
"loor price is
M
E.<<711(!0
and ceiling is
M
>.H3711(!0
%rice linked
up with =?@
crude basket and
?@ with /aptha
(heema
+(B//
D33373D
3.E 11*+1'
M >.?371+" which is
e5uivalent to
M>.?3711(!0
"ixed %rice
!he only long term contract in the country was the G year contract
with %anna 1ukta !apti fields as detailed belowJ
Gas price
(-"F
mm;tu)
.erms of sa)e
#ature
of Gas
price
Buantity
(MM",M)
,ontract term
(uyer J &)I,
-for various power,
fertili:er and
industrial users.
D.<< to E.<< "loor
D.<<
+apE.<<
<3 G years -upto
D33>3?.
It said that as can be seen, from the above tables, gas prices are much lower for
long term contracts and with larger volumes than short term contracts with small
5uantities.
?. Pricing of Gas >ith !eference to #*LP Provisions9
)s per the provisions of %*+ under /A,%, the price of natural gas for sale to
consumers shall be market driven. %rior approval of 1o%/& has to be
obtained for the formula or the basis on which the price is fixed. It has been
provided that the +ontractor shall sell all /atural &as produced and saved
from the +ontract )rea by armslength transactions.
Gas Poo) Account
In <==D, the &overnment established the &as %ool )ccount in order to encourage the
development of the gas industry in India and to compensate the companies involved
in the exploration, development and marketing of gas for the low margins on the
development and sale of gas at prices fixed by oil ministry. !he landfall price and
producer price is credited to the gas pool account. &)I, maintains the &as %ool
)ccount on behalf of the government.
0nder the current pricing mechanism, &)I, collects 8s. D.? billion every year from
natural gas consumers on behalf of the gas pool account. !his sum is used for the
following purposesJ
i. %ayment of higher international gas prices for the new jointventure companies4
ii. +ompensation to Bil India ,imited -BI,. for subsidi:ing prices in the /orthAast4
iii. +ompensation to &)I,7BI, for increases in operating cost4 and
iv. Axploration and development of smaller fields.
!he balance is transferred to the +entral Axche5uer. &as %ool )ccount has now been
dismantled.
2ptions for gas pricing po)icy
!he %roduction *haring +ontracts -%*+s. provide for pricing of gas on the basis of sale
on armslength basis. !he role of the &overnment is to approve the valuation of gas
for the purpose of determining &overnment take. In order to provide transparency in
approving valuations, the &overnment formed a +ommittee in )ugust D33H to
formulate guidelines for approving natural gas price formula 7 basis for giving
&overnment approval under the %roduction *haring +ontracts.
!he +ommittee was headed by #oint *ecretary C "inancial )dvisor, 1inistry of
%etroleum C /atural &as and had 'irector &eneral, 'irectorate &eneral Hydrocarbons
and concerned #oint *ecretaries as other members. !he +ommittee held extensive
consultations with various stakeholders, including the producers as well as the
consumers, besides other expert organi:ations, before finali:ing its report. !he
+ommittee has recommended that in all situations where a price discovery through
competitive bidding is possible, there should be no need to apply any other principle
for valuation of gas. Bnce a marketdetermined price has been discovered between the
suppliers and customers through a transparent competitive bidding process, there should
be no need for the &overnment to interfere with the same.
"urther, it has said that in the absence of a market determined price discovered
through a transparent bidding process, where valuation of gas has to be necessarily done
by &overnment, it may be done based on the price in the most recent competitively
determined contract in the region duly indexed to the present. Indexation is to be done
as per provisions of the market determined reference contract, as each market
determined contract sets out various terms and conditions of supply, including
the price review mechanism.
!he +ommittee has noted that each contract, normally, has a price review clause every
five years. If the price stands reviewed as per the reference contract, that may become
the new reference price. "or interim periods, the +ommittee has recommended that
indexation may be linked to percentage increase in price of cheapest li5uid fuel, i.e.,
"urnace Bil -"B., which is not only the cheapest li5uid fuel but has also shown
least price volatility in recent years. It was of the view that the above valuation may be
applied only when actual supply has commenced and the price has not been discovered
through the market mechanism. However, if the actual price, at which any producer
supplies to any consumer, is higher than the one arrived at by the above methodology,
then the higher price is to be reckoned for &overnment take. It would be ideal if the
+ommitteeKs approach had never to be applied, but if the eventuality does arise, '&
'&H and 'irector, %%)+ will do the calculations based on +ommitteeKs
recommendations. It would be '&HKs responsibility to ensure that the %roducer remits
the &overnmentKs take accordingly.
!he &overnment has since issued orders for constitution of an Ampowered &roup of
1inisters to consider issues pertaining to pricing of natural gas produced in the country.
!he A&o1 has held two meetings, which were inconclusive. ) subcommittee of
senior brass from the 1inistries of "inance, ,aw, %ower, %etroleum, %lanning
+ommission and A)+ is currently looking into the pricing formula proposed by
8I, for pricing its gas for 'H block in $& basin. !he recommendation of this sub
committee are likely to be submitted shortly to the A&o1, expected to meet on
*eptember <D, D33G.
Issues re)ated to supp)y and pricing of natura) gas (Ju)y $%%()
6 /atural &as meets only 2.?@ of the total energy re5uirement of the country
as against ?H@ share of coal. !he country has natural gas reserve of EG !+"
which is about is 3.H@ of the world natural gas reserve. !he fertili:er and power
sectors are the major consumers of natural gas used in the country. ;hile G=@ of
the gas re5uirement of the fertili:ers plants is being met presently, another G.GE
11*+1' of gas is re5uired for meeting the shortage of existing gas
based plants. "or conversion of /aphtha and "B7,*H* based fertili:er units,
about >3 11*+1' would be re5uired. !hus, the total re5uirement for the
fertili:er sector would be about 2H 11*+1'. )gainst the projected demand of
gas of DG=.>E 11*+1' in D3<<<D, total conservative estimate of supply is
<=<.>D 11*+1', leaving shortfall of about 22 11*+1'. !his would need
to be met through imports and expeditious action on the exploration and
development of discoveries in the domestic area.
6 Bn the gas pricing front, the 1o%C/& informed that the system of
<33@ &overnment controlled pricing mechanism is being replaced by free
market pricing through deregulation. (efore <==G &overnment fixed the price
of natural gas on cost plus methodology. *hri !.,.
*hankar +ommittee recommended to shift gas pricing methodology from cost
plus basis to import parity pricing. However, consumer price continued to be
regulated at E>@ of then fuel oil prices till D33?. !he pricing mechanism of gas
under pre/A,% production sharing contract is determined by linking it to a
basket of international average of preceding <D month fuel oil prices with a
floor and ceiling.
6 0nder /A,% regime, the contractor makes an upfront commitment of risk
money without any liability on the &overnment. !he full development cost is
recoverable in the event of discovery. !he cost recovery limit and profit
petroleum sharing split are biddable parameters. !he management committee
works as approval body for the development plan submitted by the contractor.
%rofit share is determine by pretax investment multiple -%!I1. formula which
rewards the &overnment only at higher levels of revenues.
6 0nder the %roduction *haring +ontract -%*+., the contractor is free to market
gas in the domestic market subject to the policy of the &overnment on gas
utili:ation. )rticle D<.H.< allows contractor to sell all natural gas from the
contract area at arms length prices to the benefits of parties to the contract.
0nder )rticle D<.H.E, the &overnment has the right to approve the gas price
formula keeping in view the prevailing gas pricing policy including the policy, if
any, on linkage of gas prices with li5uid fuels. 1inistry of %etroleum C
/atural &as have drawn up a set of guidelines for approving gas price7 formula
for the purpose of determining &overnment take under /A,% contracts. !hese
provide for valuation based on the most recent competitively determined
price in the region duly indexed to the present.
6 $&';/=27E %*+ provides for the &overnment to take its share of profit
petroleum in cash or kind by exercising such an option on an annual basis. *o
far the &overnment has not exercised its option to take any gas in kind
separately and entire profit petroleum has flowed to the &overnment in cash
in all %*+s. In case the &overnment decides to take its share in kind, the
following issues would need to be settled firstJ
i. !he &overnment would have to designate a &overnment nominee,
ii. !he price of such gas would have to be at par with the price of gas fixed
by the contractor in order to avoid financial losses accruing in the
consolidated fund of India,
iii. In view of the uncertainty in estimation of profit gas, the &overnment
nominee may have to keep its infrastructure idle in the years when profit
gas level fluctuates to a lower level.
6 1inistry of %ower stated that the construction of pipeline is linked to the
production centre unlike the transmission part in the power sector which is
insulated from the power production entities. )s opposed to tariff based bidding
in the power sector, the producer linkage for the construction of pipeline makes
the system monopolistic. In reply, 1inistry of %etroleum and /atural &as stated
that the risk taking is discouraged by providing advance tieup with producer
agencies before granting /B+ for the construction of pipeline. However, the
tariff for transportation would be regulated.
6 'epartment of "ertili:er stated that the &ovt. had directed that fertili:er
sector should get priority in natural gas allocation. !he &ovt. had also approved
the conversion of nongas based fertili:er plants to gas based. It added that
India could emerge as the potential hub for urea manufacture, which would
re5uire additional =? 11*+1' of gas by the year D3<<<D. It also suggested
that certain e5uali:ation of gas prices would be necessary so that fertili:er
availability at all places could be ensured.
6 %lanning +ommission en5uired whether the Indian fertili:er
companies would be able to compete in the international market as they
function under protected environment. It also opined that the freight
e5uali:ation for natural gas may not be possible. In reply to his 5uery on
optimal production profile, '&H informed that the production profile
determine the 5uantum of output technically possible over the life cycle of the
source and the contractor cannot change the production without prior approval.
6 '&H informed that the yearwise activity and development plan are approved
by the 1anagement +ommittee. '&H also undertakes audit of the technical plan,
production profile and costs.
6 It was observed that 1inistry of %etroleum and /atural &as should firm up
demand and supply projections and draw up action plans with timelines for
ensuring that the projected supplies become available. !hese may be included in
the revised agenda note for A++ along with issues, if any, re5uiring decisions. It
was also observed that the following issues would re5uire further discussions
with stakeholders before firming up the recommendations on pricing
formula7basis for the gas from $&';/=27E J
i. the %*+ stipulation relating to +)%AT, the system of approval of the
developmental plan, production profile, technical plan, the system of audit by
the &overnment and the need to make the system more transparent4
ii. the details and methodology for the administration of the provisions of %*+
providing sale of natural gas produced from the contract area at competitive
arms length prices4
iii. the gas utili:ation and pricing policy4
iv. the gas price formula and steps of the bid process submitted by 17s 8eliance
India ,td to the 1inistry for their approval including the rule for market
clearing4
v. ;hether to exercise the option for taking profit gas in kind or cash U
!he +onsumer %rice of /atural &as, 8,/& and HI# 7 'I%, 7 '0%, !ransmission
!ariff and 1arketing 1argin, adopted for computing the financial targets are given in
the following tableJ
(!s.FG222 ",M)
Item Price
'omestic &as )%1 ED33
'omestic &as )%1 -V?3333 *+1' etc.. >H32
'omestic &as 1arket 'riven G?=H
'omestic &as /A 8egion )%1 <=D3
'omestic &as /A 8egion -*mall +onsumers. DGH?
'omestic &as /A 8egion 1arket 'riven ED33
%anna 1ukta !apti #I &as G?=H
8avva #I &as ??=G
8avva *atellite H2GG
8,/& -%ooled. Butside &ujarat 2DED
8,/& -%ooled. Inside &ujarat G=<?
!ransmission !ariff -HI# 7 'I%,. =?>
!ransmission !ariff -'0%,. <3EG
1arketing 1argin 8,/& -,eveli:ed. DD>
4.&%. Gas emand "upp)y Pro<ection
Petrochemica)sF!efineriesFInterna) ,onsumption and "ponge IronF"tee) and
other industries !he current demand as per the industry estimates in the
%etrochemicals78efineries and Internal +onsumption -of &as Industries. sectors is
about D?.EG 11*+1' in D33?3H. )n annual growth rate of about G percent is
assumed during the TI plan period, which would result in a demand of EE.D?
11*+1' by the terminal year of the TI %lan.
*imilarly, the sponge iron7steel sector is also expected to grow at the same rate of G
percent from the current level of H 11*+1', reaching a level of
G.2H 11*+1' by the terminal year of the TI plan.
!he demand from various sectors has been compiled in the 8eport by
;orking &roup as given belowJ
"ector >ise Gas emand Pro<ections ($%%(:$%&$)
$%%(:%7 $%%7:%C $%%C:&% $%&%:&& $%&&:&$
%ower G=.G3 =<.D3 <3D.G3 <<>.D3 <DH.?G
"ertili:er ><.3D >D.2= ??.=3 GH.DH GH.DH
+ity &as <D.32 <D.=E <E.2E <>.23 <?.2E
Industrial <?.33 <H.3? <G.<G <2.E2 <=.HH
%etrochemicals78efineries7Internal
+onsumption
D?.EG DG.<? D=.3? E<.32 EE.D?
*ponge iron7*teel H.33 H.>D H.2G G.E? G.2H
.ota) &(C.&( &C6.65 $$'.'$ $6$.%( $(C.54
&5%
&$%
&%%
7%
6%
5%
$%
%
$%%(:
%7
$%%7:
%C
$%%C:
&%
$%&%:
&&
$%&&:
&$
Po=er
3erti)e@e
r
,ity Gas
Industri
a)
Petrochemica)sF!
efi neries
"ponge ironF"tee)
2vera)) Gas "upp)y pro<ections during +I P)an
!he supply projected by B/&+ and BI, in the %lan period is expected to fall
from ?G.D2 11*+1' in D33G32 to ?<.32 11*+1' in D3<<<D. *upply from
%rivate players7#Is is expected to increase from DE.DH 11*+1' to about
?G.DD 11*+1' in D3<<<D. !his increase from private players, considered in
the ;orking &roup report, is primarily due to the >3 11*+1' gas supply
addition from 8I, from D3323= onwards. '&H had then projected expected
additional supplies of D3, E3 and >3 11*+1' from 8I, fields in D33=<3,
D3<3<< and D3<<<D respectively and ?> 11*+1' from &*%+ in each of the
above years. However, later '&H has increased the expected availability of natural
gas from $& '7H blocks to 23 11*+1'. '&H has also indicated that the
anticipated availability of gas from &*%+ fields would be >.? 11*+1' by D3<<
<D.
In the table below, the gas availability which is confirmed by '&H is shown as -(.
and is the basis of the conservative scenario. !he gas availability expected, but which
is yet to be certified by '&H, is shown as -+. and is the basis of the optimistic
scenario in the table belowJ
"ource $%%(:%7 $%%7:%C $%%C:&% $%&%:&& $%&&:&$
B/&+ W BI, -). ?G.D2 ?2.>D ??.H= ?>.HG ?<.32
%vt.7#Is -)s per '&H. -(. DE.DH H<.?H H3.D2 ?2.>D ?G.DD
%rojected 'omestic *upply
-)W(.
23.?> <<=.=2 <<?.=G <<E.3= <32.E3
)dditional &as )nticipated
-+.
G> 2> =>
.ota) Pro<ected "upp)y
,onservative "cenario (AH1)
7%.'5 &&C.C7 &&'.C( &&4.%C &%7.4%
.ota) Pro<ected "upp)y
2ptimistic "cenario (AH1H,)
7%.'5 &&C.C7 &7C.C( &C(.%C $%$.4%
$'%
2#G, H 2IL (A)
$%%
&'%
&%%
'%
%
$%%(:
%7
$%%7:
%C
$%%C:
&%
$%&%:
&&
$%&&:
&$
Pvt.FJ/s (As per
GA)(1)
Pro<ected omestic
supp)y
Addtn) Gas "upp)y
.ota) pro< "upp)y
,ons. "cenario
.ota) pro< "upp)y
2pt. "cenario
,ooking at the overall demand projections and even the optimistic scenario of
expected domestic supplies, it is very clear that there would be a supply shortfall.
!herefore, there is a need to step up imports in the coming ? years. !here is already an
import of ,/& to the tune of <2 11*+1' by %,, at 'ahej. !he ? 11!%) 'ahej
terminal of %,, is operating at full capacity.
!he Ha:ira terminal of *hell with a capacity of D.? 11!%) is also operational. !he
'ahej terminal is set to expand to <3 11!%) by D3<3<<. (esides, the planned $ochi
terminal of %,, with a capacity of D.? 11!%) -expandable to ? 11!%). is
expected by D3<3<<. !he ? 11!%) 'abhol terminal is projected to be fully
operational by D33=<3. !o begin with, the supplies would be <.D 11!%), which
would increase to D.< 11!%) in
D3323= to cater to the 'abhol %ower %lant. !his terminal would also enable a
merchant sale volume of D.= 11!%) in D33=<3 when long term ,/& is contracted.
;hen ,/& terminal at 1angalore is taken up, <.D? 11!%) imports could be
expected by D3<<<D. &iven this scenario, the ,/& supply is projected to reach a
level of DE.G? 11!%) by the year D3<<<D
-%otentially it can add up 2E.<D 11*+1' supplies at full capacity.. !he overall
,/& projections are given belowJ
L#G "upp)y "ource $%%(:
%7
$%%7:
%C
$%%C:
&%
$%&%:
&&
$%&&:
&$
'ahej ?.33 ?.33 G.? <3.33 <3.33
Ha:ira D.?3 D.?3 D.?3 D.?3 D.?3
'abhol <.D3 D.<3 ?.33 ?.33 ?.33
$ochi D.?3 D.?3
1angalore <.D?
.ota) L#G "upp)y
(MM.PA)
7.(% C.6% &'.%% $%.%% $4.('
.ota) L#G "upp)y
(MM",M)
4%.5' 44.6% '$.'% (%.%% 74.&$
)ssumption <. Ha:ira expansion to ?.3 11!%) is not considered in
TI %lan.
D. 1angalore terminal is expected to be partially commissioned in
D3<<<D
C%
7%
(%
6%
'%
5%
4%
$%
&%
%
$%%(:
%7
$%%7:
%C
$%%C:
&%
$%&%:
&&
$%&&:
&$
ahe<
Aa@ira
a;ho)
Iochi
Manga)ore
.2.AL .PA
.2.AL ",M
!he ,/& option would to a great extent augment the indigenous supplies to meet the
demand shortfall. &iven the two scenarios of indigenous supply, the total supply,
including ,/&, is expected to increase from <<3.== 11*+1' in D33G32 to a
level of <=<.>D 11*+1' in D3<<<D under conservative scenario. 0nder the
Bptimistic *cenario, the total gas supply is expected to increase from <<3.== in D33G
32 to D2?.>D 11*+1' in D3<<<D.
emand : "upp)y Gap for #atura) Gas
It is expected that there would be a demand supply gap -shortfall in supply. to the
extent of H2.<2 11*+1' in D33G32 which would fall to >E.3H 11*+1' in
D3323= in both the scenarios. "rom this level, the gap would increase steadily to
22.3< 11*+1' by D3<<<D in the conservative scenario, whereas under the
optimistic scenario, the gap would by and large be bridged from D33=<3 onwards
and there is expected to be a demand supply balance during the last E years of
the TI %lan period. !he overall demandsupply balance is presented belowJ
2vera)) Gas emand "upp)y pro<ection during +I P)an
"upp)y $%%(:%7 $%%7:%C $%%C:&% $%&%:&& $%&&:&$
!otal *upply +onservative
*cenario
<<3.== <?E.?2 <H2.>G <2E.3= <=<.>D
!otal *upply Bptimistic
*cenario
<<3.== <?E.?2 D>D.>G <HG.3= D2?.>D
'emand -11*+1'. <G=.<G <=H.H> DD?.?D DHD.3G DG=.>E
'emand *upply &ap I H2.<2 >E.3H ?G.3? G2.=2 22.3<
'emand *upply &ap II H2.<2 >E.3H <H.=? ?.3D ?.==
4%%
$'%
$%%
&'%
&%%
'%
%
:'%
$%%(:
%7
$%%7:
%C
$%%C:
&%
$%&%:
&&
$%&&:
&$
.ota):,ons.
"cene .ota):2pt.
"cene. emand
MM",P
emand Gap I
emand Gap II
Pro<ections for the ne8t decade
%1B has desired that estimates of demand and supply of natural gas for the next
decade should be made. ;hile some reasonable projections have been
made for the ? year period, it has not been feasible to make projections regarding
indigenous production and demand for the next decade.
4.&&. GAILJs Pipe)ine #et=ork
Having a strong distribution network or in GAILs case, a comprehensive pipeline
network forms a vital part of its marketing strategy Increasing the customers
and retaining the e!isting ones can be achieved by having a good pipeline network
Good pipeline network caters to the needs of the customers and they become brand
loyal
*ince inception, &)I, has been the undisputed leader in the marketing,
transmission and distribution of /atural &as in India. )s IndiaKs leading /atural &as
1ajor, it has been instrumental in the development of the /atural &as market in
the country.
&)I, has a market share of 2G@ of the gas transmission business and GE@ of the
gas marketing business in India. &)I,Ks vast operations and projects includeJ
6 2333 kms of /atural &as highpressure trunk pipelines
6 !runk %ipelines with the capacity to carry <E3 11*+1' of /atural &as
across India
6 *upplying nearly G3 11*+1 of /atural &as per day as fuel to power plants
for generation of about ?D33 1; of power, as feedstock for gasbased
fertili:er plants to produce about << 11!%) of urea and to over ?33 other
small, medium and large industrial units to meet their energy and process
re5uirements.
6 &)I,Ks D,233 km long Ha:iraIijaipur#agadishpur -HI#. pipeline and H<3
km 'ahejIijaipur pipeline -'I%,., between them, cater to all the gas based
power plants, fertili:er plants, and industries along the entire ;est/orth
corridor of India.
&)I, also provide access to other pipelines, to third parties, for the transmission of
/atural &as. +urrently &)I, transports about 2 11*+1' of /atural &as on behalf
of various shippers.
&)I, has plans to construct /ational gas grid by connecting various pipelines
but the development of the concept is taking time. &)I, had already completed the
'ahej Iijaipur pipeline in D33> for evacuation of 8,/& from %,, 'ahej ,/&
terminal, $elaras 1alanpur pipeline in #uly D33H to supply gas near &walior in
1adhya %radesh, Iijaipur $ota pipeline in #an D33G for supply of natural gas
to the customers in 8ajasthan 8egion and #agoti %ithampur pipeline network in
1arch,D33G for supplying gas to customers in 1 % region near Indore.
etai)s of Gas Pipe)ines in various states9
Length in Ims. IA.
&ujarat <??E >DX !B 2X
!ripura H< <DX !B >X
)ssam 2 D>X !B EX
!amilnadu D?= <2X !B >X
)ndhra %radesh -)%. 2E> <2X !B >X
1adhya %radesh -1%. <>D< >DX !B <2X
8ajasthan ?33 EHX !B >X
0ttar %radesh -0%. <>2D EHX !B <X
1aharashtra <E33 E3X !B >X
Haryana 2H <>X !B >X
'elhi =H <2X !B >X
.ota) #atura) Gas Pipe)ines 7%%%
!ecent Pro<ects ,ommissioned
<. 'ahej 0ran %ipeline
D. 'abhol %anvel pipeline %roject
Ma<or Pro<ects -nder *8ecution
GAIL has a)so su;mitted the proposa) for *8pression of Interest (*2I) for )aying
fo))o=ing pipe)ines for transportation of gas to meet the gas demand of customers.
6 'adri(awana /angal %ipeline
6 +hainsa&urgaon #hajjar Hissar %ipeline
6 #agdishpur Haldia pipeline
6 $ochi $anjikkod 1angalore 7 (angalore %ipeline
6 'abhol (angalore %ipeline
6 $akinadaHaldia %ipeline
4.&$. Petrochemica) Marketing
&)I, made an entry into the petrochemicals market on )pril <=, <===. *ince
then, polymer sales have increased nearly threefold in volume, from
<<3 $! in the "inancial Rear <===D333 to E<< $! in the "inancial Rear
D33?D33H, and nearly four fold in value, from 8s >G= crore in the "inancial Rear
<===D333 to 8s.<2>D crore in the "inancial Rear D33?D33H. 2ut of a tota) Gross
Margin of !s. 4C'4 crore, po)ymers have contri;uted $$D in $%%':%6.
3or GAIL, petrochemica)s =ere part of its master p)an for vertica)
integration and utili:ation of every fraction of natural gas &)I, uses natural
gas as the feedstock for the manufacture of H'%A7,,'%A. Instead of setting up its
plant in western India -1aharashtra and &ujarat. as was traditionally the case, GAIL
opted to ;ase it in northern India, )ooking at the )arge consumer ;ase and
demand for p)astics. In doing so, they -&)I,. were able to provide impetus to the
regional petrochemical downstream units to expand their production capacity in
view of the proximity of source of raw material.
6 !oday, more than onefifth of the polymers -H'%A, ,,'%A.
consumed in India are produced and marketed by &)I,.
6 &)I,Ks polymer products are environmentfriendly and fully
recyclable.
6 &)I, has established /orth IndiaKs only gas based integrated
petrochemical complex in %ata, 'istrict )uraiya, 0ttar %radesh, about
E?3 km from 'elhi. !his I*B =333 and I*B <>333 certified facility
has a capacity of E,33,333 !%) of Athylene and E,<3,333 !%) of
%olymers -H'%A C ,,'%A..
6 +apacity expansion to >,>3,333 !%) -Athylene. is under way.
6 )n additional H'%A plant with <,33,333 !%) capacity is being set up, with
technology from 1itsui, #apan.
6 &)I,9s polymer products include wide range of H'%A grades from plant of
<33 $!) capacity based on technology from 1itsui, #apan, and wide range of
H'%A and ,,'%A grades from its swing plant of D<3 $!) capacity based
on technology from /BI) chemicals, +anada.
6 &)I, markets its ,,'%A and H'%A under the brand names G:)ene and G:
)e8.
GA IL"s p et ro ch emic al #a rke ting can $ e e xp la in ed $ % th e & ' "s of #a rk etin g
Products
&)I, offers a wide range of grades to cater to diverse applications.
6 *trategically located stockiest centers.
6 1ultiple delivery modes, supply from production sites as well as stock
points.
6 Afficient supply chain management ensure customer needs are met on time,
with products that are of consistent 5uality.
!he combination of &)I,9s wide range of %olyethylene grades based on
internationally proven technologies, professional services from the %etrochemical
1arketing &roup -%1&., Yonal Bffices and &)I, %olymer !echnology +entre
-&%!+. and commitment to customer value provides &)I, the ideal base to nurture a
long term business relationship with the customers.
6 G:)e8 high density polyethylene manufactured by &)I, is based on the
s)urry po)ymeri@ation process of 1itsui, #apan.
6 It provides a variety of grades. Its high molecular weight grades are suitable
for a wide range of applications, including H1 films, %ipes and (low
moldings.
"roduct Length of G#le!:
1)o= Mo)dingJ &lex blow molding grades have excellent processability, impact
strength, stiffness and A*+8. !he application includes small to medium si:e
containers like ,ube oil, shampoo, cosmetic, pesticide, Ianaspati and Adible oil
containers.
PipeJ &lex high molecular weight pipe grade is bimodal and has excellent
processability, chemical resistance and mechanical properties. 1ajor usages are in
the potable water system, sprinkler and sewerage. It conforms to hydrostatic
pressure re5uirement as per %A 23 classification of I* >=2> . & lex
A?D)33E7A?D033E-with 0I stabiliser.are suitable for Bptical "iber +able duct
applications .
3i)mJ &lex H1 film grade is bimodal in nature with excellent processability, and
an optimum balance of toughness and impact strength. It has an excellent
drawdownability for making thin gauge film. 1ajor usages are carry bags,
industrial liners, grocery bags, shopping bags, and multilayer packaging film for edible
oil packaging etc.
Monofi)amentJ &lex monofilament grade has an excellent extrudability and good
balance between linear strength and knot strength. 1ajor usage is in ropes and twines.
"roduct Length of G#lene:
!affia J &lene raffia grade has an excellent process ability and superior mechanical
properties, making it excellent choice for processors demanding high strength tapes . !he
grade is well accepted in the market in manufacturing of woven sacks for fertili:er, sugar,
food grains, chemicals packaging etc.
In<ection mou)ding J &lene Injection 1olding grades are available in both 0I stabili:ed
and /on 0I stabili:ed versions. !he grades have an excellent processability. !hese are
widely used in Industrial crates, vegetable crates, milk crates, soft drink crates, and
household articles.
3i)m J &lene film grades are tailor made with various additive packages to meet the
packaging re5uirements of various end use sectors. !he grades have excellent
toughness and tensile strength in its class -butene. .Its low gel count and pinholes,
excellent optical properties and sealing characteristics makes it excellent choice for
consumers in Industrial packaging 7li5uid packaging .
!otomou)ding J &lene rotomolding grade has an optimum balance of process ability,
stiffness and impact strength. !he grade finds application in water tanks, chemical tanks,
C toys.
*8trusion coatingFLamination J &lene extrusion lamination grade has an processability
and drawdown ability. !he grade is widely used by raffia processors in lamination of
woven fabric and tarpaulin.
Pipe coating J &lene pipe coating grade is designed for coating on steel pipes for
transportation of oil and natural gas. !he grade has excellent processability, A*+8,
abrasion resistance, and adhesion characteristics.
>ire and ca;)e J &lene wire and cable grades are designed for poly #elly filled cables as
per 'B! specification. !he grades have an excellent processability, thermal resistance and
electrical properties.
G:)ene range of H'%A and ,,'%A grades are based on the K"c)airtechK so)ution process
technology of /BI) +hemicals, +anada. +ustomers can achieve better profitability,
through process and material efficiencies, by using these grades.
AP* !affia grade has excellent process ability and superior mechanical properties,
making it ideal for high strength tapes.
1)o= mo)ding grades have excellent stiffness and impact properties, making them perfect
for a number of applications in the lube oil, edible oil, cosmetics C detergent
sectors.
LLP* grades are designed with various additive packages to suit the stringent
packaging norms of various end use sectors. !hey are used for heavy duty C li5uid
packaging applications where good physical properties are desired.
In<ection mou)ding grades are available in both 0I stabili:ed and /on 0I stabili:ed
versions. !hese are widely used in soft drink crates, luggage shells, industrial
moulding, and household articles.
!otomou)ding grade is designed to balance stiffness and impact strength. !he grade has
superior process ability, and finds applications in chemical tanks, water tanks, automotive
components C toys.
&)I, has also introduced pipe coating AP* grade for coating on steel pipes for
transportation of oil and natural gas. !he grade has excellent
processability, abrasion resistance, and adhesion characteristics.
Price
6 Import Parity Pricing is fo))o=ed at GAIL. !his is done due to several
reasons, the primary reason being its dominant position in the petrochemical
market.
.he 3undamenta)s of Import Parity Pricing
Import %arity %rice of a product means the price that the same product would
have attracted had that been imported. !he major constituents of
the Import %arity %rice areJ
321 Price Landed ,ostFImport Parity
PriceF!efinery .ransfer
PriceF!efinery Gate PriceF*8:
!efinery Price
W%remium
WBcean "reight
WInsurance
W+ustom 'uty
WBcean ,oss
W;harfage
Landed ,ost *8:"torage Point Price
W1arketing +ost
W1arketing 1argins
W"reight A5uali:ation
W*tock ,oss
W;orking +apital
6 !here are two sources to the petrochemical pricesJ
&. P)atts !eport (revised every >ednesday)
$. I,I" K London 2i) !eport (revised every 3riday)
6 )long with these prices the other charges such as 2ctroi, sa)es ta8,
e8cise, freight charges are added wherever applicable.
6 !he pricing also depends upon the petrochemica) emand and
"upp)y scenario.
(elow is the product price report of both G:)e8 and G:)ene (samp)e report).
(oth basic price and freight charges are charged in accordance to the location. !his
price report is effective from the <E
th
of #une, D332.
P!2-,. P!I,* K !*P2!.
,ocation %roduct %roduct /ame
Affectiv
e +urrenc
(asic
%rice "reight
()/&),B (?D)33E) (?D)33E) &,AT 3<7<37D3< I/8 H=,=>3. E,E>G.3
()/&),B (?D)33E)* (?D)33E)* &,AT 3<7<37D3< I/8 H=,>>3. E,E>G.3
()/&),B (?D)33E( (?D)33E( &,AT 3<7<37D3< I/8 H=,>>3. E,E>G.3
()/&),B (?D)33E(* (?D)33E(* &,AT 3<7<37D3< I/8 H2,=>3. E,E>G.3
()/&),B (?D)33E/)
(?D)33E/) &
,AT H'%AD 3<7<37D3< I/8 H=,=>3. E,E>G.3
()/&),B (?D)33E/(
(?D)33E/( &
,AT H'%AD 3<7<37D3< I/8 H=,>>3. E,E>G.3
()/&),B (?D)33E/B&
(?D)33E/B&&
,AT H'%AD 3<7<37D3< I/8 H?,=>3. E,E>G.3
()/&),B (?D)33EB&
(?D)33EB& &
,AT H'%A 3<7<37D3< I/8 HH,=>3. E,E>G.3
()/&),B (?D)33EB&*
(?D)33EB&* &
,AT H'%A 3<7<37D3< I/8 HH,>>3. E,E>G.3
()/&),B (??H1333E)
(??H1333E) &
,AT H'%A 3<7<37D3< I/8 G>,?23. E,E>G.3
()/&),B (??H1333E)
(??H1333E)* &
,AT H'%A 3<7<37D3< I/8 G>,323. E,E>G.3
()/&),B (??H1333E(
(??H1333E( &
,AT 3<7<37D3< I/8 G>,323. E,E>G.3
()/&),B (??H1333E(
(??H1333E(* &
,AT 3<7<37D3< I/8 GE,?23. E,E>G.3
()/&),B (??H1333E/
(??H1333E/) &
,AT 3<7<37D3< I/8 G>,?23. E,E>G.3
()/&),B (??H1333E/
(??H1333E/) &
,AT H'%AD 3<7<37D3< I/8 G>,323. E,E>G.3
()/&),B (??H1333E/
(??H1333E/) &
,AT H'%AD 3<7<37D3< I/8 G<,?23. E,E>G.3
()/&),B (??H1333EB
(??H1333EB& &
,AT H'%A 3<7<37D3< I/8 G<,?23. E,E>G.3
()/&),B (??H1333EB
(??H1333EB&* &
,AT H'%A 3<7<37D3< I/8 G<,323. E,E>G.3
()/&),B (HE)33E) (HE)33E) &,AT 3<7<37D3< I/8 H=,=>3. E,E>G.3
()/&),B (HE)33E)* (HE)33E)* &,AT 3<7<37D3< I/8 H=,>>3. E,E>G.3
()/&),B (HE)33E( (HE)33E( &,AT 3<7<37D3< I/8 H=,>>3. E,E>G.3
()/&),B (HE)33E(* (HE)33E(* &,AT 3<7<37D3< I/8 H2,=>3. E,E>G.3
()/&),B (HE)33E/)
(HE)33E/) &
,AT H'%AD 3<7<37D3< I/8 H=,=>3. E,E>G.3
()/&),B (HE)33E/(
(HE)33E/( &
,AT H'%AD 3<7<37D3< I/8 H=,>>3. E,E>G.3
()/&),B (HE)33E/B&
(HE)33E/B& &
,AT H'%AD 3<7<37D3< I/8 HH,=>3. E,E>G.3
()/&),B (HE)33EB& (HE)33EB& &,AT 3<7<37D3< I/8 HH,=>3. E,E>G.3
H'%A
()/&),B (HE)33EB&*
(HE)33EB&* &
,AT H'%A 3<7<37D3< I/8 HH,>>3. E,E>G.3
()/&),B +>E'33H)
+>E'33H) &
,A/A H'%A 3<7<37D3< I/8 GE,>G3. E,E>G.3
()/&),B +>E'33H)*
+>E'33H)* &
,A/A H'%A 3<7<37D3< I/8 GD,=G3. E,E>G.3
()/&),B +>E'33H( +>E'33H( &,A/A 3<7<37D3< I/8 H2,?E3. E,E>G.3
()/&),B +>E'33H(*
+>E'33H(* &
,A/A H'%A 3<7<37D3< I/8 H2,3E3. E,E>G.3
()/&),B +>E'33HB&
+>E'33HB& &
,A/A H'%A 3<7<37D3< I/8 G3,>G3. E,E>G.3
()/&),B +>E'33HB&*
+>E'33HB&* &
,A/A 3<7<37D3< I/8 H=,=G3. E,E>G.3
()/&),B AD3)/33=)
AD3)/33=) &,A/A
,,'%A 3<7<37D3< I/8 H2,333. E,E>G.3
()/&),B AD3)/33=)*
AD3)/33=)* &
,A/A ,,'%A 3<7<37D3< I/8 HG,?33. E,E>G.3
()/&),B AD3)/33=(
AD3)/33=( &
,A/A ,,'%A 3<7<37D3< I/8 HG,?33. E,E>G.3
()/&),B AD3)/33=(*
AD3)/33=(* &
,A/A ,,'%A 3<7<37D3< I/8 HG,333. E,E>G.3
()/&),B AD3)/33=B&
AD3)/33=B& &
,A/A ,,'%A 3<7<37D3< I/8 H?,333. E,E>G.3
()/&),B AD3)/33=B&
AD3)/33=B&* &
,A/A ,,'%A 3<7<37D3< I/8 H>,?33. E,E>G.3
()/&),B AEH)3H3)
AEH)3H3) &
,A/A ,,'%A 3<7<37D3< I/8 G3,3E3. E,E>G.3
()/&),B AEH)3H3)*
AEH)3H3)* &
,A/A ,,'%A 3<7<37D3< I/8 H=,?E3. E,E>G.3
()/&),B AEH)3H3(
AEH)3H3( &
,A/A ,,'%A 3<7<37D3< I/8 H=,?E3. E,E>G.3
()/&),B AEH)3H3(*
AEH)3H3(* &,A/A
,,'%A 3<7<37D3< I/8 H=,3E3. E,E>G.3
()/&),B AEH)3H3B&
AEH)3H3B& &,A/A
,,'%A 3<7<37D3< I/8 H?,?E3. E,E>G.3
()/&),B AEH)3H3B&*
AEH)3H3B&* &
,A/A ,,'%A 3<7<37D3< I/8 H?,3E3. E,E>G.3
()/&),B A>?)33E) A>?)33E) &,A/A 3<7<37D3< I/8 H=,3E3. E,E>G.3
()/&),B A>?)33E)*
A>?)33E)* &
,A/A H'%A 3<7<37D3< I/8 H2,?E3. E,E>G.3
()/&),B A>?)33E( A>?)33E( &,A/A 3<7<37D3< I/8 H2,?E3. E,E>G.3
()/&),B A>?)33E(*
A>?)33E(* &
,A/A H'%A 3<7<37D3< I/8 H2,3E3. E,E>G.3
()/&),B A>?)33EB&
A>?)33EB& &
,A/A H'%A 3<7<37D3< I/8 HH,3E3. E,E>G.3
()/&),B A>?)33EB&* A>?)33EB&* & 3<7<37D3< I/8 H?,?E3. E,E>G.3
H'%A
()/&),B A?D)33E) A?D)33E) &,AT 3<7<37D3< I/8 G<,<H3. E,E>G.3
()/&),B A?D)33E)* A?D)33E)* &,AT 3<7<37D3< I/8 G3,HH3. E,E>G.3
()/&),B A?D)33E( A?D)33E( &,AT 3<7<37D3< I/8 G3,HH3. E,E>G.3
()/&),B A?D)33E(* A?D)33E(* &,AT 3<7<37D3< I/8 G3,<H3. E,E>G.3
()/&),B A?D)33E/)
A?D)33E/) &
,AT H'%AD 3<7<37D3< I/8 G<,<H3. E,E>G.3
()/&),B A?D)33E/(
A?D)33E/( &
,AT H'%AD 3<7<37D3< I/8 G3,HH3. E,E>G.3
()/&),B A?D)33E/B&
A?D)33E/B& &
,AT H'%AD 3<7<37D3< I/8 HH,HH3. E,E>G.3
()/&),B A?D)33EB&
A?D)33EB& &
,AT H'%A 3<7<37D3< I/8 H2,<H3. E,E>G.3
()/&),B A?D)33EB&*
A?D)33EB&* &
,AT H'%A 3<7<37D3< I/8 HG,HH3. E,E>G.3
()/&),B A?D033E) A?D033E) &,AT 3<7<37D3< I/8 G>,=>3. E,E>G.3
()/&),B A?D033E)* A?D033E)* &,AT 3<7<37D3< I/8 G>,>>3. E,E>G.3
()/&),B A?D033E( A?D033E( &,AT 3<7<37D3< I/8 G>,>>3. E,E>G.3
()/&),B A?D033E(* A?D033E(* &,AT 3<7<37D3< I/8 GE,=>3. E,E>G.3
()/&),B A?D033E/)
A?D033E/) &
,AT H'%AD 3<7<37D3< I/8 G>,=>3. E,E>G.3
()/&),B A?D033E/(
A?D033E/( &
,AT H'%AD 3<7<37D3< I/8 G>,>>3. E,E>G.3
()/&),B A?D033E/B&
A?D033E/B& &
,AT H'%AD 3<7<37D3< I/8 H=,=>3. E,E>G.3
()/&),B A?D033EB&
A?D033EB& &
,AT H'%A 3<7<37D3< I/8 H=,=>3. E,E>G.3
()/&),B A?D033EB&*
A?D033EB&* &
,AT H'%A 3<7<37D3< I/8 H=,>>3. E,E>G.3
()/&),B "D3*33=)
"D3*33=) &,A/A
,,'%A 3<7<37D3< I/8 H2,333. E,E>G.3
()/&),B "D3*33=)*
"D3*33=)* &,A/A
,,'%A 3<7<37D3< I/8 HG,?33. E,E>G.3
()/&),B "D3*33=(
"D3*33=( &
,A/A ,,'%A 3<7<37D3< I/8 HG,?33. E,E>G.3
()/&),B "D3*33=(*
"D3*33=(* &
,A/A ,,'%A 3<7<37D3< I/8 HG,333. E,E>G.3
()/&),B "D3*33=B&
"D3*33=B& &
,A/A ,,'%A 3<7<37D3< I/8 H?,333. E,E>G.3
()/&),B "D3*33=B&*
"D3*33=B&* &
,A/A ,,'%A 3<7<37D3< I/8 H>,?33. E,E>G.3
()/&),B "??H1333E)
"??H1333E) &
,AT H'%A 3<7<37D3< I/8 G<,<E3. E,E>G.3
()/&),B "??H1333E)
"??H1333E)* &
,AT H'%A 3<7<37D3< I/8 G3,HE3. E,E>G.3
()/&),B "??H1333E(
"??H1333E( &
,AT H'%A 3<7<37D3< I/8 G3,HE3. E,E>G.3
()/&),B "??H1333E(
"??H1333E(* &
,AT H'%A 3<7<37D3< I/8 G3,<E3. E,E>G.3
()/&),B "??H1333E/
"??H1333E/) &
,AT H'%AD 3<7<37D3< I/8 G<,<E3. E,E>G.3
()/&),B "??H1333E/
"??H1333E/( &
,AT H'%AD 3<7<37D3< I/8 G3,HE3. E,E>G.3
()/&),B "??H1333E/
"??H1333E/B& &
,AT 3<7<37D3< I/8 HH,HE3. E,E>G.3
()/&),B "??H1333EB
"??H1333EB& &
,AT 3<7<37D3< I/8 H2,<E3. E,E>G.3
()/&),B "??H1333EB
"??H1333EB&* &
,AT 3<7<37D3< I/8 HG,HE3. E,E>G.3
()/&),B I?3)<23) I?3)<23) &,A/A 3<7<37D3< I/8 G3,333. E,E>G.3
()/&),B I?3)<23)*
I?3)<23)* &
,A/A H'%A 3<7<37D3< I/8 H=,?33. E,E>G.3
()/&),B I?3)<23( I?3)<23( &,A/A 3<7<37D3< I/8 H=,?33. E,E>G.3
()/&),B I?3)<23(*
I?3)<23(* &
,A/A H'%A 3<7<37D3< I/8 H=,333. E,E>G.3
()/&),B I?3)<23B&
I?3)<23B& &
,A/A H'%A 3<7<37D3< I/8 HG,333. E,E>G.3
()/&),B I?3)<23B&*
I?3)<23B&* &
,A/A H'%A 3<7<37D3< I/8 HH,?33. E,E>G.3
()/&),B I?3)D?3) I?3)D?3) &,A/A 3<7<37D3< I/8 H=,H33. E,E>G.3
()/&),B I?3)D?3( I?3)D?3( &,A/A 3<7<37D3< I/8 H=,<33. E,E>G.3
()/&),B I?3)D?3B&
I?3)D?3B& &
,A/A H'%A 3<7<37D3< I/8 HH,H33. E,E>G.3
()/&),B IH3)323) IH3)323) &,A/A 3<7<37D3< I/8 G<,<H3. E,E>G.3
()/&),B IH3)323)*
IH3)323)* &
,A/A H'%A 3<7<37D3< I/8 G3,HH3. E,E>G.3
()/&),B IH3)323(
IH3)323)( &
,A/A H'%A 3<7<37D3< I/8 G3,HH3. E,E>G.3
()/&),B IH3)323(*
IH3)323(* &
,A/A H'%A 3<7<37D3< I/8 G3,<H3. E,E>G.3
()/&),B IH3)323B&
IH3)323B& &
,A/A H'%A 3<7<37D3< I/8 H?,<H3. E,E>G.3
()/&),B IH3)323B&*
IH3)323B&* &
,A/A H'%A 3<7<37D3< I/8 H>,HH3. E,E>G.3
()/&),B IH30323) IH30323) &,A/A 3<7<37D3< I/8 GD,H=3. E,E>G.3
()/&),B IH30323)*
IH30323)* &
,A/A H'%A 3<7<37D3< I/8 GD,<=3. E,E>G.3
()/&),B IH30323( IH30323( &,A/A 3<7<37D3< I/8 GD,<=3. E,E>G.3
()/&),B IH30323(*
IH30323(* &
,A/A H'%A 3<7<37D3< I/8 G<,H=3. E,E>G.3
()/&),B IH30323B&
IH30323B& &,A/A
H'%A 3<7<37D3< I/8 H?,H=3. E,E>G.3
()/&),B IH30323B&*
IH30323B&* &
,A/A 3<7<37D3< I/8 H?,<=3. E,E>G.3
()/&),B IH2)3G3/)
IH2)3G3/) &
,AT H'%AD 3<7<37D3< I/8 G<,<H3. E,E>G.3
()/&),B IH2)3G3/(
IH2)3G3/( &
,AT H'%AD 3<7<37D3< I/8 G3,HH3. E,E>G.3
()/&),B IH2)3G3/B&
IH2)3G3/B& &
,AT H'%AD 3<7<37D3< I/8 H?,HH3. E,E>G.3
()/&),B %><)33>) %><)33>) &,A/A 3<7<37D3< I/8 H2,<>3. E,E>G.3
()/&),B %><)33>)*
%><)33>)* &
,A/A H'%A 3<7<37D3< I/8 HG,H>3. E,E>G.3
()/&),B %><)33>( %><)33>( &,A/A 3<7<37D3< I/8 HG,H>3. E,E>G.3
()/&),B %><)33>(*
%><)33>(* &
,A/A H'%A 3<7<37D3< I/8 HG,<>3. E,E>G.3
()/&),B %><)33>B&
%><)33>B& &,A/A
H'%A 3<7<37D3< I/8 H?,<>3. E,E>G.3
()/&),B %><)33>B&*
%><)33>B&* &
,A/A 3<7<37D3< I/8 H>,H>3. E,E>G.3
()/&),B %?D)33E) %?D)33E) &,AT 3<7<37D3< I/8 GH,2>3. E,E>G.3
()/&),B %?D)33E( %?D)33E( &,AT 3<7<37D3< I/8 GH,E>3. E,E>G.3
()/&),B %?D)33E/)
%?D)33E/) &,AT
H'%AD 3<7<37D3< I/8 GH,2>3. E,E>G.3
()/&),B %?D)33E/(
%?D)33E/( &,AT
H'%AD 3<7<37D3< I/8 GH,E>3. E,E>G.3
()/&),B %?D)33E/B&
%?D)33E/B& &
,AT H'%AD 3<7<37D3< I/8 GE,2>3. E,E>G.3
()/&),B %?D)33EB&
%?D)33EB& &
,AT H'%A 3<7<37D3< I/8 GE,2>3. E,E>G.3
()/&),B %?>)33<) %?>)33<) &,AT 3<7<37D3< I/8 G?,2>3. E,E>G.3
()/&),B %?>)33<)* %?>)33<)* &,AT 3<7<37D3< I/8 G?,E>3. E,E>G.3
()/&),B %?>)33<( %?>)33<( &,AT 3<7<37D3< I/8 G?,E>3. E,E>G.3
()/&),B %?>)33<(* %?>)33<(* &,AT 3<7<37D3< I/8 G>,2>3. E,E>G.3
()/&),B %?>)33</)
%?>)33</) &,AT
H'%AD 3<7<37D3< I/8 G?,2>3. E,E>G.3
()/&),B %?>)33</(
%?>)33</( &
,AT H'%AD 3<7<37D3< I/8 G?,E>3. E,E>G.3
()/&),B %?>)33</B&
%?>)33</B& &
,AT H'%AD 3<7<37D3< I/8 GD,2>3. E,E>G.3
()/&),B %?>)33<B&
%?>)33<B& &
,AT H'%A 3<7<37D3< I/8 GD,2>3. E,E>G.3
()/&),B %?>)33<B&*
%?>)33<B&* &
,AT H'%A 3<7<37D3< I/8 GD,E>3. E,E>G.3
()/&),B %(>2)33>)
%(>2)33>) &
,A/A H'%A 3<7<37D3< I/8 GG,<>3. E,E>G.3
()/&),B %(>2)33>)*
%(>2)33>)* &
,A/A H'%A 3<7<37D3< I/8 GH,H>3. E,E>G.3
()/&),B %(>2)33>(
%(>2)33>( &
,A/A H'%A 3<7<37D3< I/8 GH,H>3. E,E>G.3
()/&),B %(>2)33>(* %(>2)33>(* & 3<7<37D3< I/8 GH,<>3. E,E>G.3
H'%A
()/&),B %(>2)33>B&
%(>2)33>B& &
,A/A H'%A 3<7<37D3< I/8 G>,<>3. E,E>G.3
()/&),B %(>2)33>B&
%(>2)33>B&* &
,A/A H'%A 3<7<37D3< I/8 GE,H>3. E,E>G.3
()/&),B 8E?)3>D)
8E?)3>D) &
,A/A ,,'%A 3<7<37D3< I/8 H=,GE3. E,E>G.3
()/&),B 8E?)3>D)*
8E?)3>D)* &
,A/A ,,'%A 3<7<37D3< I/8 H=,DE3. E,E>G.3
()/&),B 8E?)3>D(
8E?)3>D( &,A/A
,,'%A 3<7<37D3< I/8 H=,DE3. E,E>G.3
()/&),B 8E?)3>D(*
8E?)3>D(* &,A/A
,,'%A 3<7<37D3< I/8 H2,GE3. E,E>G.3
()/&),B 8E?)3>DB&
8E?)3>DB& &
,A/A ,,'%A 3<7<37D3< I/8 HH,GE3. E,E>G.3
()/&),B 8E?)3>DB&*
8E?)3>DB&* &
,A/A ,,'%A 3<7<37D3< I/8 HH,DE3. E,E>G.3
()/&),B 8E?03>D)
8E?03>D) &
,A/A ,,'%A 3<7<37D3< I/8 G<,3=3. E,E>G.3
()/&),B 8E?03>D)*
8E?03>D)* &
,A/A ,,'%A 3<7<37D3< I/8 G3,?=3. E,E>G.3
()/&),B 8E?03>D(
8E?03>D( &
,A/A ,,'%A 3<7<37D3< I/8 G3,?=3. E,E>G.3
()/&),B 8E?03>D(*
8E?03>D(* &
,A/A ,,'%A 3<7<37D3< I/8 G3,3=3. E,E>G.3
()/&),B 8E?03>DB&
8E?03>DB& &
,A/A ,,'%A 3<7<37D3< I/8 H2,3=3. E,E>G.3
()/&),B 8E?03>DB&*
8E?03>DB&* &
,A/A ,,'%A 3<7<37D3< I/8 HG,?=3. E,E>G.3
()/&),B *?H)3<3) *?H)3<3) &,A/A 3<7<37D3< I/8 H>,D23. E,E>G.3
()/&),B *?H)3<3)*
*?H)3<3)* &
,A/A H'%A 3<7<37D3< I/8 HE,G23. E,E>G.3
()/&),B *?H)3<3( *?H)3<3( &,A/A 3<7<37D3< I/8 HE,G23. E,E>G.3
()/&),B *?H)3<3(*
*?H)3<3(* &,A/A
H'%A 3<7<37D3< I/8 HE,D23. E,E>G.3
()/&),B *?H)3<3B&
*?H)3<3B& &,A/A
H'%A 3<7<37D3< I/8 ?=,G23. E,E>G.3
()/&),B *?H)3<3B&*
*?H)3<3B&* &
,A/A H'%A 3<7<37D3< I/8 ?=,D23. E,E>G.3
()/&),B ;?3)33=)
;?3)33=) &
,A/A H'%A 3<7<37D3< I/8 GG,D23. E,E>G.3
()/&),B ;?3)33=)*
;?3)33=)* &
,A/A H'%A 3<7<37D3< I/8 GH,G23. E,E>G.3
()/&),B ;?3)33=(
;?3)33=( &
,A/A H'%A 3<7<37D3< I/8 GH,G23. E,E>G.3
()/&),B ;?3)33=(*
;?3)33=(* &
,A/A H'%A 3<7<37D3< I/8 GH,D23. E,E>G.3
()/&),B ;?3)33=B&
;?3)33=B& &
,A/A H'%A 3<7<37D3< I/8 H=,G23. E,E>G.3
()/&),B ;?3)33=B&*
;?3)33=B&* &
,A/A H'%A 3<7<37D3< I/8 H=,D23. E,E>G.3
()/&),B ;?D)33=) ;?D)33=) &,AT 3<7<37D3< I/8 G>,D23. E,E>G.3
()/&),B ;?D)33=)*
;?D)33=)* &
,AT H'%A 3<7<37D3< I/8 GE,G23. E,E>G.3
()/&),B ;?D)33=( ;?D)33=( &,AT 3<7<37D3< I/8 GE,G23. E,E>G.3
()/&),B ;?D)33=(*
;?D)33=(* &
,AT H'%A 3<7<37D3< I/8 GE,D23. E,E>G.3
()/&),B ;?D)33=/)
;?D)33=/) &
,AT H'%AD 3<7<37D3< I/8 G>,D23. E,E>G.3
()/&),B ;?D)33=/(
;?D)33=/( &,AT
H'%AD 3<7<37D3< I/8 GE,G23. E,E>G.3
()/&),B ;?D)33=/B
;?D)33=/B& &
,AT 3<7<37D3< I/8 H=,G23. E,E>G.3
()/&),B ;?D)33=B&
;?D)33=B& &
,AT H'%A 3<7<37D3< I/8 H=,G23. E,E>G.3
()/&),B ;?D)33=B&*
;?D)33=B&* &
,AT H'%A 3<7<37D3< I/8 H=,D23. E,E>G.3
()/&),B ;?D)*833=)
;?D)*833=) &
,AT H'%A 3<7<37D3< I/8 G>,D23. E,E>G.3
()/&),B ;?D)*833=)
;?D)*833=)* &
,AT H'%A 3<7<37D3< I/8 GE,G23. E,E>G.3
()/&),B ;?D)*833=(
;?D)*833=( &
,AT H'%A 3<7<37D3< I/8 GE,G23. E,E>G.3
()/&),B ;?D)*833=(
;?D)*833=(* &
,AT H'%A 3<7<37D3< I/8 GE,D23. E,E>G.3
()/&),B ;?D)*833=/
;?D)*833=/) &
,AT H'%AD 3<7<37D3< I/8 G>,D23. E,E>G.3
()/&),B ;?D)*833=/
;?D)*833=/( &
,AT H'%AD 3<7<37D3< I/8 GE,G23. E,E>G.3
()/&),B ;?D)*833=/
;?D)*833=/B& &
,AT 3<7<37D3< I/8 H=,G23. E,E>G.3
()/&),B ;?D)*833=B
;?D)*833=B& &
,AT 3<7<37D3< I/8 H=,G23. E,E>G.3
()/&),B ;?D)*833=B
;?D)*833=B&* &
,AT H'%A 3<7<37D3< I/8 H=,D23. E,E>G.3
()/&),B ;?D033=) ;?D033=) &,AT 3<7<37D3< I/8 HH,DE3. E,E>G.3
()/&),B ;?D033=)*
;?D033=)* &
,AT H'%A 3<7<37D3< I/8 H?,GE3. E,E>G.3
()/&),B ;?D033=( ;?D033=( &,AT 3<7<37D3< I/8 H?,GE3. E,E>G.3
()/&),B ;?D033=(*
;?D033=(* &
,AT H'%A 3<7<37D3< I/8 H?,DE3. E,E>G.3
()/&),B ;?D033=B&
;?D033=B& &
,AT H'%A 3<7<37D3< I/8 H<,GE3. E,E>G.3
()/&),B ;?D033=B&*;?D033=B&* & 3<7<37D3< I/8 H<,DE3. E,E>G.3
H'%A
()/&),B ;??)33>) ;??)33>) &,AT 3<7<37D3< I/8 G?,D23. E,E>G.3
()/&),B ;??)33>)*
;??)33=)* &
,AT H'%A 3<7<37D3< I/8 G>,G23. E,E>G.3
()/&),B ;??)33>( ;??)33=( &,AT 3<7<37D3< I/8 G>,G23. E,E>G.3
()/&),B ;??)33>(*
;??)33=(* &
,AT H'%A 3<7<37D3< I/8 G>,D23. E,E>G.3
()/&),B ;??)33>/)
;??)33>/) &
,AT H'%AD 3<7<37D3< I/8 G?,D23. E,E>G.3
()/&),B ;??)33>/(
;??)33>/( &
,AT H'%AD 3<7<37D3< I/8 G>,G23. E,E>G.3
()/&),B ;??)33>/B
;??)33=/B& &
,AT H'%AD 3<7<37D3< I/8 G3,G23. E,E>G.3
()/&),B ;??)33>B&
;??)33=B& &,AT
H'%A 3<7<37D3< I/8 G3,G23. E,E>G.3
()/&),B ;??)33>B&*
;??)33=B&* &
,AT 3<7<37D3< I/8 H=,G23. E,E>G.3
()/&),B ;?H)3<3)
;?H)3<3) &,A/A
H'%A 3<7<37D3< I/8 H>,D23. E,E>G.3
()/&),B ;?H)3<3)*
;?H)3<3)* &
,A/A H'%A 3<7<37D3< I/8 HE,G23. E,E>G.3
()/&),B ;?H)3<3(
;?H)3<3( &
,A/A H'%A 3<7<37D3< I/8 HE,G23. E,E>G.3
()/&),B ;?H)3<3(*
;?H)3<3(* &
,A/A H'%A 3<7<37D3< I/8 HE,D23. E,E>G.3
()/&),B ;?H)3<3B&
;?H)3<3B& &
,A/A H'%A 3<7<37D3< I/8 ?=,G23. E,E>G.3
()/&),B ;?H)3<3B&*
;?H)3<3B&* &
,A/A H'%A 3<7<37D3< I/8 ?=,D23. E,E>G.3
P)ace
)n important decision when trying to determine the overall competitive
marketing strategy is place. %lace includes company activities that make the
product available to target consumers. Affective distribution decisions will make
sure that the product is available for the target market once &)I, has demand for
it. )lthough there are many issues involved in this including inventory control,
logistics, channel relationships, the factors &)I, is most concerned with in
marketing are choosing the right channels.

!here are four ma<or divisions in &)I,9s %etrochemical 1arketing
/etwork.
<. Petrochemica) Marketing Group
&)I,-I/'I). ,I1I!A'
&)I, (H);)/ , <H,(HI$)I#I +)1) %,)+A 8 $
%08)1 ,/A; 'A,HI<<33HH
D. Petrochemica) -nit at GAIL, PA.A
&)I,-India. ,imited
%B%)!) 'istt. )uraiya -0%. D3HD><
E. GAIL Po)ymer .echno)ogy ,enter
&)I, -I/'I).,!'.
(E?GEH, *ector < /BI') D3<>3<-0%. I/'I)
5. Lona) 2ffices
Modes of se))ing
$irect sellingJ In this type of selling, the raw material i.e. the
petrochemical is sold to the customer directly from the petrochemical plant at
%ata. In this type of selling no intermediaries are involved.
%tock transfer to &onsignment %tockiest '&%(J &)I, has its :onal offices at
strategic locations so that the market potential of petrochemicals can be identified
and tapped. )fter the customers are identified, a strong distribution network in
the form of +* is formed and the raw material is transferred to them from whom
the industries procure the petrochemical as raw material.
In this third type of selling, the customers from various :ones procure the ra=
materia)s from the @one specific consignment stockiest ;ut instead of
paying the ,", they pay GAIL direct)y.
(asically, the +* acts as intermediaries between &)I, and the customer and helps
in strengthening the distribution network and maintain good industrial relations.
!hey help &)I, understand the customer trends of a specific region and also
in the retention of actual customers.
6 !he +onsignment *tockiest s are elected through tenders.
6 !he desiring +* should show a ;ank guarantee of !s & ,rore to
&)I, and only after that can &)I, give the +* raw materials worth 8s
D.? +rores.
6 !his is mandatory so as to choose the best out of the tenders and
averting losses.
Packaging
D? kilograms bags each of &lene and &lex are available to the
customer to choose from. It is limited to D? kilograms in accordance to
the international standards. !he other reason being, it is easy to handle and
can be transported safely. ;hile shipping or loading the petrochemicals in
truck, the standard D? kilograms bag can be easily transported from the
warehouse to the customer9s site.
Promotion
<. %articipation in plastic7petrochemical !rade "airs. !his is done so as to
promote the &)I, brand among the customers.
D. )dvertisements in maga:ines and journals related to natural gas or
petrochemicals. !his helps them to create awareness among the industry
end customers.
E. )lso, the &)I, website in which every single detail is given regarding
the business portfolios which helps the customer choose &)I, as their supplier.
>. !he consignment stockiest are given attractive discounts so as to retain
them and practice the correct business process
,onsiderations for the right product mi8
<. !he demand and supply scenario.
D. !he feedback received by &)I, every month after the sales and production
planning meet.
E. !he plans for the next month for all the :ones after the :onal representatives
express their re5uirements for their customers.
>. !he limitations of the plant along with the stock available.
?. !he production capacity.
H. %roduction additives. !heir supply and availability.
G. %rice of each grade. !he grade which generates maximum revenue is
preferred.
In a nutshe)), =e can say that the right product is a compromise ;et=een
operations and marketing.
4.&4. ,ity Gas istri;ution
!his is another sector which has a high growth potential. ;orldwide, city gas
distribution has grown hand in hand with the gas sector development in terms of
supply infrastructure and transmission infrastructure. ;ith the expected growth in
the gas supply and the simultaneous creation of gas interstate transmission
infrastructure in India, this sector is bound to grow in the TI %lan period. ;ith the
emphasis on clean environment, this sector would get the necessary thrust in the
coming years. In line with this, various players, primarily led by &)I,, have drawn
up ambitious plans to roll out city gas infrastructure across a number of cities in the
country. !he current demand estimate in this sector is about << 11*+1' in D33H
3G and <D.32
11*+1' in D33G32. )ssuming a conservative annual growth of 2 percent,
the demand would go up to about <D.=E 11*+1', <E.2E 11*+1', <>.2
11*+1' and <?.2E 11*+1' in D3323=, 3=<3, <3<< and <<<D respectively.
&)I, was the first company in India to pioneer city gas distribution project. In
addition to marketing /atural &as through !runk and 8egional !ransmission systems,
&)I, has formed joint venture companies to supply gas to households, commercial
users and the transport sector. ;ithin the short span of <3 years, &)I, has
expanded its +/& business from < company -1ahanagar &as ,td.. in India to 2 in
India and > abroad.
1ackground of ,ity Gas Pro<ects
!he use of /atural gas as a fuel was in vogue for 5uite some time in India but was
limited to industrial applications only. !he main driver for the reali:ation of the
importance of city gas projects in the initial stage was due to environmental concerns.
!he rapid growth in urbani:ation and increasing vehicular emissions in India in the
last <3 <? years resulted in significant rise in environmental pollution. !his has
been a major cause of concern in important cities. (ased on the ambient air 5uality
monitored in a study in the late nineties, it was found that the contribution from
vehicles to the ambient air pollution was as high as H?@ of total air pollution. !his was
also taken cogni:ance of by the judiciary at various levels.
)ll this while, &)I, took many initiatives to introduce %iped /atural &as -%/&. for
households and +ompressed /atural &as -+/&. for the transport sector to address the
rising pollution levels. %ilot projects were launched by &)I, in two big cities namely
'elhi C 1umbai in early nineties leading to start of commercial operation of city gas
projects in 1umbai and 'elhi through #oint venture mode. !hus &)I, successfully
established natural gas as an ecofriendly, economical and safe alternative to gasoline
and ,%& in transport sector. !he results of these ventures are 5uite visible through
improvement in air 5uality in these cities. )s such, &)I, played a role model
for introduction of +&' projects in the country.
;ith the gain of experience and expertise &)I, has replicated +ity &as projects in
other cities where gas is available along with pipeline connectivity. &oing
ahead with its plan, &)I, has so far implemented +ity gas projects in <E cities
independently7through #I route and has formed 2 joint ventures for this purpose.
"urther, with a planned network expansion of more than <D,333 $ms of high pressure
trunk pipelines by D3<<<D, &)I, is hopeful that as many as D33 cities are likely to
be on city gas distribution map of India in due course connecting the cities and
towns falling in the catchment areas of its gas pipelines. !hese cities would span
across <? states and are estimated to have a population of about <H3 million.
*imilarly, a large number of vehicles including public transport will run also on +/&.
I#I.IA.I/*" .AI*# 10 GAIL
&)I, has taken initiatives to introduce %iped /atural &as -%/&. to reduce pollution
from conventional fuels and +ompressed /atural &as -+/&. as clean burning fuel to
curb the vehicular emission and launched projects in the cities namely 'elhi,
1umbai C Iadodara in nineties. GAIL has successfu))y esta;)ished natura) gas as
eco:friend)y, economica) and safe a)ternative to gaso)ine in transport sector and
LPG in domestic, commercia) and industria) sector.
!I/*!" 23 ,#G
6 *conomics
6 *missions
6 "afety
J2I#. /*#.-!* ,2MPA#I*" I# I#IA
!o enhance the usage of /atural &as, &overnment of India has entrusted &)I, to play
leading role in #oint Ienture +ompanies for implementation of +ity &as %rojects for
supply of %/& and +/& in various cities of India. *o far &)I, formed eight #oint
Ienture companies namely F
".
#o
.
"tate ,ities ,ompany J/ Partner "tatus
<. 1aharash
tra
1umbai,
!hane
1ahanagar
&as
&)I,, (ritish
&as
%/&7 +/& being
supplied.
1aharashtra
D. 1aharash
tra
%une
1aharas
htra
/atural
&as
&)I,, (%+,
&ovt. of
1aharashtra.
*upply of %/&7 +/&
under implementation.
!he <st +/& supply
likely by the end of
E. 'elhi 'elhi
Indraprastha
&as
&)I,, (%+,
&ovt. of
/+!, 'elhi.
%/&7+/& being
supplied..
>.
0ttar
%radesh
/oida
Indraprastha
&as
&)I,, (%+,
&ovt. of
/+!, 'elhi.
+/& being supplied.
?.
0ttar
%radesh
,ucknow
)gra
&reen &as
,imited
&)I,, IB+,
&ovt. of 0ttar
%radesh
+/& being supplied.
H.
0ttar
%radesh
$anpur
+entral 0p
&as
&)I,,
(%+,
&ovt.of
0ttar
+/& being supplied.
G.
)ndhra
%radesh
Iijayawa
da ,
Hyderaba
(hagyanagar
&as
&)I,, H%+,
&ovt. of
)ndhra
+/& being supplied. .
2. !ripura )gartala
!ripura
/atural
&as
+ompany
&)I,, &ovt.
of !ripura C
&ovt. of
)ssam.
%/&7 +/& being
supplied
=.
1adhya
%radesh
Indore
)avantika
&as
&)I,,
H%+, C
&ovt. of
1adhya
*upply of %/&7+/&
is under
implementation.
,urrent ,o:ordinates
In the view of the emerging changes in the Hydrocarbon *ector and with the
formation of %/&8(, it is essential for &)I,Ks growth that the business strategy be
amended suitably and action plan with time frame is 5uickly firmed up. )ccordingly a
detailed +ity &as *trategy 8oadmap has been prepared for implementation of +ity
&as %rojects in DE3 cities identified contiguous to existing and proposed pipeline in a
phased manner in ? years hori:on.
GAILJs main strategy for city gas distri;ution is through Joint /entures.
.his he)ps in infrastructure deve)opment and gives a systematic approach
to the pro<ect.
!etai) Gas9 Market Presence
P#G9
GAILJs Progress9 0nder its +ity &as 'istribution project in 'elhi, Indraprastha &as
,td, a #I of &)I, -India. ,td, (harat %etroleum +orporation and the &overnment
of /+! of 'elhi, is supplying %iped /atural &as -%/&. to D.E?,acs 'omestic and
?33 +ommercial +onsumers.
1ahanagar &as ,td a #I of &)I, -India. ,td, (ritish &as and the
&overnment of 1aharashtra, is supplying %/& to ?.< ,acs 'omestic and <D33
+ommercial +onsumers and >3 Industrial consumers in 1umbai, /avi 1umbai,
!hane, 1ira (ayandar.
In addition to above, &)I, has implemented +ity &as %rojects through its #oint
Ienture +ompanies its subsidiary -&)I, &as ,imited. and for supply of %/& in
cities of %une, Hyderabad, Iijayawada, $akinada, $anpur, (areilly, )gra, ,ucknow,
)gartala, 'ewas, *onepat, Indore, $ota having a customer base of about =333
'omestic and DE33 +ommercial and Industrial +ustomers.
GAILGs 3uture P)ans9 &)I, has drawn plans to execute the +ity &as
'istribution %roject in various cities, which are falling enroute of its !ransmission
%ipelines.
,#G9
GAIL Progress9 )t present &)I, is supplying +/& through its joint venture
companies and subsidiary company -&)I, &as ,imited. in 'elhi, 1umbai, Iadodara,
%une, Hyderabad, Iijayawada, $akinada, $anpur, (areilly, )gra, ,ucknow, )gartala,
'ewas, *onepat, Indore and $ota.
&)I, has set up D3= +/& stations in 'elhi and adjoining areas to cater to
DH333 buses C mini buses, D.GG ,acs cars 7 taxies and <.D ,acs autos. In 1umbai <>2
+/& stations are constructed to cater to H,233 buses, H?,333 cars7taxies and <.>3 ,acs
)utos.
In addition to above, &)I, has set up H> +/& *tations through its #oint Ienture
+ompanies its subsidiary -&)I, &as ,imited. and for supply of %/& in cities of
%une, Hyderabad, Iijayawada, $akinada, $anpur, (areilly, )gra, ,ucknow, )gartala,
'ewas, *onepat, Indore, $ota having a customer base of about G333 +ars7!axies,
?2333 )utos and DG33 (uses C 1ini buses.
.he ,ity Gas 2pportunity
!he emerging change in +ity gas7+/& consumption pattern in India is evident
through its growth from <@ of total gas usage in D333 to >?@ currently. In fact, the
consumption in India9s domestic sector is substantially low as compared to that in
developed economies like 0*) and 0$ where the domestic and commercial
consumption of natural gas is over >3@ of total consumption. !his only
demonstrates the potential for huge expansion and growth in this area. !he higher
expected availability of gas and aggressive growth plans of various players are
likely to boost the supply, and as a result, demand in household and transport sector.
It is projected that +&' projects would account for nearly D3 11*+1' of
gas in the long run as against the current consumption of ?H 11*+1'. In
addition to these, the demand from commercial and industrial sectors like glass,
ceramics, tea plantation etc also is expected to grow at a fast pace. !hus, the +&'
segment in India is an opportunity waiting to be tapped.
,hapter:5
8esults and 'iscussion
!he following are the results of the studyJ
6 eve)opment F Modifications of Po)ymer Grades
&)I, owns a large %etrochemical +omplex at %ata -0%., where different grades of
polymers are developed 7 modified depending upon customer re5uirement.
6 "etting of Joint /enture Agreements for ,ity Gas Pro<ects in India
6 AcEuisition of $ "eismic ata in *?P 1)ocks
&)I, has varying A5uity %artnership in DG AC% (locks in India C )broad. &)I,
aims to undertake -alongwith the +onsortium %artners. activity of )c5uisition of
*eismic 'ata in AC% (locks.
6 .he eregu)ation9 A Paradigm "hift
Administered Pricing Mechanism eregu)ated Pricing Mechanism
"ixed %arameters "lexible %arameters
8are 8evisions in %rices "re5uent 8evisions in %rices
+ost %lus %ricing 1arket 'etermined %ricing
)ssured 8eturns /o )ssured 8eturns
*upplier+ustomer ,inkages +ompetition
)veraging Affect )ccent on ,ogistic efficiency
6 India current)y operates && gas processing p)ants. !hese plants
prepare the gas for transportation in the transmission system and extract
valuable ,%&s.
6
3orms of Market !isk
6 &as %rice 8isk
Z *hort term volatility vs. ,ong term price trends
Z *tructural changes in the market
Z &eopolitical issues
6 &as *upply 8isk
Z +ompetition from other supplies 8eservoir and facility risk
6&as 1arketing 8isk
Z +ompetition from other marketers 1arketing strategy and alignment
Z
Gas Price !isk
/o direct control of prices
[!he first major means of mitigation is by minimi:ing construction costs
Z &as sales contracting strategy or strategies
Z "inancial hedging tools4 futures, options
Z 'esign7plan for access to multiple markets
Z 8isk vs. Bpportunity
&as 1arketing 8isk
Z +ompetition from other marketers
Z )bility to attract proper mix of buyers7contracts
Z )bility to obtain transport needed
"trategy and a)ignment
Ialueadding vs. risk averse strategy Brgani:ational alignment to meet strategy
X)ccretiveX business relationships
Z Joint ventures
Z Managing ,ontracted Asset Managers
Z
!o)es of the "tateGs Gas Marketer
<. 1anage +apacity in accordance with their contracts.
D. 1anage daily variations in gas deliveries.
E. 1onitor delivery forecasts using information provided by producers and
accessible elsewhere.
>. 1anage transportation capacity
?. %repare for and participate in Bpen *easons
H. *ell *tateKs &as. In*tate C Axport sales.
G. 1anage the mix of sales contracts, financial tools and markets to minimi:e risk
and maximi:e returns in accordance with established policy.
Z &as1arketing Bptions
<. Aarly long term gas sales
D. *pot sales at first market
E. "irm contracting for gas sales
>. +ontracted asset managers
?. #oint ventures
6 &)I, is not exploiting the market affordability of a large proportion of their
gas.
,hapter:'
+onclusion C *cope for further work
&)I, has ambitions to be a highly efficient integrated gas company, with
interests from field development and production, through national transmission and
imports, to distribution and allied industries such as petrochemicals. !hese ambitions
are not limited to India, as &)I, is building a portfolio of international upstream and
downstream gas assets. lt dominates domestic infrastructure and gas purchasing from
domestic suppliers.
;ith its diverse business portfolios, &)I, is one of the highest profit making
/avartnas and with its strategic alliances with the other key players, it is 5uite sure of
&)I, to retain its dominant position.
It is India9s largest gas transmission company and holds an enormous customer base
with its 5uality assured service.
&)I, operates the countryKs largest gasfired petrochemicals complex, with an installed
polyethylene -%A. capacity of DH3,333tpa. !he variety of grades offered by &)I, to
cater to its customer needs, shows its customer focus approach.
&)I,, probably would not face any threats from the competitors or from the imports as
the demand of petrochemicals is going to rise up and the imports would be a help to
sustain the increased re5uirements. It is beyond contention that +ity &as project
implementation is definitely going to play a significant role in the growth of Indian
economy. !he next decade is going to be the decade of +ity &as 'istribution in
India. "or &)I,, this would be a continuing journey of creating new economic and
social opportunities and developing business competencies.
;ith recent developments in natural gas sector, some players have advantage on
the supply side while others are strong on the distribution part. It is time of
cooperation and competition.
India needs to put in place policies, incentives and infrastructure to prepare for rising
consumption of natural gas to >33bcm in D3E3, according to a study released in #anuary
D33G. K)ssuming that each additional bcm of gas will cost about 0*M lbn to develop,
this would imply an investment of more than 0*ME?bn by
D3E3,K the study by %etroleum *ecretary 1 * *rinivasan said.
Importance of effective regulation cannot be overemphasi:ed. !he gas industry in
India is still at a nascent stage and the regulatorKs role would be crucial in ensuring
good customer service and stimulating investments by ensuring a level playing field
for all players. !he &overnment needs to be complimented for timely enactment of the
%/&8( )ct D33H, due to which the %etroleum C /atural &as 8egulatory
(oard is a reality now. 8egulation is crucial to ensure that the natural monopolies
vested in distribution companies is not abused while also allowing for an ade5uate
rate of return on their investment. !he 8egulator will oversee the
construction of new distribution networks and proposed additions to the network while
disallowing unnecessary duplication of investment and effort.
!he 8egulator can also ensure that *tandards C +ode of %ractice are followed
to take care of human safety C consumer interest at large.
"cope for further =ork
<. )nalysis of the scenario pre and post /A,%.
D. +ompetitive scenario and pricing of &)I,9s ,H+ products.
E. !he role of regulators in gas transmission.
>. ,ikely impact of key &overnment %olicies and )cts on
competition.
,hapter:6
8ecommendations for Improvement
)he outcomes of the research and the analysis conducted, resulted in
recommendations for GAIL 'India( Ltd which deserves management attention )he
points are as follows:
<. &as sales agreements should be made more flexible vis\vis competitors.
D. 8evision of methodology for fixed transmission tariffs.
E. /eeds to improve door to door service through transportation arrangement
for petrochemicals.
>. &)I, is not exploiting the market affordability of large proportion of their gas.
?. 'omestic gas connection needs to be augmented.
H. &)I, should exploit the northern belt and tie up with companies located
near the belt.
G. In gas marketing, the eastern belt -(ihar, ;est (engal. should be tapped
as there is tremendous potential as well as opportunity which can be harnessed.
2. &)I, has its legs stretched till $& (asin and the $ochi$anjirkkod
(angalore71angalore pipeline has been laid. !his calls for the customer
tapping who are located in the vicinity of the pipelines.
=. /aphtha cracker unit should be installed following which successful
diversification into chemicals can be made possible.
<3.!he emergence of new players and extent of market liberali:ation may pose a
threat to &)I, and the essence to combat the creeping competition is by
retaining the existing customers and creating sound prospects. !his can be done
by creating both tangible and intangible benefits
<<.In market lot of potential is there but resourcing is lacking hence
optimi:ation of resourcing is a must.
<D.&as sourcing needs to be improved.
<E.!ransportation of polymers is not full proof4 it needs to be
ade5uate7comprehensive.
<>."or city gas distribution, opportunities should be explored in domestic cities
only.
<?.%rioriti:ed network to be developed for the industry clusters.
<H. !he +81 module should be enhanced and improved.
<G.&)I, should be prompt in reaching out to customers falling near upcoming gas
pipelines.
<2.+ustomer9s preparedness should be aligned with pipeline projects.
<=.+ustomer meets and education should be organi:ed by Yonal offices.
,onc)usion
6 !ype of business &)I, is in and the dynamic and forward approach of
&)I, management C working culture embedded into majority of various
working level officers would instill confidence in any stakeholders mind that
&)I, will proactively modify course7approach to excel in the upcoming
competitive scenario in India.
,hapter:(
8eferences
<. (% statistical 8eview of ;orld Anergy, #une D33G
D. (usiness 1onitor International #ournal
E. &)I, sponsored Infraline 8esearch F D33H
>. &)I, -India. ,td.9s 3=<3 )nnual 8eport
?. &)I, official presentations of strategies
H. !he oil C gas journal, 1arch32
>e;sites
<. w w w .bu s in e s s m on it o r o n li n e . c o m
D. w w w .g a il o n li n e . c o m
E. w w w .h a ld ia p e tr o c h e m ic a l s . c o m
>. w w w .in fr a li n e .c o m
?. w w w. r il . c o m