Annual Report - 2005-06 - GAIL (India)

Polyethylene market in India is dominated by the domestic producers like IPCL (Division
of RIL), RIL, GAIL and HPL. Commodity wise HDPE / LLDPE / LDPE constitute 40% of the
commodity polymers in India.
Source : Ingref
Volume (‘000 MT)
5000
4000
3000
2000
1000
0
Consumption Dynamics – Commodity Polymers in India
PP
35%
LDPE
5%
PS
5%
LLDPE
12%
Demand vs Supply in India – HDPE/LLDPE
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Source : Chemsystems Online
Demand
Supply
PVC
20%
HDPE
23%
On the LNG front, your Company is
focused on increasing its gas trading
business by augmenting supplies
through LNG imports. LNG is expected
to become a major gas sourcing
alternative and this would drive
Indian companies to participate in all
parts of the LNG value chain i.e. LNG
liquification, LNG transportation and
LNG regasification.
Through Gujarat State Electricity
Generation Ltd. (GSEG) and Ratnagiri
Gas & Power Private Limited (RGPPL),
your Company is seeking to vertically
integrate its operations and to further
improve its margins. The investment
in Dabhol would provide GAIL an
opportunity to import 2.9 MMTPA of
LNG for merchant sales.
The City Gas Distribution ventures of
your Company are an attempt to stake
a claim in a market which has good
potential and an ability to drive up
margins.
CORPORATE STRATEGY
The industry has robust fundamentals, there
already is a strong gas demand and at the
same time there are also new gas sources. The
importance of natural gas is expected to increase
in the Indian Energy basket. High prices of the
competing fuels and growing environmental
concerns across the globe would lead to a shift of
preference towards natural gas as fuel since gas is a
cleaner fuel than most of the liquid fuels. However
the demand of gas will be sensitive to the changes
in price of gas vis’-a-vis’ competing fuels. The same
will impact the other related sectors your Company
has a presence in.
In a very dynamic scenario, your Company looks
forward with a focus on its gas transmission
business and with a vision towards the upstream
and the down stream sectors of the gas value chain.
Strategic move
Protect core
business
Move upstream
Key Strategic plans of GAIL
Rationale....
– Protect margins and market share
– Secure supply
– Grow profitability
The market is tending towards an increasing demand supply gap of polymers in the
next few years.Currently, Polypropylene accounts for majority of the market share.
The polyethylene production capacity of Petrochemical Complex at Pata is being
increased from 3,10,000 TPA to 4,10,000 TPA to achieve economies of scale. Your
Company is also considering setting up Petrochemical plants in Assam & Kerala.
Furthermore, GAIL is also exploring setting up a gas based Petrochemical complex
in Iran.
GAIL’S OUTLOOK
Your Company is an Integrated Gas
Company and has made its presence
felt in all areas of the value chain,
from Supply and Sourcing (E&P and
PLL) to Demand (GSEG & Dabhol;
Diversify downstream
presence
Explore
international
opportunities
– Reduce cost to serve
– Increase sources of revenue
– Monetise upstream investments (captive
uses such as power)
– Create growth despite
reducing domestic growth
opportunities
City Gas) including the midstream
segment of gas transportation & gas
processing (Liquid Hydro Carbons &
Petrochemicals).
In the E&P business, your Company has
started realizations from sale of oil from
the Cambay basin block and is looking
forward to its commercial operations.
The prospect from the A-3 Block in
Myanmar is encouraging following the
results of drilling of the first well, which
encountered and tested natural gas.
Besides, drilling activities in the Block-
26 in the Bay of Bengal is also expected
to begin in the next fiscal i.e. 2006-2007.
Your Company plans to spend
Rs.900 Crores in the next two years to
further its stake in the business with a
view to secure supplies.
44 Winning Momentum 45