Insight Conversation: Sashi Mukundan, BP

Sashi Mukundan is president of BP India and senior vice president of BP Group. He spoke to Sambit Mohanty on how BP’s aspiration to transform itself into an integrated energy company will allow it to play a bigger role in India's transition toward cleaner fuels like gas, hydrogen and renewables, while pursuing its retail fuel and gas production ambitions with its partner Reliance Industries.

What are BP’s expansion plans in India?

With its many investments in energy businesses, BP is one of the largest international energy companies in India. As you may be aware, earlier in August we set out a new strategy that will see BP transform from an international oil company to an integrated energy company. The world’s energy problems are getting more complex. They increasingly require complex, multi-energy solutions. This plays to our strengths. We will diversify our company into different forms of energy – renewables, bio[energy] and hydrogen.

In the last couple of months, BP has made three major announcements signaling significant investments in the energy and digital space in India – the global business services center in Pune, an investment in Green Growth Equity Fund (GGEF) and the launch of the petroleum retail joint venture with Reliance Industries Limited, Jio-BP.

Along with our partners, we continue to develop three deepwater gas projects on the east coast of India, at an investment of $4.5 billion. The first project is expected to commence production in the next quarter, with the next two projects expected to come online in 2021 and 2022. Together these are projected to add 30 million cubic metres (1 Bcf/d) of gas production by 2022 and meet 15%-20% of India’s estimated gas demand in 2022.

As we grow our business footprint in the country, we seek to support India’s energy transition, directly and through our partners, to deliver cleaner, more affordable energy, ensuring a better quality of life for the people of India.

Sashi Mukundan, BP

What is the role of natural gas in this plan?

Gas will remain absolutely key to BP and be a part of the transition to net zero emissions. At BP we believe that the world will need decarbonized gas as a fuel to achieve net zero by 2050 or sooner. Gas will be decarbonized as hydrogen with carbon capture, use and storage to get to net zero.

India has a natural gas base with a potential to meet 50% of the anticipated demand for gas through to 2050. Natural gas burns at half of the emission rate of coal in power generation and offers significant benefits for air quality. New domestic gas production will not only significantly reduce emissions but also the country’s import dependence.

Achieving a gas-based economy for India will certainly be a challenge and BP is committed to play its part. BP’s overall focus is on resilience – both cost and environmental footprint. We believe gas has an important role to play in displacing coal.

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Is BP is planning to venture into any new areas? 

Through Lightsource BP and the Green Growth Equity Fund (GGEF) we are managing investment in India’s green infrastructure sector. GGEF plans to invest in over $5 billion of rapidly-scalable green businesses. BP on its own has recently announced plans to invest in GGEF, which also gives us an option to co-invest in scalable renewable businesses. We will continue to look for additional business opportunities to further support India’s low carbon economy including natural gas development, zero carbon and bioenergy initiatives and digital innovations.

Any comments on how the retail tie-up with Reliance is progressing? What’s the growth vision and how does this JV fit into your low carbon energy plans?

As you know we launched the new Jio-BP venture in July this year. Jio-BP aims to become a leading player in India’s fuels and mobility business, leveraging Reliance's presence across 21 states and by bringing BP's extensive global experience in high-quality differentiated fuels, convenience retail, lubricants and adjacencies.

In parallel we will also start to build a network across India for EV charging and battery management, supporting fleets and customers. The venture aims to expand from its current fuel retailing network of over 1,400 retail sites to up to 5,500 over the next five years. This rapid growth will require a four-fold increase in staff employed in service stations – growing from 20,000 to 80,000 in this period.

Jio-BP also aims to increase its presence in aviation fuel marketing from 30 to 45 airports in the coming years. Over time, BP's ambition is to halve the carbon intensity of the energy products we sell, even as we aim for net zero carbon in our oil and gas production, and in our own operations. Therefore, while expanding its presence in fuel retailing and aviation fuels, it aspires to provide consumers with advanced fuels with lower emissions, EV charging and other low carbon solutions over the time.

How are gas production plans progressing in India? With imported LNG prices remaining low, will it affect upstream output plans?

We believe there are significant “discovered” and “yet to find” gas resources in India, which need to be explored and developed. Over the next three-to-five years, we hope to see a significant increase in gas production.

While low LNG prices could potentially impact project returns, we believe these are cyclical and inherent risks in the upstream industry. It is imperative to allow for discovery of true market price without any regulatory restrictions.

Along with our partners we are developing three deepwater projects in the Krishna Godavari basin. Despite challenges posed by the global pandemic and widespread lockdowns, we have been able to progress these projects. Most activities for the first of them, the R-series project, have been completed and we expect to see first gas in the last quarter of 2020. Logistical challenges created by the pandemic have necessitated the commissioning to be pushed back a few months.

What steps does India needs to take to boost consumption in the gas sector?

India has set an ambitious target to increase the share of natural gas in the energy mix from 6% to 15% by 2030. To meet this objective, the government is progressively reforming the gas value chain.

Several policy initiatives have been implemented in recent years across the entire gas value chain, supporting the development of gas resources, creation of pipeline infrastructure, increased regasification terminals and increases in the city gas distribution network.

We believe that in order to fully realize India’s gas potential and to significantly help increase the share of gas in the energy mix it is imperative to usher in changes like: providing true marketing and pricing freedom; [a] unified pipeline tariff; setting up of a gas exchange; fair, transparent and non-discriminatory access to gas pipeline infrastructure; and inclusion of gas in GST [goods and services tax].

How will coronavirus impact India’s energy transition plans?

COVID-19 presents a unique opportunity for India to prioritize its transition to a low carbon economy. As the country and its economy recovers, the focus will need to shift to stimulating demand, necessitating clean and affordable energy.

Given the opportunities, India could attach green conditions to recovery packages, offer increased policy support for investments in infrastructure, fuels and technology that accelerates energy transition while creating growth and jobs.