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INTERVIEW: Adani Gas CEO says infrastructure, policy push perfect recipe for growth

Highlights

Company's gas volumes to witness double-digit growth

Sees GST, pipeline tariffs as two stumbling blocks

Low prices to aid India's domestic gas consumption

Singapore — From boosting retail footprint to multiplying pipeline and distribution networks, the chief executive of India's Adani Gas has big plans amid a belief that there is opportunity for India's gas consumption to move into a high growth trajectory.

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Two years into his role as CEO, Suresh Manglani is confident that a cocktail of investor-friendly government policies, low prices, backing from its parent company and its alliance with Total has set the stage to tap a market where the share of gas in the energy mix is 6%, compared to a world average close to 25%.

"I have a clear mandate to boost gas infrastructure and the city gas distribution network so that gas reaches across all the 19 geographical areas awarded to Adani Gas and another 19 areas through the joint venture with Indian Oil Corp.," Manglani told S&P Global Platts in an exclusive interview.

With the joint venture -- named Indian Oil Adani Gas Private Limited -- the AGL network covers 71 districts in 15 states and 8% of the country's population.

AGL currently has about 550 km of steel pipelines -- also called backbone pipelines -- and about 4,500 km of medium-density polyethylene pipeline.

Manglani said Adani is aiming to grow that network by five to eight times over the next eight years. That would support growth in gas volumes.

In the financial year ended March, gas sales volumes of AGL -- including compressed natural gas and piped natural gas -- grew 8% year on year to 582 million cu m from 541 million cu m a year earlier. The company's average annual gas volume growth over the past few years has been around 11%.

"We are expecting that double-digit growth in volumes to continue in the years to come," Manglani said.

Untapped potential

He added the company's residential customers would grow to more than 2.5 million over the next eight years, from about 450,000 currently. In addition, CNG stations would grow to more than 600 from the current 115 stations over the same period.

"We have submitted our minimum work program to the Petroleum and Natural Gas Regulatory Board. In each segment, we are hoping to grow by 4-5 times," he said.

"Technology being one of our key growth drivers, our newly launched My Adani Gas app, digital bill payments, spot billing, and other initiatives will enrich customer experience and enhance our operational efficiencies," he added. "Likewise, many other digital initiatives are in the pipeline."

Manglani said AGL is actively pursuing a plan to boost its retail network by creating multi-fuel stations, adding that the joint venture of Total with Adani Group would help Adani Gas tap into their expertise.

"In the future, we want to create a retail business model that will be a one-stop fuel solution -- fuel stations that can serve all kinds of transportation fuels, including LNG. Total's fuel retailing expertize in more than 130 countries will help us in achieving that ambition," he added.

Policy reforms

"I am seeing a lot of positive environment being created by the government to boost gas consumption through development of gas-related infrastructure -- CGD networks, transmission pipelines and RLNG terminals. The government's continued focus on the sector has encouraged us to be a part of that vision," Manglani said.

At the same time, there are a few challenges that need to be addressed -- bringing gas under the goods and services tax and introducing a simplified pipeline tariff structure.

India currently has a "complex pipeline tariff structure" under which if gas travels through several pipelines, tariff for each pipeline has to be paid. This increases the cost burden for consumers.

"Let's assume if gas travels from southern India to the northern part of India and if it has to pass through three different pipelines, and this means three sets of contracts and other formalities," he said.

PNGRB chairperson Dinesh Kumar Sarraf recently told Platts that it would soon be initiating an industry consultation process on the issue.

"Also, for gas reforms to be complete, it needs to be under GST. Without it producers pay different kinds of taxes that pushes up their costs, but they can't claim back that input credit," Manglani added.

PNGRB recently stated that LNG stations would be excluded from the purview of CGD exclusivity licenses issued for specific geographical areas.

"All along, CGD entities have had clear understanding that setting up LNG stations for transportation is part and parcel of its authorization. This development -- after CGDs have committed minimum work program -- had certainly brought some ambiguity, and currently CGDs are reviewing this clarification by PNGRB," Manglani said.

He said the anticipated rise in LNG regasification capacity in the coming years, along with an expected rise in domestic gas production, would mean that domestic gas supplies would rise sharply in the coming years. "This is great news for consumers who can get gas at affordable prices," Manglani said.

He expects international gas prices to remain low for some time. "I think that given the current gas prices and excessive supply scenario, increasingly, a lot of our gas imports will happen on the basis of spot prices and will be relatively shorter-term contracts."

With the joint venture -- named Indian Oil Adani Gas Private Limited -- AGL network covers 71 districts in 15 states and 8% of the country's population .