Suresh Mangalani | CEO | Adani Gas LtdMr. Suresh Manglani is the Chief Executive Officer of Adani Total Gas Limited (ATGL), has about three decades of experience in Oil and Gas Industry, about a decade and a half in British Gas and BP and since the last several years, spear heading ATGL’S foray the sector. He is also the director in board of the joint venture Indian Oil -Adani Gas Private Limited, and the director of joint venture Total Adani Field Marketing Private Limited between Adani and Total.

In a forum discussion with Indian Infrastructure, Suresh P. Manglani, Chief Executive Officer, ATGL, spoke about the progress of oil and gas sector, impact of government initiatives, challenges associated with the sector and future outlook…

Q1. What has been the progress in the oil and gas sector over the past one year?

The past one year can be summed up as a period of turbulence and resilience. The country experienced a sharp resurgence of the second wave of the pandemic, affecting people and eq­uipment mobility. The year was marked by a sh­arp increase in logistics and freight costs and kept the cost of oil and gas high. The economic recovery post the first two waves of the pandemic saw a rebound in energy demand arou­nd the globe. This, coupled with supply-side co­n­s­traints, caused energy prices to soar, es­pe­cially those of natural gas. While gas prices hit a 30-year low at the start of the pandemic, th­ey touched a nearly two-decade high in 2021. The Russia-Ukraine conflict further hardened oil and gas procurement costs. Despite these challenges, the industry has not only sustained itself but also grown, demonstrating resilience in the face of unforeseen realities.

One positive outcome is the long-term shift to low-carbon energy systems. At COP26, a lar­ge number of countries and organisations committed to achieving net zero emissions within the next few years.

Q2. What has been the impact of the initiatives taken by the government?

The government has taken several initiatives for improving the country’s energy security. These include diversifying crude and gas sour­ces, substituting demand by promoting the use of natural gas as fuel and moving towards a gas-based economy, promoting renewable en­ergy and al­ternative fuels such as ethanol, promoting the use of compressed biogas (CBG) as automotive fuel under the Sustainable Alter­na­tive Towards Affordable Transportation (SATAT) initiative, issuing guidelines for promoting biodiesel, undertaking refinery process improvements, promoting energy efficiency and conservation, and initiating electrification of the transport sector.

Further, policies have been introduced for increasing oil and natural gas production under the production sharing contract regime. Other policies include the Discovered Small Field Po­licy, and Hydrocarbon Exploration and Licen­s­ing Policy. The government has made efforts to streamline approval processes, including the electronic single-window mechanism, for wider private sector participation. A recent reduction in excise duty on petrol and diesel by Rs 8 per litre and Rs 6 per litre respectively has brought about much-needed relief to consumers and addressed inflationary concerns.

Last year was a landmark year for the gas supply infrastructure – pipeline length increa­sed from 16,200 km to 32,500 km, the plan­ned capacity of LNG terminals increased to over 30 million tonnes per annum (mtpa) from the currently operational 42.5 mtpa. CGD infrastructure expanded significantly, as 209 geographical areas (GAs) were awarded in the 9th, 10th and 11th rounds of CGD bidding.

Q3. What are the emerging trends in the area of digitalisation?

Digitalisation is no longer an option, it is the new normal, and availability, accessibility of quality data and data usage are now the new ways of defining “wealth”. Companies are ac­c­elerating digital transformation across pro­ce­sses and operations with the objectives of achieving customer satisfaction, improving efficiency, increasing speed, and enhancing precision and competitiveness by investing in cutting-edge technologies and automated infrastructure. At Adani Total Gas Limited, digitalisation, innovation, robotisation and automation are way of life and a part of our DNA.

Improved governance is a key modern-day demand for which technology- and digitalisation-driven platforms can be leveraged by minimising human interventions as well as corresponding errors.

Consolidation of organisational capabilities into a knowledge hub to facilitate the flow of knowledge, leading to informed decision-making, is another key area of digitalisation. Predictive and prescriptive data analytics are being used for demand forecasting and discerning consumer behaviour. This will enable organisations to respond in real time.

Q4. What are the key challenges that need to be addressed?

Oil and gas entities need to deal with multiple government authorities, agencies and departments for grant of permissions and no-objection certificates. The most cumbersome part is obtaining multistage multi-authorities’ permissions and this leads to abnormal delays in completing infrastructure projects, resulting in cost overruns and viability concerns. Streamlining permissions or introducing a regime of “deemed permissions after 30 days” should be the key reform to help entities focus on infrastructure building.

The increase in the cost price of natural gas, coupled with a reduction in the allocation of domestic natural gas over the past one year, has had an adverse effect on consumer economics, suppressing the existing demand and future growth as well as the cash flows of CGD entities. High natural gas prices are severely hampering the development of newly allocated GAs due to reduced advantage over alternative fuels. The government is working on providing maximum feasible gas to CGD entities for home and CNG consumers and that too at ad­ministrative price mechanism (APM) prices. In light of the expected increase in gas prices in the future, the industry has been requesting the gov­er­nment for a sustainable and longer-term af­fordable APM pricing to provide certainty and stable prices to end consumers.

Q5. What is the sector outlook for the next one to two years?

With the conclusion of the 11th round of bidding, India’s CGD network has covered 86 per cent of the national land mass and 96 per cent of the population, laying the framework for tra­nsitioning to a gas-based economy. In the CGD sector, demand has remained concentrated in a few pockets where CGD infrastructure is avai­lable. However, going forward, this is ex­pec­ted to change with large-scale availability of natural gas across the country.

There has been a massive push by the government to rapidly expand the natural gas in­fra­structure through initiatives such as Bharatmala, Sagarmala, the green energy corri­d­ors, and multiple industrial and econo­mic corridors. The development of multiple smart citi­es has ensured an inflow of huge investments, which is further expected to drive up demand.

Many organisations are looking to reinvent themselves by optimising their resource portfolios, transforming business models, focusing on financial health and committing to climate change by setting aggressive ESG goals.

Oil prices have recovered to around $100 per barrel after turning negative in April 2020. Oil prices above $60 per barrel will most likely improve or complement the energy transition in the near term. Strong oil prices enable investments in riskier and expensive green energy solutions such as green hydrogen, and carbon capture, utilisation and storage. With a greater focus on pursuing their net zero goals, oil and gas entities are expected to acquire low-carbon assets or divest the high-intensity ones, leading to consolidation or portfolio restructuring.

Traditional fuels (diesel and gasoline) also face competition from low-emission fuels such as hydrogen, renewable energy sources and el­ectric vehicles. Going forward, green hydrogen is expected to play a key role. Reputed organisations have declared their ambitions to produce the least expensive green hydrogen. This will transform India from a country that is over-reliant on imported oil and gas to one that can become a net exporter of clean energy.