Owing to the recent bidding rounds and authorisations along with continued policy support, the city gas distribution (CGD) network has recorded remarkable growth. The uptick in domestic production over the past few years is also attributed to upstream initiatives. With the strong emphasis on digitalisation, industry has been deploying technological solutions for asset maintenance, leak detection, etc. In this regard, Akhil Mehrotra, managing director and chief executive officer, Pipeline Infrastructure Limited expressed his opinion on sector’s growth, key challenges, notable policy measures, and future trends.

What are the biggest challenges that the sector faces today?

With the transition to cleaner fuels, the oil and gas sector is expected to face competition from renewables in the future. However, as India is a price-sensitive market, affordability will play a determining role. Going forward, as cleaner fu­els become more and more affordable, the de­mand outlook for the oil and gas sector may get impacted, which, in turn, may impact investments in the sector.

As for natural gas pipeline transportation, the biggest challenge for the pipeline operator is the volume risk owing to volatility on both the supply and demand sides. The existing tariff structure does not allow operators to cover for the volume risk. Incentivising the pipeline operators will encourage investments in the sector and expansion of pipeline infrastructure.

While the formation of the National Gas Grid and the implementation of a unified tariff are welcome steps, the prevalent regional disconnect between pipelines limits the reach of natural gas to all parts of the country. Obtai­ning right of use (RoU) and approvals from local authorities is challenging for the pipeline operators. It is time-consuming and often leads to delays in project execution.

Natural gas is still outside the purview of the GST regime, but gas transportation is subject to GST. Consequently, consumers are un­able to get the benefit of input tax credits, ultimately resulting in an overall increase in costs. It becomes imperative for the benefit of consumers to rationalise the tax structure on natural gas by bringing it within the ambit of GST.

What are your views on the initiatives being taken to reduce the country’s import dependence?

India’s oil and gas sector has historically been import-reliant as we have 80 per cent and 50 per cent import dependency for oil and gas respectively. The government has consistently taken initiatives and implemented reforms to increase domestic oil and gas production and enhance energy security. The introduction of marketing and pricing freedom for natural gas exploration and production has significantly im­proved our domestic gas production. Domestic gas producers can now trade the available volumes on the gas exchange, which will increase market liquidity and facilitate consumer access to the available gas quantities. The upstream initiatives have encouraged private sector in­vestment and increased domestic gas production in the country. The government’s initiatives to develop other indigenous energy sour­ces such as compressed biogas and ethanol blending in petrol are also expected to help reduce the country’s import dependence.

What are the digital initiatives being taken to improve asset maintenance and operational efficiency?

Data is everywhere – whatever we do generates data. These data sets can assess the ope­rational performance and suggest improve­me­nts. By using data analytics, we can strive to re­duce operational costs, optimise maintenance schedules, enhance safety, and prevent incide­nts through timely forecasting and implementation of preventive and remedial measu­res. However, the key for a successful data analysis lies is correct data capturing.

At PIL, we always ensure accuracy in data capturing through digital modes. We have taken multiple digital initiatives for enhancing asset management and operational efficiencies. Ro­bo­tic process automation helps us compute metering flow through robotics, ensures accuracy in custody transfer billing, reduces customer grievances and optimises man-hours and facilitates decision-making based on historical data. Our asset maintenance tool named fugitive me­thane emissions detection is currently under implementation. It employs optical gas imaging technology to capture equipment leaks that cannot be detected by conventional fire and gas detectors/LEL meters. Drones help in the surveillance of the entire pipeline length using artificial intelligence, and highlight changes in RoU or any abnormal conditions.

What is the demand and supply outlook for the sector amid the ongoing energy transition?

As India advances towards its target of net zero transition by 2070, it is likely that the government’s focus would be the promotion of clean fuel usage in the future, and the policies would reflect the same. However, considering our di­verse fuel mix and the presence of several energy-consuming sectors, coupled with In­dia’s highly price sensitive energy market, the consumption of oil and gas will continue to grow in the future. India’s energy appetite is growing rapidly owing to economic development and urbanisation, and thus every fuel will find its space in In­dia’s energy basket based on its application and affordability. With the recent increased support from the government across the entire value chain of the oil and gas sector, it would be apt to suggest that the de­mand-supply outlook is positive, at least for the next decade and a half.

What are the key trends that will shape the sector going forward?

Going forward, India needs to strengthen energy security by reducing import dependence, expa­nd its natural gas infrastructure and rationalise taxation on petrol, diesel and natural gas. The key trends that will shape the sector include ethanol blending in petrol, rapid development of the natural gas pipeline and LNG import infrastructure to create a regional balance, inclusion of natural gas in the GST ambit, development of compressed biogas, blending of hydrogen in natural gas pipeline networks, integration of renewables with gas, uniform gas pricing – “One Na­tion One Gas Price” – and digital transformation for efficient, secure and safe operations.