Central Government Departments


 

Business Developments of GAIL (India) Limited

GAIL’s business development initiatives are focused on Globalisation, Mergers and Acquisitions, Diversification and Joint Ventures.

Globalisation

GAIL is globalizing its business activities with the objective of exploring growth opportunities and entering new markets with major thrust on:

i. Natural Gas & LPG Pipeline Transportation Projects
ii. Gas Processing & NGL Fractionation Plants
iii. Gas Sector Exploration & Production
iv. Natural Gas-based Appliances
v. Gas sector O&M Services
vi. Telecom Infrastructure Projects
vii. Compressed Natural Gas for Vehicles
viii. LNG Gasification & Regasification Projects
ix. City Gas Distribution Infrastructure Development & Retailing
x. Gas sector-related Manpower Training and Research & Development

GAIL began its globalisation process in 1999 with its entry into the fast growing natural gas market in Egypt. The company has vast expertise in City Gas Distribution and CNG for vehicles through its joint venture concerns in Delhi and Mumbai. To capitalise on these competences and to utilise the untapped business potential, GAIL has made strategic investments in two companies in Egypt: Fayum Gas Company S.A.E. involved in local gas distribution and Shell CNG S.A.E. involved in retailing CNG.

Fayum Gas Company S.A.E. (FGC):

FGC was incorporated in 2000 for designing, financing, constructing, operating and maintaining a gas transmission and distribution network in the Governorate of Fayum on behalf of the Egyptian General Petroleum Company (EGPC) - national oil and gas company in Egypt / its successor Egyptian Natural Gas Holding Company (EGAS).

FGC signed a concession agreement with EGPC / EGAS valid for a period of 20 years. As per the concession agreement, FGC has to connect 25,000 domestic / commercial customers and three industrial customers in Phase 1 (2001-03) and 58,000 domestic / commercial customers and four industrial customers in Phase-2 (2004-06). Outside the concession agreement, FGC entered into agreement with a major industrial user - Emisal. An additional 9,000 residential customers (Aboxa) are also being connected by FGC outside Phase I & II concession.

Shell CNGE S.A.E. (SCNGE):

SCNGE was incorporated in 2002 for setting up of CNG fuel stations to sell CNG as auto fuel and for setting up CNG conversion centers. SCNGE has planned to build 30 CNG fuelling stations and nine conversion centers by 2007. Currently, around 35,000 taxis are running on CNG of the total taxi population of around 300,000 in Egypt (of which around 110,000 are in Greater Cairo). Hence there is a large potential market for CNG in Egypt.

GAIL will be acquiring 19 per cent equity in FGC and 22 per cent equity in SCNGE. Today as a result of these initiatives GAIL is poised to become a Multinational Corporation. Another major equity participation opportunity is being evaluated in Egypt. GAIL intends to continue its expansion with its business leads being pursued across continents. Some of the regions attracting attention are:

i. Middle-East (Iran)
ii. Europe (Turkey)
iii. South Asia (Bangladesh, Myanmar)
iv. Africa (Egypt, Tanzania, Mozambique)
v. South-East Asia (Philippines, South Korea)
vi. South America (Bolivia)

Mergers & Acquisitions

GAIL plans to achieve expansion in its present businesses and enter other synergistic business areas. The company is actively considering both organic and inorganic means of growth, synergistic diversification into other business areas and geographical diversification, broadly focusing on:

Growth in the gas sector to maintain its dominant position in the Indian gas market. Securing long-term gas supplies both from domestic (conventional and unconventional) and foreign (Pipeline and LNG) sources. The company is associated with various prospective transnational gas pipeline projects to India and is involved in LNG import projects as a member of Petronet LNG Ltd.

Develop the Natural Gas Infrastructure and promote usage of natural gas as eco-friendly fuel for vehicles, domestic and commercial purposes by developing the National Gas Grid. After successful implementation of City Gas and CNG projects in Delhi, Mumbai and Vadodara, GAIL is promoting the same in other cities. The company is also undertaking City Gas projects in Iran, Bangladesh, Egypt and other countries.

GAIL is transforming into an integrated energy company by commissioning and operating a world-scale petrochemical plant. It also has considerable upstream acreages and equity participation in power plant.

Diversify geographically by undertaking investment or execution of international projects in gas infrastructure development, gas processing, upstream participation, etc. GAIL has embarked upon a global expansion plan that will ensure its presence in global E&P, gas processing, pipelines, gas retailing and CNG for vehicles. The company has made investments in Myanmar, Egypt and is at various stages of entering new markets.

GAIL has undertaken Synergistic Diversification by lateral integration in Telecom, and the company is leasing its spare bandwidths. GAIL has already got the ISP and IP-II licenses to operate as a Telecom Service provider company. Other areas of interest include coal bed methane, coal gasification and other unconventional sources of energy.

To achieve the targeted growth in the above highlighted areas GAIL focuses on:

Growth through Internal Development or Organic Growth. In the early stages of its development, the company developed most of the natural gas infrastructure that drives the fourth largest economy in the world (PPP terms).

Growth through Mergers and Acquisitions or Inorganic Growth. GAIL is pursuing acquisition opportunities in a large petrochemical plant in South Asia, gas infrastructure and marketing company in East India, and an Indian E&P company, and is expanding its upstream businesses by acquisition of participating interests in E&P properties globally.

GAIL’s participation methodology

Undertake projects on own: GAIL has commissioned and is operating a world-class petrochemical plant at UPPC at Pata in Uttar Pradesh. The company has developed its own exclusive gas transmission, distribution and marketing network.

Undertake projects in partnership with others- both incorporated and unincorporated joint ventures: City Gas and CNG projects have been executed by forming incorporated joint ventures with other companies and agencies. Investments in upstream properties are done through unincorporated joint venture route.

Diversification

GAIL’s major thrust areas for diversification are:

i. Surface coal gasification
ii. Insitu coal / Lignite gasification
iii. Unconventional sources of energy like solar energy
iv. Gas-based cogeneration power plant

GAIL is considering diversification into coal / lignite gasification. India has huge coal deposits and by gasification route another domestic gas sourcing option will open up to improve the overall domestic gas availability. Solar energy is another cheaper renewable energy source which can be utilised successfully for various industrial, commercial and domestic applications thereby reducing the consumption of liquid petroleum products as well as natural gas. By entering into power sector, GAIL can integrate downstream constituents of the gas sector value chain.

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