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BOARD OF DIRECTORS
On behalf of the Board of Directors of your Company, it is my pleasure to present the 31st Annual Report of your Maharatna Company, along with Audited Financial Statements for the financial year 2014-15-
PARTNER GROWTH WITH INDIA'S NATURAL GAS LEADER
With a turnover of Rs.56,56g Crores, GAIL (India) Limited, is India's largest natural gas Company and ranked among the top gas utilities in Asia. Your Company has a presence across the entire gas value chain with activities ranging from Gas Transmission and Marketing to Processing (for fractionating LPG, Propane, 5BP Solvent and Pentane), transmission of LPG, and production and marketing of Petrochemicals like HDPE and LLDPE. Your Company has extended its presence in Power, LNG re-gasification. City Gas
Distribution and Exploration & Production through equity and joint venture participations and also diversified into solar and wind power generation.
Gas transmission is one of the core competencies of GAIL and it draws strength from aboutll.OOO km of natural gas pipeline network and 2,038 km of LPG pipeline transmission network.
With a lean workforce of 4,266 employees, your Company plays a meaningful role in social and economic development of the country and makes a substantial contribution towards its energy security.
DISINVESTMENT BY PRESIDENT OF INDIA
The Government of India (Gol) has disinvested 15,672,024 shares on 27* March, 2014 through CP5E ETF. Further, Gol has disinvested 37,819 shares on 8th April, 2015 through CP5E ETF as Bonus Units. After disinvestment, the President of India holds 711,695,832 equity shares, representing 56.11% of paid-up share capital of GAIL.
Your Company has a consistent track-record of dividend payment. So far, your Company has disbursed dividend of over Rs.l3,043 Crores to the shareholders including Rs.7,925 crores disbursed as dividend to Government of India.
The Board of Directors of your Company had earlier approved payment of an interim dividend @ 30% (Rs.3 per equity share) on equity share of Rs.l0 each amounting to Rs.380.54 Crores, which was paid in March, 2015. Further, the Board has recommended payment of final dividend @ 30% (Rs.3 per equity share) on equity share of Rs.10 each for 2014-15 amounting to f 380.54 Crores. With this, the total dividend payment for the fiscal year 2014-15 will be 60% (Rs.6 per equity share) on equity share of Rs.10 each amounting to Rs.76l.09 Crores on its paid-up equity capital of Rs.l.268.48 Crores and dividend distribution tax of Rs.l53.56 Crores. The total dividend pay-out including corporate dividend taxaccountsfor30.10%of Profit After Tax.
CONTRIBUTION TO EXCHEQUER
Your Company has contributed over Rs.5,788 Crores in 2014-15 to the exchequer through dividend, duties, taxes and others, as compared to f 6,993 Croresin2013-14.
Your Company has been reaffirmed the highest domestic credit rating of AAA from ICRA, CARE, CRISIL and India Ratings, which carry the lowest credit risk. The international rating agency, Moody's International, Hong Kong, has also reaffirmed the corporate issuer rating of Baa2, which is one notch higher than sovereign rating. Further, Fitch Ratings has also assigned a long-term foreign currency issuer default rating of BBB- with a Stable outlook, which is equal to sovereign rating.
In order to make a quantum leap in its growth trajectory, your Company has developed its corporate strategy for the period 2011-2020. This strategy is currently under execution and the Company is closely monitoring progress on various strategic initiatives as well as continually assessing the macro environment to evaluate its impact on GAIL's businesses. The management of your Company has been playing a crucial role to achieve the strategic objectives and to ensure that it emerges as an integrated hydrocarbon major with significant upstream, midstream and downstream interests by 2020.
In the upstream segment, your Company plans to increase LNG imports through conventional route as well as through terminal capacity booking. It also plans to acquire equity in producing assets/liquefaction facilities to source equity-linked LNG. It has made remarkable progress in sourcing LNG by finalizing several long-term deals with suppliers, like Sabine Pass Liquefaction LLC (USA), Gazprom (Russia) and WGL Midstream Inc. (USA). GAIL Global (USA) LNG LLC, a subsidiary of your Company in the United States of America (USA), has booked LNG capacity in Dominion Cove Point's LNG liquefaction terminal in the state of Maryland. In addition, your Company is pursuing LNG shipping business by charter hiring LNG ships to transport LNG from the USA to India and other global markets. Your Company has also ventured into LNG trading business through its wholly owned subsidiary, GAIL Global Singapore Pte Limited.
To facilitate increase in LNG volumes, your Company plans to set up land based LNG terminals and Floating Storage and Regasification Units (FSRUs). It is also booking additional regasification capacities in existing and new terminals being set up by other companies. Your Company has tied-up additional regasification capacities at Dahej LNG terminal with Petronet LNG Limited (PLL). Further, in-line with the LNG sourcing efforts, your Company has intensified its domestic gas market development efforts in India to attract and retain more customers.
In order to bridge the demand-supply gap of natural gas as well as to address the energy security needs of the country, your Company is aggressively pursuing the transnational Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project. Bilateral GSPA with Turkmengas has already been signed to import 38 MMSCMD gas into the country through this pipeline. Further, the TAPI Pipeline Company Limited has been incorporated as a Special Purpose Vehicle in the Isle of Man by the four TAPI entities.
In the midstream segment, your Company aspires to retain its leadership position through a continuous pan-India expansion of pipeline networks in synchronization with customer readiness along the pipeline networks. Your Company now has approximately 11,000 km network of natural gas pipeline in the country To further cater to the growing demand and to increase its geographic reach, various pipeline projects are at different phases of execution which will take the network size to around 15,000 km. In the downstream segment, your Company aspires to be amongst the top petrochemical players in the country by expanding existing capacities, setting up new plants, acquiring equity stakes in upcoming projects along with product off-take rights for marketing. It has doubled existing petrochemical production capacity at Pata by commissioning the second petrochemical unit Pata. A Greenfield Petrochemical plant is also beingset up in Assam through your Company's subsidiary, Brahmaputra Cracker & Polymer Limited (BCPL). Another petrochemical plant at Dahejis being setup through a JV.ONGC Petro-additions Limited (OPaL). By 2016, your Company is expected to havel.7 MMTPA polymer volume for marketing. On the retail side, your Company is targeting additional 40-50 Geographical Areas (GAs) through its subsidiaries and JVs for city gas distribution (CGD) in the coming years. Your Company's wholly owned subsidiary, GAIL Gas Limited, is progressing on track with respect to CGD projects in the cities of Kota, Dewas, Meerut and Sonepat. Further, GAIL Gas Limited has won the authorization from Petroleum & Natural Gas Regulatory Board (PNGRB) in 4th round of CGD bidding to develop CGD network for the city of Bengaluru. Your Company aims to reduce its carbon footprint in a phased manner and contribute positively towards a low carbon economy Accordingly your Company has set targets for renewable energy projects and significant progress has been made so far. Your Company has 118 MW installed capacity of wind energy. It has also established a 5 MW solar power project. Further, your Company is a stakeholder in an SPV created under the aegis of Ministry of Petroleum & Natural Gas (MOP & NG) & Ministry of New and Renewable Energy (MNRE) for setting up of grid connected Renewable Energy Power Projects.
In order to achieve the strategic goals efficiently and in a time bound manner, a major thrust is being given to strengthen and enhance the capabilities of human resource of your Company. Accordingly, recruitment, training and development policies are being suitably aligned with strategic objectives to enable your Company to implement and achieve its strategic goals by 2020.
During the year under review, the segment wise business performance of your Company is as under:
? Natural Gas Marketing
Natural gas continues to constitute your Company's core business. During 2014-15, gas sales clocked 72 MMSCMD, compared to 79 MMSCMD in the previous financial year. Major supplies of natural gas are made as fuel to power plants, as feedstock for gas-based fertilizer plants and for LPG extraction. Your Company holds around 60% market share in India.
Your Company owns and operates a network of about 11,000 kms of high pressure trunk pipelines with a pan-India capacity to transport around 206 MMSCMD of natural gas. Average gas transmission during the year was 92 MMSCMD compared to 96 MMSCMD in the previous financial year.
Your Company has the distinction of being the only company in India, to own and operate exclusive pipelines for LPG transmission for third-party usage. It owns and operates two LPG Pipeline transmission systems with a total length of 2038 kms. Of this, 1415 km of pipeline network transports LPG from western to northern parts of India (Jamnagar- Loni LPG Pipeline) and the remaining 623 kms of pipeline network transports LPG in the country's southern part (Vizag-Secunderabad LPG Pipeline). The LPG transmission system has a capacity to transport up to 3.8 MMTPA of LPG. In2014-15, the LPG transmission throughput achieved was about 3.09 Million MT.
During 2014-15, your Company has produced 447 Thousand MT of polymers and sold 441 Thousand MT of polymers.
? LPG and Other Liquid Hydrocarbon Production
Your Company has seven LPG plants in the country. USAR LPG Plant is in complete shutdown condition and is being kept under preservation mode. In 2014-15, the total liquid hydrocarbon production was aboutl,276 Thousand MT, which mainly comprised of 1,039 Thousand MT of LPG, 115.8lThousand MT of Propane, 22.76Thousand MT of Pentane and 98.75 Thousand MT of Naphtha.
During the year 2014-15, E&P business has generated sufficient revenue to be self-sustainable. Production of gas from its A-l & A-3 block in Myanmar has reached peak production of 14 MMSCMD. In 2014-15, revenue of approximately Rs.663.10 Crore has been generated from sale of hydrocarbon from its 4 producing blocks namely A-l & A-3, Myanmar and Cambay Onland blocks CB-ONN-2000/l (Ahmadabad) & CB-ONN-2003/2 (Ankles war) in Gujarat. The Field Development Plan (FDP) has been submitted for gas resource of 71 BCFin Tripura block.
Your Company is an Operator in three onland blocks viz. (I) RJ-ONN-2004/l in Rajasthan basin (Ganganagar) awarded during NELP-VI bidding round, ii) CY-ONN-2005/l in Cauvery basin, Tamil Nadu (Thanjavur and Thiruvarur) awarded during NELP-VII bidding round and (iii) CB-ONN-2010/ll in Cambay basin, Gujarat (Anand and Ahmadabad) awarded during NELP-IX bidding round. Your Company is non-operating partner in remaining!2 blocks.
During the year 2014-15, preparation for drilling of exploratory wells in block CY-ONN-2005/l was in progress. Actual drilling shall start after land acquisition. In block CB-ONN-2010/ll, during the year 2014-15, acquisition, processing and interpretation (API) of 131 KM2 3D Seismic Data has been completed. Drilling of exploratory wells is planned during2015-l6.
INITIATIVES FOR FUTURE GROWTH
? Global Initiatives
In November 2014, GAIL Global (USA) LNG LLC (GGULL), wholly-owned subsidiary of your Company in the US, signed a 20 year gas sourcing agreement with WGL Midstream Inc. (USA) for procuring natural gas required to feed the 2.3 MMTPA Dominion Cove Point LNG Terminal. Earlier in 2013, GGULL has signed Terminal Service Agreement (TSA) with Dominion Cove Point LNG LP for booking 2.3 MMTPA liquefaction capacity in the Cove Point LNG liquefaction project located at Lusby in the state of Maryland in the US.
Your Company is constantly pursuing a leading role in the TAPI Pipeline project to receive Natural Gas from the Galkynysh fields in Turkmenistan. The Pipeline Consortium Company TAPI Pipeline Company Limited (TPCL) was incorporated on 11th November 2014 in 'Isle of Man', a British Crown dependency located in the Irish Sea. TAPI has a mandate to build, own and operate the proposed TAPI Pipeline.
? Domestic initiatives
The domestic business initiatives of your Company were as follows:
LNG Regasification Terminals
Your Company is planning to set up a Floating Storage & Re- gasification Unit (F5RU)/ Re-gasification terminal on the East coast of India. In this regard, discussions are on with Adani Ports and Special Economic Zone Ltd. (APSEZ) for equity participation and booking of capacity in the proposed regasification terminal at Dhamra port in Odisha.
In 2011, your Company contracted 3.5 MMTPA of LNG from Cheniere Energy, USA on FOB basis for an initial period of 20 years. Further, in 2013 your Company has also signed a Terminal Service Agreement (TSA) for booking of 2.3 MMTPA of liquefaction capacity in Dominion Cove Point terminal for 20 years. The initial supplies from both these contracts are expected to commence from December 2017. Currently, your Company is in the process of long term Charter hiring of LNG ships through international bidding route.
Natural Gas Pipeline Projects
During the year, your Company has completed 36 number of 'Last Mile Connectivities' coveringl29 km approx. of pipeline to increase the commercial utilization of various pipeline networks in 11 states-Uttar Pradesh, Uttarakhand , Punjab, Haryana, Rajasthan, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Andhra Pradesh and Kerala.
Your Company has a total installed capacity of 118 MW of Wind Energy Generation Projects (WEG). Your Company had started with a modest capacity of 4.5 MW wind energy in the state of Gujarat in March 2010 for captive use. After the success of the first WEG project, an additional capacity of 14.7 MW of WEG was installed in January 2012 in the state of Gujarat for captive use. Your Company graduated to commercial production after commissioning98.75 MW of WEG projects in the states of Tamil Nadu and Karnataka in March 2012.
During the year, your Company also entered into generation of solar power by setting up a 5 MW Solar Power Plant in the state of Rajasthan under the Jawaharlal Nehru National Solar Mission, through bidding.
Your Company is entering into a joint venture for Coal Gasification cum Fertiliser production at Talcher, Odisha, with Rashtriya Chemicals and Fertilizers Limited (RCF), Fertilizer Corporation of India Limited (FCIL) and Coal India Limited (CIL). It is proposed to setup Coal Gasification unit based on Coal supplied from a coal block allocated for the plant.
The project envisages production of 3,850 MT urea per day. The success of this project shall pave the way forward for production of fertilizer from the abundantly available domestic coal, resulting in lesser dependency on import of fertilizers.
RELATED PARTIES-SUBSIDIARIES/ASSOCIATES/JOINT VENTURES
Your Company has formed subsidiaries and joint venture companies for CGD, petrochemicals, LNG, gas trading, power generation and shale gas. Your Company is one of the pioneers introducing city gas projects in India for natural gas supplies to households, commercial and transport sectors through its subsidiary and joint venture companies. The details of these subsidiary and joint venture companies are mentioned hereunder:
NATURAL GAS, LNG AND POWER
? GAIL Global (Singapore) Pte. Limited (wholly owned subsidiary)
GAIL Global (Singapore) Pte. Ltd. (GGSPL), primarily "