Need of the Hour: Infrastructure Development

Amit Gupta
CEO, Pipelines & Terminals, Essar Projects
Indian government has earmarked USD 5 billion in the pipeline & terminal sector in the Hydrocarbon Vision 2025, to meet the country’s growing energy demand. However, realizing this would require the government to have prudent and pragmatic approach for the development of infrastructure in the hydrocarbon space. Amit Gupta, CEO, Pipelines & Terminals, Essar Projects, shares his views on the bottlenecks in execution of building onshore hydrocarbon industr y infrastructure and some of the key projects in an exclusive interaction with Offshore World.

Twelfth Five year plan envisages major investments in the field of infrastructure. What is the outlay for pipelines & terminals by the government? What is the scope of participation of private sector players from India & overseas investors?

The government's announcement on infrastructure investment plan, though arriving late, but is a welcomed move since it will boost the faltering economy of the country and will also make the depreciating rupee healthy and steady. The hydrocarbon vision of 2025 envisages an investment of approx USD 5 billion in the pipeline & terminal sector.

India has a wider and major scope for growth and expansion in the infrastructure sector; however it needs a prudent and policy controlled plan. A sudden surge may bring in certain anomalies which may paralyse or stagnate the growth.

The union minister has announced to expand the national gas grid to nearly 30000 km by 2017 with a capacity throughput of 875 mmscmd from the existing 230 mmscmd. The terminal handling capacity is also earmarked to reach 50 mtpa from the existing 14 mtpa. Petroleum & Natural Gas Regulatory Board (PNGRB), the regulatory body, has already chalked out plans for outlay on the pipeline sector. However several uncertainties viz gas evacuation in KG basin has stalled the projects. In other segments like crude and petroleum products pipeline, major projects are already underway. The crude and petroleum product segment is also witnessing enormous expansion with major projects of IOCL and OIL in implementation phases. There is vast scope of private player's participation since PNGRB has commenced application cum bidding methodology for projects development. Recent times have witnessed increased participation of private players in such bidding. The Public -Private Partnership (PPP) model should be developed for this sector as it will positively build a broader platform for private players and provide good opportunities for Indian as well as overseas investors.

Give us an insight into the existing and required pipelines & terminals infrastructure in India. Also please do comment on the scope of investments in the sector.
The existing pipeline network for hydrocarbon transportation comprises of almost 30-32 percent of all the modes of transportation. Various companies have their own operational network of pipelines. To list a few, major players are the government PSUs like GAIL, ONGC, IOCL who operate a larger nationwide grid of pipelines and terminals. The hydrocarbon pipeline network in India tantamount to approx 25000 km however but has fewer terminals for handling large LNG imports.

As compared to other developing countries, the network of pipeline in our country is still very insignificant. If you look at America it has about 200,000 km of pipeline and has come into existence from the early 19th century. The major reason for not having the infrastructure is the non -availability of natural resources be it gas or crude. We think with new resources and new LNG plants, the infrastructure is bound to increase.

India is witnessing increased demand of natural gas and will ensure a steady pattern for pipeline network growth. This in turn demands larger growth and subsequent higher scope of investments. The cost involved in pipeline is a direct function of length, operating and diameter.

Inadequate pipeline infrastructure and high cost of capital have constrained investments into India's hydrocarbon industry. What measures, according to you, should be undertaken to speed up investment growth in the sector? Pipeline infrastructure is less capital intensive and less complex; however the hydrocarbon processing, handling and storage facilities are complex and require huge capital for construction operation and maintenance. Also the source finding and development are of larger importance. Hence to speed up infrastructure growth the resource development is of utmost importance. On project implementation part, the need of the hour is to have a single window clearance system which would accelerate the pace of project implementation. Also price regulation of gas is a major driver for project implementation. No company would prefer investing in large complex projects without better Return on Investment (ROI).

How critical is it for the country like India to have adequate terminal capacities and pipeline infrastructure in place? What are the major challenges that need to be addressed?
LNG handling facilities in India are scarce and need high attention for growth. Major terminals like the ones in Gujarat (Dahej and Hazira) which are owned & operated by Petronet and Shell are focusing on expansion to be able to handle higher imports. The LNG terminal at Dabhol (operated by GAIL) is having plans for expansion which is a good sign for the country as it will mitigate the heavy surge of gas demand envisaged in coming future.

India depends heavily on imports of crude and LNG which necessitates us to have world class and huge facilities to meet the growing demand of hydrocarbon in the country. It is of vital importance to have in place all infrastructures viz. import terminals, pipelines, intermediate storage terminals, etc from source to consumers.

The major challenge which needs attention on priority is systematic development of infrastructure to have pan India uniform growth. Also critical issues like land acquisition should be appropriately addressed so as to enable smooth implementation of projects.

Brief us on the advancements in technology for offshore and onshore pipelaying and terminals.
Time has witnessed good advancements in terms of technologies, which have increased productivity and in turn accelerated project implementation. For example, the automatic welding technology has improvised the welding productivity to a larger extent. A preprogrammed welding feed is installed in the memory which controls the welding bug. This delivers a constant and higher quality progress which is really important for pipeline sector. Also AUT (Auto Ultrasonic testing) facilitates immediate results for weld acceptance. The pipeline can be immediately coated and buried underground. Further, with HDD in place crossing huge water bodies in no time has become a reality. This also conserves the environment since water bodies are not disturbed in any way.

What are the major challenges in execution of projects at various stages? Please comment on the same with respect to land acquisitions, procurement challenges, construction challenges, political issues, safety & security, intrastate and interstate pipelines.
Land acquisition is a major hurdle in today's time. Moreover, a complex procedure for acquisitions pushes the implementation schedule of any project beyond unacceptable time limits. As witnessed in Odisha and West Bengal there are major political and local hurdles which are delaying major investment plans in the states. The need of the hour is to create a concurrent atmosphere with all stakeholders so that projects are executed as planned. Vested interest of certain anti-social elements also put the project off track from the scheduled completion.

Selection of vendor is important as low quality vendor can supply at a lower cost but would have impact on the life span of the project. Clients need to adhere to strict quality control while approving the vendor.

The terrains at times prove to be the major challenge for construction; however since necessity is the mother of invention, challenges bring out the best of solutions during construction phases. Innovative methods are adopted to execute and overcome the challenge. An example would be the rope way shifting of equipment and pipeline laying in steep ridges.

Political issues put the infrastructure growth on a standstill. Hence it is expected that political mileages should not come across the growth of any countries infrastructure. There should be a political concurrence towards a common goal, which is the growth and development of the nation.

Safety & security of project is a critical issue. Anti-social elements try to disturb the operations of an existing project or underway project. Efforts should be maximised to keep a constant vigil on operations. National agencies like the CISF or private security agencies should be engaged to isolate any threats to the project. As for intrastate and interstate pipelines, in India there is as such no issue on this part.

How do you ensure safety and security throughout the operational life of the terminals?
A constant vigil on the terminal periphery and strong intelligence is important part of providing safe environment for the operation life. We have strong agencies which can ensure the safety and security of the terminals .

What is your take on cross country pipeline projects?
PNGRB has announced its growth plans and has already put in place 4–5 major projects. GSPC consortium with IOCL, BPCL and HPCL has acquired rights to develop 3 pipeline projects cumulating to about 3500 km of the earmarked pipe routes. Similarly GAIL-EIL consortium has been awarded the Surat Paradip sector which is about 1500 km.

All these 5000 km of pipeline are likely to be executed in the next 2-3 years. The near future seems good for pipeline infrastructure growth and in turn opportunities are awaited by construction companies for executing these projects.

Tell us about company's recent completion of the erection of fi rst -ever fuel oil tank for the Jurong Aromatics Complex project in Singapore .
Essar Projects completed erection of its first ever Fuel Oil Tank outside India for the Jurong Aromatics Complex project in Singapore. The 31.06 m diameter x 16.45 m height tank is the first of the 30 IFR (Internal Floating Roof ) Tanks that are part of the storage facilitiesof the Jurong plant complex. The work involved meticulous planning and execution. The plates were sourced from India(Essar Steel) and had to be shipped to Singapore. The major aspect was that we completed this tank erection in a short span of less than four months complying with strict safety, quality control and tight deadlines.

The construction of this tank was completed in line with the stipulated schedule and at present the project cumulative actual progress is leading the scheduled progress by an appreciable 1 percent. It is truly an outstanding achievement for us since in an EPC project it is rarely observed that actual progress is leading!

The Jurong Aromatics Complex is the biggest aromatic complex in the world. Essar has bagged the EPC job which involves setting up of OSBL (Outside Battery Limits) facilities for the grass root integrated Aromatics Complex, including Storage Facilities, Jetties, and Interconnecting Pipeline between Jetty, Plant & Rock Cavern, and other ancillary facilities over a duration of 32 Months and a contract value of USD 320 million. The Storage facilities comprise 30 IFR (Internal Floating Roof ) Tanks and 9 Spherical Tanks.

What are the projects in the pipeline?
In India we have recently been awarded a 400 km crude oil pipeline by Indian Oil Corporation which is part of Salaya Mathura pipeline.

We are also executing the 800 km product pipeline for IOCL from Paradeep to Ranchi on the East coast of India. We have also secured a water pipeline from GWIL in Gujarat which is an EPC project to lay a 92 inch pipeline. We are now actively targeting the overseas market and the target markets are Middle East, Africa, Latin America as well as South East Asia. We have set up offices in various parts of these targeted market and are now qualified with major oil and gas clients like GASCO, ADGAS, ENI, SAIPEM etc and we are bidding aggressively in these areas.