By Jayati Arora
Oil and gas companies worldwide are at a crossroads as they have the responsibility of diversifying their business operations and transitioning to renewable energy and green fuels. This shift is driven not just by global and domestic climate commitments but also by the favourable cost economics offered by renewable energy sources on the back of technological advancements. Fossil fuel companies are increasingly diversifying their portfolios by setting up more renewable energy projects, either for their own electricity needs or for sale to the national grid. These companies are also exploring green hydrogen and its derivates as well as biofuels, particularly compressed biogas (CBG).
Fortunately, Indian fossil fuel companies are embracing this responsibility proactively and promoting renewable energy and green fuels. One such company is GAIL Limited, a state-owned natural gas processing and Distribution Company and a Maharatna PSU.
As of April 2024, GAIL operates an approximately 16,000 km natural gas pipeline network and is executing multiple pipeline projects to reach about 20,000 km of the National Gas Grid. The company’s alternate energy portfolio currently stands at 132 MW, and it is actively exploring new opportunities in solar, wind, biogas and green hydrogen. GAIL Limited aims to develop 3 GW of renewable energy capacity by 2030. To this end, it plans to invest Rs 60 billion in renewable energy during 2022-25, having cumulatively invested around Rs 6.85 billion until 2022-23. The company has developed its net zero strategy for reducing both Scope 1 and Scope 2 emissions by 100 per cent, and Scope 3 emissions by 35 per cent by 2040 in line with the national commitments.
Renewable Watch provides an overview of the renewable energy initiatives taken by GAIL Limited and its recent financial performance…
Green hydrogen
Globally, fossil fuel companies are increasingly adopting green hydrogen as a sustainability measure. However, this move is often criticised as a form of greenwashing, as there is no fundamental shift in their existing business operations. However, a more balanced view, particularly in developing countries, acknowledges green hydrogen as a relevant transitional green fuel to facilitate the decarbonisation of traditional fossil fuel companies’ portfolios. In light of this, GAIL is also transitioning to green hydrogen.
The PSU is expected to soon commission its first green hydrogen project at the Vijaipur complex in Guna district of Madhya Pradesh. The project is expected to produce 4.3 tonnes of green hydrogen per day with a purity of 99.999 per cent. For this project, Cummins has partnered with Tecnimont Private Limited, an Indian subsidiary of the Maire Tecnimont Group, to build a 10 MW proton exchange membrane electrolyser.
GAIL is also blending hydrogen with natural gas in its city gas distribution (CGD) network. Its joint venture company, formed with Hindustan Petroleum Corporation Limited and Avantika Gas Limited in Indore, blends 5 per cent of hydrogen into its piped natural gas (PNG) network and 2 per cent of hydrogen, by volume, into its CNG network.
Compressed biogas
As a domestic renewable energy resource, CBG holds significant promise in reducing natural gas imports and achieving the country’s clean energy objectives. According to the Institute for Energy Economics and Financial Analysis, if India gradually replaces its natural gas consumption by up to 20 per cent with biogas and biomethane, it could potentially reduce its liquefied natural gas import expenses by around $29 billion from 2025 to 2030.
In 2018, the Ministry of Petroleum and Natural Gas (MoPNG) launched the Sustainable Alternative Towards Affordable Transportation (SATAT) scheme to promote the production and utilisation of CBG as an alternative green fuel for the transport segment, and reduce India’s dependence on oil and gas imports by producing CBG using agricultural residues, cattle dung, sugarcane press mud, MSW, and sewage treatment plant waste. The MoPNG had set the target of establishing 5,000 CBG plants producing 15 mmt per annum by 2024. As of March 2024, 53 CBG projects have been commissioned under the SATAT initiative. Further, the government has issued guidelines for the comingling of domestic gas for supply, for the compressed natural gas (transport) and PNG (domestic) segments of CGD networks to synchronise CBG with CNG in the CGD network. GAIL has been appointed to operationalise the CBG-CGD Synchronization Scheme.
Recently, in May 2024, GAIL signed a tripartite agreement with Indian Oil Adani Gas Private Limited and Reliance Bio Energy Limited for blending CBG under the CBG-CGD Synchronization Scheme. Prior to that, GAIL signed an agreement with TrueAlt Bioenergy Limited for setting up 10 CBG plants at an investment of over $72 million. These projects will be funded with a combination of debt and equity. The scope of work involves processing over 600 million kg of organic waste and other decomposable waste per annum to produce over 33 million kg of CBG, 20 million kg of solid fermented organic manure and over 30 million kg of liquid fermented organic manure per annum. Each unit would process 10,000 kg per day to produce 100,000 kg of CBG.
In a significant effort to reduce stubble burning and enhance the utilisation of crop residue, GAIL has signed an MoU with the Punjab Energy Development Agency to set up 10 CBG plants, along with other new and renewable energy projects, in the state. It will help Punjab in managing 0.5 million tonnes of paddy straw per annum. The company is also planning to set up CBG plants with a capacity of 100 tonnes per day across 15 districts of Karnataka, at an investment of Rs 4.5 billion. It will significantly contribute to the improvement of the waste management system in the state, particularly in Bengaluru.
Solar and wind
Rapidly moving towards its decarbonisation goals, GAIL is actively setting up ground-mounted solar, rooftop solar and wind power plants at its operational locations. According to GAIL’s Annual Report 2022-23, it has about 132 MW of alternative energy capacity in its portfolio, of which about 118 MW comes from wind energy projects in Gujarat, Karnataka and Tamil Nadu and about 14 MW from solar energy projects, including small solar units.
On the tender front, in January 2024, GAIL invited engineering, procurement and construction (EPC) bids for setting up a 170 MW wind power project, including 10 years of comprehensive operations and maintenance, in Maharashtra on a lump sum turnkey basis. Recently, the company awarded a tender for a 10 MW (AC) solar PV grid-connected power plant worth Rs 452.97 million at Vijaipur in Guna district, Madhya Pradesh, to Ilios Power Private Limited.
Furthermore, GAIL is seeking opportunities in solar manufacturing. It aims to manufacture PV panels and build an integrated solar manufacturing project, which will include metallurgical grade silicon, polysilicon, ingot/wafers, cells, modules and solar glass.
Financial performance
GAIL witnessed a significant surge of about 42 per cent in total profit, which reached Rs 66.6 billion during April-December 2023 as against Rs 46.98 billion during the same period in 2022-23. This can be attributed to higher gas trading margins, an increase in transmission volume and tariff revisions. Meanwhile, the PSU’s annual income demonstrated a marginal decrease from Rs 1,131.1 billion in 2022-23 (till the third quarter) to Rs 998 billion in 2023-24 (till the third quarter). Its total expenses decreased from Rs 1,071.1 billion in April-December 2022 to Rs 911.6 billion in April-December 2023. On a quarterly basis, the company’s total income declined marginally from Rs 360.6 billion in the third quarter of 2022-23 to Rs 350.6 billion during the third quarter of 2023-24.
The way forward
India has set a target to increase the share of gas in energy consumption from the current 7 per cent to 15 per cent by 2030. In addition, the country plans to set up 500 GW of non-fossil fuel power capacity by 2030. GAIL will play a key role in meeting these targets. Although the PSU faces stiff competition from experienced clean energy players in both the public and private sectors, it has achieved notable milestones in the green energy space, particularly in the areas of CBG and hydrogen blending. With its strong financial and operational performance, high risk appetite and an extensive gas pipeline network offering significant hydrogen blending opportunities, GAIL is well positioned to lead the decarbonisation journey.
