Expect progress in Kochi-M'lore pipeline by FY15: Petronet

The company’s Dahej terminal in Gujarat operated at nearly 110 percent capacity in Q1FY15 and is expected to operate at the same capacity levels going forward.

Below is verbatim transcript of the interview:

Q: A big brokerage recently downgraded this stock. One of the key concerns that they have is that lack of approvals on the Phase II pipeline will force the Kochi terminal to stay in losses for three years plus. Can you give us a sense in terms of the approvals for the Phase II pipeline, where does it stand and do you think that Kochi terminal will be in losses for that long?

A: Kochi has only one concern which is about the lack of pipeline connectivity. As you know the pipeline, Kochi to Mangalore is actually having two segments, one is Kochi-Mangalore and other is Kochi-Bangalore via Tamil Nadu.

The segment which is via Tamil Nadu, the state government of Tamil Nadu had raised some issues and had gone to court so the matter is under litigation. The high court had given verdict in favour of GAIL.

We hope in next month’s time this matter would be settled and that the pipeline work would start soon.

The other pipeline which is Kochi to Mangalore which is within Kerala, we hear that the Kerala government has started renewed efforts to see that the pipeline is facilitated.

GAIL has also reconstituted and strengthened their team so I think there is a lot of renewed initiative and thrust to see that the pipelines come in time. We hope that once the pipeline work starts, it shouldn’t take more than six-eight months time to really complete. So we expect that within this financial year significant progress should come.Q: Do you notice any significant improvement in centre-state conversation with the new government?

A: Yes. The state government formed a new committee of senior officers from the planning board along with district collectors of the concerned districts to overview and facilitate the pipeline.

Also the ministry, central government is giving an indication to the state government that this is too important a project and therefore, needs to be monitored closely. So all these efforts show that there is a concern and there is an urgency now coming up to put this project on fast track and also monitor it closely.

By March onwards there should be a significant improvement on that. Meanwhile, we have started working on an alternate initiative of having some reload and storage facilities being given to some international players who had shown lot of interest so that our terminal gets utilised for higher capacity. We might start on this project next month.

Q: By when will the Mangalore line start construction and by when will the Tamil Nadu line and Bangalore line start construction?

A: The Kochi and Mangalore pipeline has been taken in, there are seven-eight segments that were awarded so some work in a very discontinued kind of manner. So the progress is very low but the ROU is in place in quite a good distance in different districts.

The GAIL team feels confident that once the state facilitates, the district collectors are there, they would have a better dialogue with people primarily because of some compensation issues or little rerouting which is normal in any pipeline projects. Once this is facilitated the actual 380-400 kms shouldn’t take more than six-eight months.

Q: What are your trading margins for this quarter and are there any internal estimates that you can share with us for this fiscal?

A: As of now the volumes seem pretty good. Last quarter also we had operated Dahej terminal, which operated more than its capacity. We see a similar trend happening and so, volumes have been pretty good.

We have done more numbers of spot cargos compared to last quarter. So I can only say that the margins should be good, volumes should be good and the similar trend persists.