New Delhi: State-owned Engineers India Ltd (EIL) plans to enter the gas-based power project business as an engineering, procurement and construction (EPC) firm and a consultant, positioning itself to take advantage of the expected surge in the domestic output of the fuel.
The leading engineering and technical services provider is expected to face competition from other companies in the space such as Bharat Heavy Electricals Ltd, Reliance Anil Dhirubhai Ambani Group’s Reliance Infrastructure Ltd, BGR Energy Systems Ltd, Larsen and Toubro Ltd and even Chinese companies such as China National Machinery and Equipment Import and Export Corp., and Shandong Electric Power Construction Corp., or Sepco.
EIL, which plans a partnership with an equipment manufacturer, has decided to enter the business keeping in mind the prospect of gas discoveries and its status as a clean-burning fuel, given the increasingly tight emission norms.
“In the gas-based power project business, either it can be a combination of being an EPC player and a consultant or one of these,” said A.K. Purwaha, chairman and managing director, EIL. “Whenever we will be going for a project, we will be going with some partner.”
India has a power generation capacity of 152,360 MW, of which 10.8%, or 16,822.85 MW, is gas-based.
“We know the proposal of the government and the other players in the gas market... I am very confident that going forward, the demand for natural gas will grow,” he said. “We need to position ourselves to provide optimal solutions to the people. That means you provide a gas-based power project at an optimal cost.”
India has recoverable natural gas reserves of 119.55 billion cubic metres and produced 32,847 million cubic metres in 2008-09. Natural gas production from the prolific D6 block in the Krishna-Godavari basin has started and is expected to reach around 89 million standard cubic metres per day by March 2012.
“Gas-based power projects will be the need because coal availability is a big limitation,” said Anish De, chief executive at Mercados Asia, an energy consulting firm. “EIL has good expertise in the design of projects, though they have been in more oil and gas projects, but there is a lot of synergy here.”
In a related development, the company plans to refocus on the fertilizer plant business.
Though EIL has set up eight fertilizer projects, it has been concentrating on the hydrocarbon value chain and built its expertise in refinery engineering with a raft of projects. These include 47 petroleum refinery projects, seven petrochemical complexes, 250 offshore platforms, 35 oil and gas processing projects, 26 mining and metallurgical plants, and 37 crude oil, gas and petroleum pipelines.
“We have got very good strength in hydrocarbons and all its value chain, be it upstream, midstream or downstream,” Purwaha said. “We are looking to enter new areas in line with the government’s policy.”
EIL has cash reserves of around Rs1,600 crore and posted a net profit of Rs105.37 crore on a turnover of Rs468.20 crore in the second quarter.