Sie sind auf Seite 1von 68

INSTITUTE OF PETROLEUM MANAGEMENT, GANDHINAGAR

Gujarat State Petronet Limited

Analysis of GSPLs Average Tariff


Summer Internship Project Report
under the guidance of

Dr. Pramod Paliwal Deputy Director - Academics Institute of Petroleum Management, Gandhinagar Pandit Deendayal Petroleum University submitted by ; Mohana Priya.S 2007021 MBA Institute of Petroleum Management, Gandhinagar Pandit Deendayal Petroleum University

Acknowledgements

I hereby take this opportunity to express my gratitude to all those who gave me the possibility to complete this project. I would like to extend my sincere thanks to. Dr. Pramod Paliwal, Deputy Director (Academics), Institute of Petroleum Management, Gandhinagar, without whose efforts the project would not have been a reality. I am deeply indebted to Mr. Vinay Kumar, Deputy General Manager (Personnel and Administration),Gujarat State Petronet Ltd (GSPL) for having identified me as the summer trainee in his esteemed organisation. I express my sincere gratitude to Mr. Ravindra Agarwal, Deputy General Manager to work (Commercial), for a well GSPL for giving me with an his opportunity department. My special thanks to Ms. Amrita Doctor, Assistant Manager (Commercial), GSPL for her constant encouragement and stimulating support which made this project a reality. I also thank all the Senior Officers and Management Trainees in the Commercial Department of GSPL for their help throughout my project. I am deeply beholden to Dr. Amit Biswas, Professor, Indian Statistical Institute, Chennai for his help, stimulating suggestions structured project

and encouragement in all the time of research and for making this project a success. I would also like to give my special thanks to my parents and friends whose has always been there for me and supported in completing this project well on time.

Abstract

Gujarat State Petronet Limited (GSPL), the energy lifeline of Gujarat is the first company in India to transport natural gas on Open Access basis and is a Pure Natural Gas transmission company. It is hence insulated from the vagaries of the natural gas prices. The Company derives its income from transmission tariff, the price set for its service of transporting gas from the supplier to the user. With the natural gas emerging as the largest economic opportunity in the living memory of India, need for major reforms is just becoming increasingly apparent. The natural gas sector has been slowly moving towards deregulation for close to a decade now and the likely transition of the sector from being a state managed to a free market is expected to have some remarkable changes in the tariff structure. In this context, the analysis of GSPLs present average transmission tariff would ensure the Companys preparedness to confront the changes that is near anticipated. This project aims at giving GSPL that preparedness with extensive analysis of the Companys tariff over the last two years (2006-2008) across the various zones of operation, market and customer wise. It goes on to give a model for forecasting the Companys revenues and a comparative study of the tariff structure with a similar market abroad.

Table of Contents

S.NO

CHAPTER TITLE

PAGE NO. 7 12 14 15 16 41 51 54 56

1. 2. 3. 4. 5. 6. 7. 8. 9.

The Organization The Department Project Objective The Approach Data Collection and Analysis The Revenue Projection Model Comparative Study with Market Abroad Findings and Recommendations References

List of Charts
S.NO CHART TITLE PAGE

NO.

1. 2. 3. 4. 5. 6. 7. 8. 9.

GSPLs Total Revenues for the period Apr06-Mar08 GSPLs Total Volumes for the period Apr06-Mar08 Average Tariff charged by GSPL for the period Apr06-Mar08 Customers paying tariff in the range of Rs.0.1 to Rs.0.5/scm Customers paying tariff in the range of Rs.0.5 to Rs.1.5/scm Customers paying tariff in the range of Rs.1.5 to Rs.2.5/scm Customers with small Average Tariff variations over the period Customers with large Average Tariff variations over the period Share of Firm and Interruptible contracts in Revenues for Apr06 to Mar08 Share of Firm and Interruptible contracts in Volumes for Apr06 to Mar08 Average Tariff- Firm vs Interruptible for the period Apr06 to Mar08 Zone wise Revenues Collected for the period Apr06-Mar08 Zone wise Volumes Transported for the period Apr06-Mar08 Zone wise Average Tariff charged for the period Apr06-Mar08 Customer Contribution to GSPLs revenues from Apr06 to Mar08 Average Tariff Comparison GSPL vs TGL

20 20 21 22 23 24 25 25 34

10.

34

11.

35

12. 13. 14. 15.

38 39 40 44

16.

53

List of Figures

S.NO

FIGURE TITLE

PAGE
6

NO.

1.

The commercial and contractual structure of GSPLs natural gas transportation business

GSPLs existing and planned gas transmission network

2.

10

infrastructure including the sources of supply

3.

GSPLs Organisational Structure

11

4.

Commercial Department Organisational Structure

13

5. 6. 7. 8. 9. 10.

Projection of Total Revenues of GSPL till June 2008 Revenue Projection from GPEC till June 2008 Revenue Projection from ESSAR STEEL till June 2008 Revenue Projection from ESSAR POWER till June 2008 Revenue Projection from IFFCO till June 2008 Revenue Projection from GSPC GAS till June 2008

45 46 47 48 49 50

The Organization
Natural gas is the fastest growing primary energy source amongst all the fossil fuel. With the setting up of PNGRB and maturing of the natural gas markets in India, there is a likeliness of emergence of a competitive sector going forward. Gujarat State Petronet Ltd (GSPL) is perched on the top with its leadership position to witness the unfolding of growth and regulatory developments in the sector.

GSPL, a GSPC group company owns and operates the second largest natural gas transmission network in India. It is the first and only pure natural gas transmission company in India and it is believed to be the first company in India to transport natural gas on an open access basis, which means that it makes its gas transmission capacity available to any shipper on a non discriminatory basis. Currently, its gas transmission network exclusively serves the State of Gujarat and is connected to all the major natural gas supply sources as well as most of the major users and demand centres in Gujarat. Most of its customers are natural gas end-users who purchase natural gas from upstream suppliers, such as marketers, producers and importers, and use its gas transmission network to transport such natural gas to their location, although occasionally its customers are the natural gas suppliers who arrange to supply natural gas to the purchasers at their location. GSPL does not own the natural gas that it transmits and therefore does not assume any natural gas commodity price risk. GSPL commenced transporting natural gas following completion of the first segment of gas transmission network in November 2000. The company went public in the year 2006 and it currently operates a medium-to-high pressure gas transmission network comprising approximately 1130 kms of natural gas pipeline from Vapi to Himmatnagar. GSPL is continuing to expand and extend its network of natural gas transmission pipelines and plans to construct additional natural gas transmission infrastructure across the state of Gujarat. It currently transports more than 16 million metric standard cubic metres per day (mmscmd) of natural gas. The State of Gujarat is presently the primary origination or entry point for both domestic natural gas and imported liquefied natural gas (LNG) for Western and Northern India. This is because of its strategic location and oceanic access to LNG producing countries in the Middle East and Asia. GSPLs pipelines are connected to all the major supply sources in Gujarat including designated collection points near the natural gas fields of Cairn Energy (India) Private Ltd. (Cairn Energy), GSPC and GSPC NIKO, all located in Hazira, and re-gasified LNG from the LNG terminal promoted by Shell and Total located in Hazira, which is known as the Hazira LNG terminal, and the Petronet LNG terminal located in Dahej. A spur line has been constructed by GSPL that connects the network to the land fall point of gas from Panna Mukta Tapti located in Hazira. The majority of GSPLs customers are power, fertilizer, chemical and steel plants who purchase natural gas from suppliers such as Bharat Petroleum Corporation Limited (BPCL), Cairn Energy, GSPC-Niko and Indian Oil Corporation Limited (IOCL). GSPL also transports natural gas for onward distribution by local distribution companies who
8

supply

natural

gas

to

retail

consumers

in

the

cities

of

Ahmedabad,

Baroda,

Himmatnagar,Mehsana,Gandhinagar,etc. GSPL benefits from certain competitive strengths that have enabled it to achieve significant growth and profitability. The following are its key competitive strengths;

First pure natural gas transmission company in India. First mover advantage in Gujarat. Connection to all major natural gas suppliers and most demand centers in Gujarat.
Strong Parentage.

Project management expertise and strong management team. Advanced engineering practices that provide efficient natural gas transportation. GSPL seeks to further expand its natural gas transmission business. The following are the key elements of its strategy:
Extend and expand the gas transmission network.

Fast time to market. Manage gas transmission network to maximize profitability. Increase and diversify customer base. Maximize capacity utilization.

Business Overview

The following diagram summarizes the commercial and contractual structure of GSPLs natural gas transportation business:

Figure: 1 The commercial and contractual structure of GSPLs natural gas transportation business

The suppliers of natural gas include marketers, producers and LNG terminals. Marketers purchase natural gas from producers and/or LNG terminals for resale to users and include companies such as BPCL, GAIL, GSPC, GSPC-NIKO and IOCL. Producers engage in natural gas exploration and production and include companies like Cairn Energy, GSPC, ONGC, Reliance Industries Limited, British Gas and Niko Resources. LNG terminals, including the Hazira LNG and Petronet LNG terminals, import LNG and supply re-gasified LNG. Bulk customers comprise industries such as power, fertilizer, steel and chemical plants which require natural gas as fuel or feedstock for their operations. Local distribution companies supply natural gas to retail consumers and include BPCL, Gujarat Adani Energy Limited and GGCL. Suppliers and users enter into a gas sales agreement (GSA) that specifies the quantity of natural gas, price and other commercial terms. Since large quantities of natural gas can only be transported

10

by pipelines while it is in gaseous form, either the user or the natural gas supplier must enter into a gas transmission agreement (GTA) with a natural gas transportation company such as GSPL to transport the natural gas from the supply source to a point where it can be utilized. The GTAs that GSPL enter into with its customers designate the entry and exit points for the natural gas as it travels through the Companys gas transmission network and provide for terms such as tariffs, tenure and capacity reserved in its gas transmission network amongst others. Tariffs primarily consist of capacity charges, which are fixed fees for the reservation of capacity and typically cover 90% of the customers tariff commitment, and commodity charges, which are linked to the actual transportation of natural gas through the gas transmission network. GSPLs GTAs include ship or pay provisions, which require its customers to pay the capacity charge for the capacity reserved by them regardless of the amount of natural gas they transport. The Companys GTAs also include provisions for payment security mechanisms such as bank

11

guarantees

and

letters

of

credit.

Figure 2: GSPLs existing and planned gas transmission network infrastructure including the sources of supply

12

GSPL Organizational Structure s

Figure 3. GSPLs Organisational Structure

13

The Department

The Commercial Department (under which my project was identified) of GSPL is responsible for conducting business development activities and managing existing customer relationships. In determining the new markets in which to target GSPLs sales and marketing efforts, the Department conducts demand surveys to ascertain the demand for natural gas in various industrial clusters. It also reviews demand surveys from reputable external agencies for various industrial regions such as Rajkot, Surat and Vapi. The Department tracks potential customers who may benefit from access to natural gas supply and focuses on developing relationships with these potential customers by educating them on the economic and environmental advantages of using natural gas versus other fuel sources. On identifying the interest, GSPL works collaboratively with these potential customers to develop a plan to implement the use of natural gas in their operations. GSPL also collaborates with natural gas suppliers to ensure that supply and demand is sufficient to justify the required capital expenditures in infrastructure. The Department proactively discusses entering into GTAs with potential customers. GSPL also assists the customer with the natural gas purchase agreements by guiding them through the process of identifying natural gas suppliers. It is believed that this proactive approach of the Company and the Departments marketing efforts has built tremendous good will in the market. In markets where GSPLs gas transmission network is already operational, the Department also focuses on managing existing relationships and providing competitive prices and high quality service, especially where competing pipelines exist in order to retain the customers.

14

Commercial Department Organisational Structure

Figure: 4 The Commercial Department Organisational Chart

15

Project Objective
The Natural Gas sector in India has been slowly moving towards deregulation for close to a decade now. However, rather than introducing free market forces into the existing statemanaged sector, India has developed a separate almost decontrolled gas market alongside the existing sector. The significant development over the years, have been the passage of the Petroleum and Natural Gas Regulatory Board (PNGRB) Bill in the Parliament in the year 2001. The important feature of this bill is the setting of an independent regulatory for midstream and downstream activities and to promote competition in the oil and gas sector. The major challenge to complete gas sector reforms that still remains is how to transit gas users from the statemanaged sector to free market.

With the need for reforms increasingly felt on the growing natural gas sector, the changes in transmission tariff that would occupy a prime position in the reforms will be an issue that would have major implications on the business of gas transmission companies in India. The Companies derive income from this tariff which is least affected by the fluctuating natural gas prices . Gujarat State Petronet Limited, the pioneer in transporting natural gas in the country has the second largest gas transmission network in India, next only to Gas Authority of India Limited (GAIL). The reforms in the sector, followed by the restructuring of the transportation tariffs, would have serious implication on GSPLs business. Analysing the companys Average tariff over the last two years (2006-2008), would give them a fair idea of how their business has been performing across the sectors and over the different zones in that period. A model has been developed to project the revenues of GSPL for the next fiscal year and a comparative analysis was made with a market abroad. These analyses would help the company approach the changes in the tariff structure with a positive outlook.

16

The Approach
The project was divided into tasks and sub tasks which follows the following schema; 1. Analysis of GSPLs Average tariff
a) Analysis of GSPLs business in terms of revenues and volumes

b) Determination of the Average Tariff c) Analysis of Average Tariff across company level d) Identification of variables having an impact on the average tariff
e) Clustering of customers incorporating the variables identified

f) Share of Firm and Interruptible contracts g) Analysis of Average Tariff across zones At the end of each sub task, the project would reach its objective of helping the Company get a fair share idea of their price of transportation per unit of the volume of the gas transported across company level and zone. The variables that would be identified would help GSPL decide on the charges that the Company would be able to fix. These changes in the tariff even at a smaller level would have an impact on the rise in revenue for the company.

2. Development of a model for revenue projection for GSPL A model has been developed using Double Exponential method of Forecasting. This method has been widely used for projecting revenues in business houses as the data provided shows a trend and the method is found to be handling trends in a better manner than the other smoothing methods of forecasting.

3. Comparative Analysis of the Tariff with a market outside India Argentina in South America is one of the developing countries whose gas markets had undergone profound changes as a result of regulatory and structural reforms launched in the

17

1980s. The transformation from a highly regulated market to a totally liberated one is an experience that India can look forward. TGS is an Argentine gas transmission company similar to GSPL. The comparison between the tariffs of the two companies would give GSPL an idea of the Argentine market and the tariffs prevalent there.

Data Collection and Analysis


The GTAs that GSPL enters into with customers typically provide for commercial terms, such as quantity, quality, schedule, payment terms, security terms, events of default and remedies for the transportation arrangements. The GTAs also include an operating code, which provides operating parameters and minimum natural gas quality requirements at gas entry and exit points to ensure grid discipline. The terms of the GTAs range from one to fifteen years. Tariffs primarily consist of capacity charges, which is a fixed charge for the reservation of a designated amount of capacity, and commodity charges, which are linked to the actual transportation of natural gas through our gas transmission network. The GTAs also provide for ship or pay minimum guaranteed off take requirements typically covering 90% of the customers tariff commitment, which require the customers to pay the capacity charge for the capacity of natural gas reserved by them regardless of the amount of natural gas they transport. GSPL also charges customers overrun, variance and imbalance charges when a customer off takes more gas than they have contracted and scheduled for delivery. GSPLs tariffs are determined based on independent contract negotiations with the customers and are based on various factors, including distance, capacity reserved, and tenure of the GTA. GSPL bills its customers on a fortnightly basis and minimizes its credit risk by requiring bank guarantees and letters of credit typically equal to two billing cycles from its customers as provided in its GTAs. Upon invoicing, its customers are generally required to pay the entitled amount within seven days. When GSPL enters new markets where there are no existing competitors, it conducts a market survey to determine the level of tariffs that the market will support. In setting new tariffs, GSPL also considers the tariff amount that will yield a sustainable return on investment, current cost of natural gas and the total cost of delivered natural gas to the customer. In addition, GSPL

18

compares the total cost of delivered natural gas to the customer to the cost of alternative fuels in order to maintain the competitiveness of its services.

19

The Data

The Analysis was required to be performed on the database provided by the Commercial Department of GSPL. The database is a comprehensive collection of the fortnightly invoices sent to those Customers who had active GTA over the period from Apr06 to Mar08. It contains the volumes transported to the respective customers and the respective amount received from the Customers, which includes the tariff that was signed in the GTA. This tariff for each customer had been previously arrived at while signing the GTA taking into account various factors like the distance, the period of contract and the capacity reserved.

Methodology

There seemed to be a policy within the Company, to keep their capacity and commodity charges confident. This was a limitation with the data to calculate the average tariff charged by GSPL, but a method was devised to arrive at the Average tariff without taking into account the confidential data. Since the average transmission tariff is the price charged for transporting per unit of gas, dividing the total amount collected from the customers by the total volumes used gave the price per unit the customer had paid for transporting which rightly was the average tariff. This method was rather simple and easy to arrive at the average tariff each company was charged. The similar method was followed to find out the average tariff across zones and for firm and interruptible contracts.

20

List of Customers

The database gave way for identification of GSPLs customers which predominantly included players across manufacturing, power, fertilizer companies and gas distribution companies.

1. 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

AEC AEGL Alok Industries AML Asian Granito BPCL CGSML City Tiles ESSAR Steel Limited Essar Power Limited GACL GFL GGCL GIPCL GNFC GPEC GSEC - Dhuvaran GSECL GSEG GSFC - Hazira Gas GSPC (Raymond) GSPC(Welspun) GSPC(Kribhco) GSPC GAS HLPL (for NTPC) HPCL IFFCO KRIBHCO IOCL - NTPC NTPC Gandhar NTPC Kawas Oracle Granito SABAR DAIRY SGL VNG - Mora Gas

21

As mentioned under the Approach, the phase of the project has been divided into modules as shown; 4. Analysis of GSPLs Average tariff
h) Analysis of GSPLs business in terms of revenues and volumes

i) Determination of the Average Tariff j) Analysis of Average Tariff across company level k) Identification of variables having an impact on the average tariff
l) Clustering of customers using MINITAB

m) Share of Firm and Interruptible contracts n) Analysis of Average Tariff across zones

(a). Analysis of GSPL business in terms of revenues and volumes s

Revenues The invoice amounts in the database included the service tax prevalent for that particular fiscal year. The first step in the analysis was to find out GSPLs revenues across the given period. Deducting the service tax amount from the invoice amount gave the GSPLs revenues for that particular period. The Chart gives the comprehensive picture of how GSPL had performed in the last two years. There has been a 100 percent growth in terms of revenues for GSPL from Apr06 when it was around Rs.20 crores to Rs.40 crores in Mar08. The trend clearly is an upward one, but there have been fluctuations in the revenue generation over the two, which projects a slower growth for the forthcoming months. August seems to be the month, where revenues see a lower peak in both the years. The reason behind it being the monsoons when businesses see downward trend. This is contrary to the month of October when the business starts to gain momentum.(Chart1)

22

23

Chart 1: GSPLs Total Revenues for the period Apr06 - Mar08

Volumes The Gas transported over the two years has clearly seen a rise from 350 MMscmd in Apr06 to 650 MMscmd in Mar08. (Chart2). The increase is around 86 percent over the period and the trend is obviously an upward one. The slope of the curve is much better than the revenue slope, for the fluctuations are not as much as the revenues and the growth in volumes is projected to be much better than revenues. The slowdown in the August and the peak in October months follow the same reason as the revenues.

24

Chart 2: GSPLs Total Volumes for the period Apr06 - Mar08

(b) Determination of the Average Tariff

The Pipeline Transmission Tariff in GSPL has been calculated on Cost of service basis and it complies with the procedures set by the Petroleum and Natural Gas Regulatory Board Act, 2006. Annexure B explains how this Tariff has been determined.

The Average Tariff charged by the Company is seen to be between Rs.0.5 to Rs.0.8/scm. It is quite evident from the chart that the trend is a consistent trend and this comes with the low slope in revenues and slightly higher slope with the volumes. The two year high in August is quite obvious and evident fact that both the revenues and volumes saw the two year low in that particular month(Chart3)

Chart 3. Average Tariff charged by GSPL for the period Apr06-Mar08

25

26

(c) Analysis of Average Tariff across company level The next step after determining the average tariff that GSPL charges, was to pool the customers paying the similar tariff and substantiate the find with valid reasons. Since the Average Tariff charged was found to be in the range of Rs 0.5 to Rs. 0.8/scm, customers were grouped as;
1. Customers paying tariff in the range of Rs.0.1-Rs.0.5/scm 2. Customers paying tariff in the range of Rs.0.5-Rs.1.5/scm 3. Customers paying tariff in the range of Rs.1.5-Rs.2.5/scm 4. Customers whose tariff saw large fluctuations over the period

5. Customers whose tariff saw few fluctuations over the period

Chart 4: Customers paying tariff in the range of Rs.0.1-Rs.0.5/scm

27

The Chart(Chart4) shows the customers who have been transporting huge volumes and whose tenure of contract is also long. It is quite obvious that the huge volumes and long tenurea are the prime reasons for the remarkably low average tariff by these customers.

Chart 5: Customers paying tariff in the range of Rs.0.5-Rs.1.5/scm

The Chart (Chart5) shows nearly 50 percent of the Companys customers and those who have been very consistent with their volumes and payments. Most of the customers in this group are power and fertilizer companies.

28

Chart 6: Customers paying tariff in the range of Rs.0.5-Rs.1.5/scm

The previous charts (Chart 4 to Chart 6) showed customers who were very consistent in taking volumes and farthest from souce. The following charts (Chat7 Chart8) show customers who were by way showed fluctuations either during fewer months or many. Yet these were good revenue fetchers for in some cases capacity booked was largely underutilized. There was more than one reason for the fluctuations. Shut down of the Company, Low demand of Natural Gas, monsoons are some of the valid reasons for these fluctuations.

29

Chart 7: Customers with small Average Tariff variations over the period

Chart 8: Customers with large Average Tariff variations over the period

30

(d) Identification of variables having an impact on the average tariff

The following are the variables that have been identified to have an impact on the average tariff Capacity Reserved (Volumes booked)

The Customers book their volumes of gas that need to be transported and charges are based on that. It is also referred as the Maximum Daily Quantity (MDQ).This charge is called the capacity charge and forms the 90 percent of the tariff. This capacity and the corresponding charge is a part of the GTA. Irrespective of the amount of gas used, the customer is liable to pay this component. Capacity Utilized (Volumes used)

Due to various reasons, the customers use slightly more or less of the actual capacity booked. This component is called the commodity charge and is 10 percent of the tariff. When the customer off takes more gas than the input volumes, there is an imbalance created and the customer is liable to pay a penalty. Active Business months

The number of months the customer had actively used the gas and paid for it also has an impact on the average tariff. The expiry of GTA or Bank Guarantee leads to holding of the gas with the supplier. Uniformity in using the capacity

The consistency under which the customer uses the booked capacity is an important parameter, for GSPL benefits if the customer underutilizes the volume of gas transported, while it also takes care to penalise if the case is otherwise. The Customer pays in more for the less gas used, as the volumes specified in the GTA would be more than the actual usage.

31

Total Revenues collected

The Company gets its income from the tariff collected. Tariff is for per unit volume of the gas and it becomes revenues when it comes to total volumes. Hence tariff and revenue are directly proportional.

Tenure of Contract

The longer the tenure of contract, the more benefit the customer receives for the gas prices are fluctuating every day. Proper demand estimation of the gas from the customer side would help them in the long run. Longer tenure of contract also means revenue generation for a longer time for GSPL; hence it is a mutual benefiting factor. Yet the PNGRB would not allow contracts to be signed for more than 15 years while in markets abroad it goes up to 30 years.

Distance from the source

Shorter is the distance from the source lesser is the tariff charged. Hence, tariff and distance are inversely proportional to each other

32

(d)Clustering of customers using MINITAB

There have been eight variables identified that are supposed to have impact on the average tariff. Out of these eight variables five are at hand and the other three, due to limitations in the data, is unavailable. Using these five variables, the 35 customers can be grouped to have a fair share of idea of similar ones out of these 35. The five variables that are identified to incorporate to form Clusters of customers are 1. Total revenues 2. Uniformity in Revenues 3. Total Volumes 4. Uniformity in Volumes 5. Business Months In addition to these variables the Average tariff is also added to arrive at the Clusters of customers that throw similarity Incorporating all the above variables to form clusters (groups) using MS EXCEL is a daunting task. This limitation in EXCEL is been overcome by using MINITAB. Minitab is a statistical software package that provides a wide range of basic and advanced data analysis capabilities. It provides a system for organizing and analyzing data and reporting results of statistical analysis. Minitab Statistical Software helps to draw valuable insight from your data and makes it easy to illustrate and interpret the results of your analyses. Its comprehensive collection of methods and intuitive interface has made it the package of choice for thousands of companies in more than 80 countries worldwide. How this software which is a choice of many business houses around the world would help GSPL is analysing the Average Tariff was an interesting task that was performed during the tenure of the training

33

Cluster analysis is a collection of statistical methods, which identifies groups of samples that behave similarly or show similar characteristics. In common parlance it is also called look-alike groups. The simplest mechanism is to partition the samples using measurements that capture similarity or distance between samples. In this way, clusters and groups are interchangeable words. Often in market research studies, cluster analysis is also referred to as a segmentation method.

There are three stages to cluster analysis; namely, partitioning/similarity (what defines the groups), interpretation of clusters (how to use groups), and profiling the characteristics of similar/partitioned groups (what explains the groups).

The concept of ordering involved is the hierarchical approach in the analysis here. The ordering is driven by how many observations could be combined at a time or what determines that the distance is not statistically different from 0 between two observations or two clusters. The clusters could be arrived at either from weeding out dissimilar observations (divisive method) or joining together similar observations (agglomerative method). Most common statistical packages use agglomerative method and the most popular agglomerative methods are (1) single linkage (nearest neighbor approach), (2) complete linkage (furthest neighbor), (3) average linkage, (4) Wards method, and (5) Centroid method.

With the Total Revenue and Total Volumes already available, the uniformity in the revenues and the volumes were found out. The measure of uniformity for the total volume of gas transported for the customer for the two years is defined as follows: Uv = (sum | Vi- Vbar)/24. for each customer, similar method was followed to find out the uniformity of the Total Revenues collected. Now that, we have six variables, namely Total Revenues, Total Volumes, Uniformity( Revenues), Uniformity( Volumes) and Average Tariff, Cluster Analysis was carried out using these variables on the sample of 35 customers using MINITAB. In this analysis we find out the distance by a suitably defined distance measure (in this case Euclidian) by using all the variables on each of the customers. Those customers who are close to each other then form the clusters.
34

GS P L 's Customer Cl uster s


-237.29

Similarity

-124.86

-12.43

100.00

C L L ed O L L C L G C C ) L a s L i to it o le s L F L L S L an as L C ies Y O d) a r ot A E A EG I PCimit F C GSMHPC N F S ECG SE G SP T P A M a G GA Cran r a n Ti B PC G SG G AG GCv a r a G OTAGP E str A I R HC ere dh Sp G G n G L IF C N C ir G G i ty or du D IB li v a P C hu z T er or M n le C SP I n R KR De C G NT D a L (f G w - - HTEE si a r ac k A BA C TP L G A O lo C C S Po A S SP N C L LP VN SE F R ar H (G G G S SA ss IO E as ES aw K C TP N

Obse r v at ions

Figure : GSPLs Customer Clusters generated using MINITAB

The Figure shows a ward-linkage cluster analysis applied to the 35 customer-sample and 6variable data set using Minitab. The metric employed was Euclidean distance. The dendrogram obtained shows good discrimination between the customers
35

36

The following is the list of customers falling under the respective groups as generated by MINITAB

Group1

Group2

AEC AEGL Essar Power Limited GIPCL IFFCO CGSML HPCL GNFC GSECL GSEG GSPC HLPL (for NTPC) AML VNG - Mora Gas GACL Asian Granito Oracle Granito City Tiles BPCL

Group 3

Group 4

37

GFL SGL GSPC GAS GGCL GSEC - Dhuvaran GSFC - Hazira Gas GPEC ESSAR STEEL

Group 5

Alok Industries SABAR DAIRY KRIBHCO NTPC Kawas (GSPC Delivered) NTPC Gandhar IOCL - NTPC Spot

38

Interpretation of the Cluster Analysis

While MINITAB has taken care of the two stages of Cluster Analysis, namely partitioning and profiling of the customers, the interpretation was made based on the centroid values obtained through the method of Euclidean Distance.

A ranking of the groups was made considering the centroid values of all the individual variables in each cluster

Rank

Cluster

1 2 3 4 5

Group4 Group1 Group3 Group2 Group5

This ranking is the consolidated ranking arrived at after ranking each Group on Revenue, Volumes, Business Months, Uniformity across Volumes and revenues and Average Tariff respectively.

39

GSPL can now look forward on setting up a rationalized tariff based on these groups. These groups does show some sort of similarity although on the surface it may not be so. A small change in the tariff charged for the group would have major implication positively on the Companies business

40

(f) Share of Firm and Interruptible contracts

Firm Contract refers to services that are rendered by GSPL without interruptions or reductions in the volumes of gas to be transported mentioned by the shipper(customer) in the GTA. In terms of Firm the Company can be sure of the amount of gas the shipper would be taking in a day. The pipeline capacity is adjusted accordingly.

Interruptible Contract refers to services that is subject to interruptions, the quanity or volume of gas transported to the shipper is subjcted to fluctuation. Since the company is not sure of the volume that the shipper would require to transport. This service comes for a premium price.

Although the interrruptible contracts come at an extra price, firm contracts are beleived to be better as it also shows the commitment of the customer in terms of volumes and the business. Firm contracts are beleived to fetch more revenues than the interrruptible ones.

For the period Apr06 to Mar08, the share of firm and interruptible contracts in terms of revenues and volumes is shown in the charts below.(Chart 9 & Chart 10) The firm contract seem to give in consistent revenues and volumes, while the share of interruptible have started to rise. This trend is eveident from the fact that natural gas demand is on the rise and customers who are not sure of the demand quantitatively go for interruptible contracts.Also,Local Distribution companies are the major users of this service as they are not sure of their sales either.

41

42

Chart 9: Share of Firm and Interruptible Contracts in Revenues Apr06-Mar08

Chart 10: Share of Firm and Interruptible Contracts in Volumes Apr06-Mar08

43

While the Average Tariff for Firm contracts over theperiod seem to be almost constant on 0.5/scm, the average tariff for interruptible has seen a steep rise.(Chart11)

Chart 11: Average Tariff Firm vs Interruptible (Apr06-Mar08)

44

45

(g) Analysis of Average Tariff across zones GSPL levies charges based on the zonal rates, hence zones occupy an important position in deciding the transmission rates. The company operates in eight different zones across the state of Gujarat. The different zones and the customers under that zone are as follows;

1. Vapi

Alok Industries GGCL GSPC-Vapi GSPC GAS

2. Hazira-Mora

BPCL for Kribhco ESSAR STEEL LTD Essar Power Limited GSEG HLPL for NTPC KRIBHCO NTPC Kawas

3. Utran

GSECL

4. Bharuch Dahej

46

GACL GFL GNFC GPEC NTPC Gandhar VNG Mora Gas AEGL-Dhanora

5. Baroda

GIPCL GSFC Hazira Gas GSPC Gas-Dhaban

6. Anand-Dhuvaran

CGSML

7. Ahmedabad-Gandhinagar

AEC AEG-VatvaL AML HPCL IFFCO GSPC gas

8. Santhej-Mehsana-Himmatnagar

Asian Granito City Tiles Oracle Granito SABAR DAIRY SGL

47

The Chart (Chart 12: Zone wise Revenues collected over the period Apr-06 to Mar-08) gives the total revenues collected across the zones in the two year period. The peaks at the Hazira zone indicate that the zone had been a real revenue fetcher for the company. The reasonably low revenues collected at Utran and Anand is because these zones have single or very few customers

48

Chart 12: Zone wise Revenues collected over the period Apr-06 to Mar-08

The volumes transported follow the same trend as the revenues except for Bharuch zone. This zone has the companys largest customer GPEC. The customer also pays very well in spite of the large volumes he takes.(Chart 13)

49

Chart 13: Zone wise Volumes Transported over the period Apr-06 to Mar-08

Distance from the source is an important parameter that decides the average tariff. It could be noticed that the zones; Vapi, Hazira and Utran has low average tariff owing to the fact that they have close proximity to the source of gas in Hazira. As the distance increase the price of transporting gas per unit volume also shows an upward increasing trend. While the period of contract and the volumes transported also are factors that cannot be ignored, distance does occupy the predominant position in fixing zonal rates.(Chart14)

50

Chart 14: Zone wise Average Tariff charged over the period Apr-06 to Mar-08

51

The Revenue Projection model using MINITAB


GSPL had been constantly expanding since its inception and the earlier analysis shows its revenues to have grown hundred percent from the time of start up. It would be interesting to know GSPLs stand in terms of revenues earning in the near future. As part of the project objective, a revenue projection model was made using the statistical software, MINITAB. The Data The database containing the revenues generated from the individual shippers obtained from the invoices from Apr-06 to Mar-08 was comprehensive enough to generate a model to project GSPLs revenues for the future. Methodology Once data had been captured for the time series to be forecasted, the next step was to select a model for forecasting. Various statistical and graphic techniques was experimented in the selection process starting with time series forecasting analysis to graph sequence plots of the time series that was to be forecasted. A sequence plot is a graph of the data series values, usually on the vertical axis, against time usually on the horizontal axis. The purpose of the sequence plot was to give a visual impression of the nature of the time series. This visual impression suggested whether there were certain behavioural components present within the time series. The presence/absence of such components helped in selecting the model with the potential to produce the best forecasts. The model that was selected to Project the Companys revenues was Double Exponential Smoothing. Double Exponential Smoothing as it is probably the most widely used class of procedures for smoothing discrete time series. This popularity can be attributed to its simplicity, its computational efficiency, its ease of adjusting its responsiveness to the changes in the process being forecast and its reasonably accuracy.

52

There are two equations associated with Double Exponential Smoothing.


ft = a.Yt+(1-a)(ft-1+bt-1) bt = g.(ft-ft-1)+(1-g).bt-1 where:

Yt is the observed value at time t. ft is the forecast at time t. bt is the estimated slope at time t. a - representing alpha - is the first smoothing constant, used to smooth the observations. g - representing gamma - is the second smoothing constant, used to smooth the trend.

To initialize the double exponential smoothing model, f1 is set to Y1, and the initial slope b1 is set to the difference between the first two observations; i.e. Y2-Y1. Although there are other ways to initialize the model, as of the time of writing, these alternatives are not available in this implementation. Future implementations of this model may offer these options.
The smoothing constants must be a value in the range 0.0-1.0. But, the "best" value to use for the smoothing constants depends on the data series being modelled. In general, the speed at which the older responses are dampened (smoothed) is a function of the value of the smoothing constant. When this smoothing constant is close to 1.0, dampening is quick - more weight is given to recent observations - and when it is close to 0.0, dampening is slow - and relatively less weight is given to recent observations. The best value for the smoothing constant is the one that results in the smallest mean of the squared errors (or other similar accuracy indicator).

After selecting a model, the next step is its specification. The process of specifying a forecasting model involves selecting the variables to be included, selecting the form of the equation of relationship, and estimating the values of the parameters in that equation. While selection of variable is done by the analyst, the equation of relationship and estimation of values of the parameters are done by the statistical software MINITAB.

53

After the model is specified, the software also verifies and validates the performance of its forecasts with historical data for the process it was designed to forecast. Error measures such as MAPE (Mean Absolute Percentage Error), MAD and MSD may be used for validating the model.

The Chart (Chart 15) shows the contribution of the individual customers across the period from Apr06- Mar08. The trend in revenues for the same period was analysed in the previous chapter. The Chart is reproduced here for better understanding.

54

Chart 15. Customer Contribution to GSPLs Revenue in 2006-2008

It could be noted that those customers who have been able to garner more than Rs.25 Cr in the given time period have been marked in pink. It would be interesting to watch how these players would be performing as the affect the Companys revenues largely.

55

The figure (Figure 5) gives the Double Exponential Smoothing Plot of Total Revenues. On Mar08 the revenue was about Rs.45 crores, this is set to see an increase in the next moths to come. It is expected to be nearly Rs.50 crores in the next three months. MINITAB has generated the revenue projection for the next three months, though the model developed could be used for any number of forecasts. The number of forecasts has been kept minimum to have the forecasts kept nearly to accuracy keeping the errors minimum. The wider the number of forecasts the larger would be the error and the accuracy would also be low.

P r ojecti on of TOTAL R EVEN UES ti l l J un'0 8


55 50 45 40 35 30 25 Month Apr Year 2006 Aug Dec Apr 2007 Aug Dec Apr 2008
Variable Actual Fits Forecasts 95.0% PI Smoothing C onstants Alpha (lev el) 0.2 Gamma (trend) 0.2 Accuracy MAPE MAD MSD Measures 5.26455 1.92979 6.41193

Tot al Rev enues

Figure 5 : Projection of Total Revenues for GSPL till June08

56

\ The following were the top five customers whose have been giving more than Rs. 40 crores of revenues in the last two years for GSPL

1. 2. 3. 4. 5.

GPEC ESSAR Steel ESSAR Power IFFCO GSPC Gas Projection of revenues from these players would give an overview to GSPL of how their business would be. GPEC had been the largest customer to GSPL giving more than Rs.140 Crores in the last two years, the amount of flow from them have been seeing a fall since last 6 months which is forecasted to continue.(Figure 6), but the stream is forecasted to be consistent with the last months
R ev enue P r ojecti on fr om GP EC ti l l J un'0 8
100000000
Variable Actual Fits Forecasts 95.0% PI Smoothing Constants Alpha (lev el) 0.2 Gamma (trend) 0.2 A ccuracy Measures MA PE 1.19897E+01 MA D 8.35224E+06 MSD 1.26876E+14

90000000

80000000 GPEC 70000000 60000000 50000000 Month Apr Year 2006 Aug Dec Apr 2007 Aug Dec Apr 2008

Figure 6 : Revenue Projection from GPEC till June08

57

ESSAR STEEL had been the second largest customer to GSPL roping in revenues more than Rs. 100 crores in the last two years. The flow of revenues from them had seen fluctuations in the last few months which is set to go consistently low in the coming months (Figure 7)

R ev enue P r ojecti on fr om ES S AR S TEEL ti l l J un'0 8


70000000 65000000 60000000 ESSA R STEEL 55000000 50000000 45000000 40000000 Month Apr Year 2006 Aug Dec Apr 2007 Aug Dec Apr 2008
Variable Actual Fits Forecasts 95.0% PI Smoothing Constants Alpha (lev el) 0.2 Gamma (trend) 0.2 A ccuracy Measures MA PE 8.69953E+00 MA D 4.80959E+06 MSD 3.82517E+13

Figure 7 : Revenue Projection from ESSAR STEEL till June08

58

Essar Power had been the third largest customer for GSPL giving more than Rs.40 crores in the given period. The flow had been gaining momentum recently, but the inconsistency has shown fall in the revenues for the next three months (Figure 8)

R evenue P r ojecti on fr om ES S AR P OW ER ti l l J un'0 8


31000000 30000000 29000000 Essa r Power Limit ed 28000000 27000000 26000000 25000000 24000000 23000000 22000000 Month Apr Year 2006 Aug Dec Apr 2007 Aug Dec Apr 2008
Variable Actual Fits Forecasts 95.0% PI Smoothing Constants Alpha (lev el) 0.2 Gamma (trend) 0.2 A ccuracy Measures MA PE 5.79827E+00 MA D 1.54848E+06 MSD 3.75577E+12

Figure 8 : Revenue Projection from ESSAR Power till June08

59

IFFCOs business to GSPL was not as much today as it was in the late 2006, it has started to decline and the fluctuations followed. The flow of revenues from their side is seen to fall in the next coming months as well

R evenue P r ojecti on fr om IFFCO ti l l J un'0 8


35000000 30000000 25000000 20000000 15000000 10000000 5000000 0 Month Apr Year 2006 Aug Dec Apr 2007 Aug Dec Apr 2008
Variable Actual Fits Forecasts 95.0% PI Smoothing Constants Alpha (lev el) 0.2 Gamma (trend) 0.2 A ccuracy Measures MA PE 2.07509E+01 MA D 5.45824E+06 MSD 6.66354E+13

IFFCO

Figure 9 : Revenue Projection from IFFCO till June08

60

The trend had been always higher for GSPC Gas and it is set to follow in the coming months as well

R ev enue P r ojecti on fr om GS P C GAS ti l l J un'0 8


80000000
Variable Actual Fits Forecasts 95.0% PI Smoothing Constants Alpha (lev el) 0.2 Gamma (trend) 0.2 A ccuracy Measures MA PE 1.23700E+03 MA D 6.04404E+06 MSD 4.82647E+13

60000000

GSPC GA S

40000000

20000000

Month Apr Year 2006

Aug

Dec

Apr 2007

Aug

Dec

Apr 2008

Figure 10 : Revenue Projection from GSPC GAS till June08

61

Comparative Study with Market Abroad


Argentina is the market chosen for the comparative analysis, the prime motivation behind it was that the country had begun liberalisation very much at the same time when India had begun. In the Natural Gas scenario, Argentina began deregulating natural gas production in 1989 as part of its privatization of YPF. As with the oil industry, YPF (now Repsol-YPF) retains a dominant position in the upstream sector. The second-largest natural gas producer in Argentina is Total. Two companies, Transportadora de Gas del Sur (TGS) and Transportadora de Gas del Norte (TGN), control Argentinas natural gas transmission system: TGS, controlled by Petrobras, is South America's largest pipeline company, delivering the majority of Argentina's total natural gas consumption. There seems to be a striking similarity in the way TGS does business and the way Gujarat State Petronet Limited does.

Transportadora de Gas del Sur S.A. (TGS or The Company) started operations in late 1992, as a result of the privatization process of the Argentine energy segment. Currently, TGS is the leader gas transportation company in Argentina, delivering about 62% of the gas consumed in Argentina. We render gas transportation services directly to distribution companies, electrical power plants and industries along a pipeline system of 4,997 miles (of which TGS owns 4,682 miles), through seven Argentine provinces with a compression power of 579,090 HP. TGS is also one of the leading NGL producers and traders both in the local and international market, and an important provider of midstream services, including business and financial structuring, turnkey construction and the operation and maintenance of facilities (used for gas gathering, conditioning and transportation). In addition, through its wholly-owned subsidiary, Telcosur, TGS also has rendered telecommunication services, becoming an important carrier of carriers.

62

Characteristics of Business Comparison between TGS and GSPL


Characteristics Regulations TGS Under the Regulations of the Gas Act ENERGAS Open Access Non-Discriminatory Firm and Interruptible Neither vertical or horizontal up to 35 years GSPL Under the Petroleum and Natural Gas Board Act PNGRB Open Access Non-Discriminatory Firm and Interruptible Neither vertical or horizontal up to 15 years

Regulator Access to Capacity Nature of Service Type of Service Type of Integration Term of Contract

63

TGS also fixes tariff based on zone rates similar to GSPL .It operates in four zones unlike GSPL which operates in 9 zones. The comparison between their tariffs are given below Santa Cruz is one of the zones that TGS was transporting gas and it covers around 2000 kms of pipeline. Hence the region was selected to compare the tariffs between them. The length of the pipeline was much similar to GSPLs total length. Tariff was fixed on entry-exit basis, so it paved way to compare the two companies tariff rates for the last six months and it was found that GSPL was more consistent, while TGS was constantly increasing its tariff on month basis. (Chart 18) .The source of TGS tariff is http://tgs.ar

Chart 16. Average Tariff Comparison GSPL vs TGS

64

Findings and Recommendations


GSPLs total revenues had a 100 percent growth from Apr-06 to Mar-08 The total Volumes had a 86 percent growth for the same period Average Tariff charged by GSPL is in the range of Rs.0.5- Rs.0.8/scm While the large customers pay average tariff in the range of Rs.0.1 to Rs.0.5/scm, nearly 50 percent of its customers are found to be paying Rs.0.5 to Rs.1/scm The Analysis proved the fact that volumes play a very critical role in deciding average tariff while there were many other parameters too The Average tariff across the zones show that close proximity to the source of natural gas has its advantage The Firm and Interruptible contracts of GSPL showed the trend of natural gas usage in the state to be on the rise with the steep increase in the interruptible contracts over the given period

The Cluster Analysis paved way to find out similar groups owing to various factors. The Companys Revenues were projected and a model was created that could be used to forecast its revenues for any period

The Comparative Study clearly shows that GSPLs business model is truly world recognised and the tariff rates were within the limits with reasonable rate of return.

65

Recommendations

REVISION IN TARIFF The Analysis clearly proved that GSPL has limited downside risk with the changing regulatory framework as the average tariff (Rs.0.5 to Rs.0.8/scm) set by the company is well below the estimated normative tariff (Rs.0.65 to Rs.0.8/scm). The Company is well placed with this tariff and there is no anticipation of any hazard in this in the near future. If in any case the company wishes to revise the tariff, it can experiment with the clusters that had been obtained. These groups are generated as they show similarity with the various factors that have been taken into account. GSPL is well placed with the current range of tariff which is well below the normative tariff , there is no revision in tariff recommended in the near future. CONCENTRATION TOWARDS MEDIUM PLAYERS GSPL is all set to grow big, the model created to project its revenues shows that the company is all set for a major growth. The model could be used to project revenues for any number of period, provided care should be taken that as the number of forecast increases accuracy decreases. It was seen that the revenues from the top players seem to go down consistently in the recent past, while those players falling under the next five to ten are showing increasing trend. GSPL is recommended to concentrate on these players who are emerging to give increased revenues over the period, eg .GSPC GAS WORLD CLASS BUSINESS MODEL Except for the fact that the tenure of contract is very less in India which is not more than 15 years, while it is nearly 35 years in many countries abroad and especially with Argentina, whose market shows striking resemblance with Indian, there is no change required as far as the business model of GSPL is concerned. Deep research for the project shows that GSPLs business model to be truly world class.

66

References

Prajakta S. Kalekar (2004). Time series Forecasting using Holt-Winters Exponential Smoothing , Kanwal Rekhi School of Information Technology Annual Report of Gujarat State Petronet Limited for the year 2006-2007 Annual Report of Transportadora de Gas del Sur Limited for the year 2006-2007 http://www.minitab.com accessed on 15-05-2008 http://www.tgs.ar/eglish accessed on 20-5-2008 http://www.gujaratpetro.com accessed on 15-04-2008

67

CASE STUDY

68

Das könnte Ihnen auch gefallen