00:00 Hello and welcome to BQ Prime. I am your host Vikas Shrivastava. Today we have with us Mr.
00:05 Subramaniam Sharma. He is the Executive Director and also the Energy Division of L&T's head.
00:12 He will talk to us about the current agreement that they have entered into with the Australian
00:16 company for Australia's largest urea plant that they will be doing the fabrication for that.
00:23 And he will also talk to us about their renewable plants in coming years.
00:28 Welcome to BQ Prime, Mr. Sharma. Thank you very much. Thank you very much for having me here.
00:33 Sir, first of all, if you can give us some significance and also what purpose this
00:37 agreement will solve for L&T going ahead. One which are related to the one we signed
00:43 today. Yeah, I think it's a very important milestone as you would have seen in my press
00:48 release. This is one of the largest urea plant getting modularized globally and also it's one
00:54 of the largest orders for us in terms of fabrication, modular fabrication business.
01:00 Generally, the worldwide the trend is now to modularize more and more plants.
01:05 It has been a conventional practice to do it for offshore, but now that is also being done for
01:11 onshore projects because of general challenges all the industry is facing with respect to
01:17 availability of skilled manpower. So modularization enables the owners to build it in a controlled
01:23 environment and have the required level of assurance of quality and safety. So I think
01:30 we have been trying to grow this business. L&T has built a lot of capability over the last
01:35 one and a half, two decades in modularization and we have been trying to expand our customer base
01:42 and geographical base. We delivered some good modular projects for one of our major customers
01:48 for a project in Singapore and then also in Europe in Rotterdam and all of this have helped us to
01:54 also increase our profile and this is I would say the major breakthrough to supply modules in
02:00 Australia. Perdeman is a major developer and Saipem is the EPC contractor who are well-renowned EPC
02:08 contractor and for both of them to have had faith in us and have given this award is a testimony to
02:14 our commitment and our capability. So I am very pleased and I think this will help us to enhance
02:19 the fabrication portfolio and also expand our customer base and geographical base.
02:24 So one thing we have got to know that this you are doing it from your Kattupalli plant in Tamil
02:30 Nadu. So what was the basic reason why you are doing it from here? Is it cost saving or some
02:36 other factors that you are looking at? That is a very good question. We have three yards,
02:39 one is in the west coast of India which is in Hazira, the other is in the east coast of India
02:44 which is Kattupalli and third is in the Gulf coast. So it so happened that each of these yards are
02:49 strategically located. The Hazira one caters to the offshore west coast market, the Suhar-Oman
02:58 caters to the Gulf coast, Gulf Middle East market and the East Kattupalli one is in the east coast
03:05 caters to the eastern area. Australia being on the eastern side of India and has got a straight
03:12 line voyage, it is a natural choice to do it here. Cost wise I think whether it is Hazira or Kattupalli
03:21 are very comparable. So there is no very distinct advantage. The location.
03:25 Second more important reason is that our customer which is Saipem who is the EPC contractor also
03:30 are going to execute this job from their Chennai office. So there is a lot of engineering interface
03:36 which can be easily handled because both yards being in the same, both of locations being in the
03:40 same city provides an advantage. In terms of savings or in terms of cost
03:46 that you were talking about, what is the difference between setting up it in say Kattupalli or in
03:51 Australia? Well I think the major cost is the labour cost. I mean the cost of labour
03:59 is almost as what I am hearing is almost about 7, 8x even more and of course cost of living is also
04:07 much higher. So for every man hour you spend you should technically save that much of,
04:13 I mean that 8x ratio should work but however the productivity also is higher on those places
04:20 compared to us. So all in all net of productivity difference there should be still a saving of about
04:26 2.5 to 3 times. The other thing is from our discussion with the Australian companies
04:32 chairman also, we have got to know that entire focus is now shifting towards India and when
04:38 companies are strategizing for China plus one kind of strategy. So what kind of opportunities
04:43 we can see now coming up and which areas or geographies we can see that?
04:49 Well I think yes China plus one strategy is in play, I mean we are hearing that from many
04:55 customers and India happens to be a good sort of alternative. A is because of very good technical
05:03 capability we have and large resource pool and B also is the language, you know we speak the
05:08 language, English language comes very handy for good effective communication. And so I think,
05:15 I believe that India should gain a larger share if that China plus one strategy plays out properly
05:23 and that should happen. We should benefit from customers in Europe, we should benefit
05:29 from customers from USA and also countries like Australia, New Zealand and Japan. So I think
05:38 it is a good opportunity for us to capitalize from this development.
05:44 Couple of more questions, one on your, since you are heading the energy division and lot of focus
05:49 is there by L&T on green hydrogen also and company is planning to spend some 12 billion dollars in
05:55 next 5 to 6 years out of which one third is what is going towards green hydrogen and renewables.
06:01 So can you give some kind of breakup like you know next 2 to 3 years what kind of investments
06:06 you have planned and in which segments it will go into? Well I think see the initial investment
06:13 which is committed and approved by the board is for electrolyzer that is firm
06:17 and that I think we have said that we will be spending about 500 crores or something like that
06:22 in that order. The second one is will be in the, the big investment will come in the development
06:30 of the assets that will be through the joint venture and as I was explaining the, there is
06:35 little bit of uncertainty in terms of what will be the demand for green hydrogen and how much it
06:41 will generate and also we are looking at export. So it is hard to put exact number but we are
06:47 expecting that in the next one and half two years we will have about 2 billion dollars.
06:51 Over 5 years maybe we will spend 4 billion dollars but in a short term we may be spending
06:56 about one and half to 2 billion dollars. And this will generate how much of hydrogen?
07:00 1 gigawatt, I mean roughly 1 gigawatt if you have to do it from everything like including
07:08 generating the power required for that plus the hydrogen plant and infrastructure.
07:12 So 1 gigawatt will cost about 17,000 crores, 18,000 crores.
07:16 One last question on this recent notification which the government has come out with on
07:22 setting up a standard for green hydrogen of 2 kg of CO2 emission for 1 kg of hydrogen production
07:29 as a threshold. So what kind of clarity and what kind of more details are expected by industry on
07:35 this? Well I think this is still in the very early stage, I mean I have not honestly I have not
07:40 studied that fully and I will need some more time to analyze that but I think it is still early
07:47 stage it is in the consultation phase and I will have to come back on that I am not very sure about
07:55 that. Thank you very much for talking to BQ frames. Thanks.
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