How H-Energy is plotting an energy abundant future for India.

“You’re talking about petrol that goes into a car. It goes into vehicles, people’s homes, businesses, everything. It is shockingly price sensitive, and even more so as far as global events are concerned. It’s not about the cooking gas price in India, it’s about how cold the winter was in America, how much gas they consumed, did a non-gas based source power plant shutdown, was there a nuclear accident and then prices jumped because people switched over,” he says,

“A developer picks a period and gets into a project, always assuming that there will be demand for property at a certain price. In oil and gas, you could have a day that the price you’re selling is less than the cost of production and it has nothing to do with the actual gas price. You could have regulators one day preferring gas because coal is bad one day holding gas back to support EVs. So you live in a very sensitive and risky world that requires you to be alert and awake all the time.”

The bit about being a property developer is something India’s fastest growing liquefied natural gas (LNG) provider knows a thing or two about. Before diving into oil and gas as the CEO of H-Energy, Hiranandani tried his hand at Dubai’s real estate market, a four-year phase of his life that began in 2003 and resulted in 23 Marina, the pencil-shaped 90-storey tower in one of Dubai’s most sought-after residential districts.

Real estate, however, didn’t inspire any passion in Hiranandani. He’s always been a man that appreciated the deep technicality of a practice. At Rochester Institute of Technology in New York, he graduated with a degree in science. And while both real estate and the energy industry can very closely resemble a dhanda (best described as a business that you have to get your hands dirty in) the latter, which he dived wholeheartedly into in 2010, affords the kind of purpose that a man like Hiranandani craves.

“Energy abundance provides quality of life. And if you can’t provide energy then you can’t improve people’s lives. Everybody talks about infrastructure and roads, but if you can’t get better trucks on them then what is the point. Getting sanitation into people’s homes is a major problem, but those sanitation systems don’t work without energy. So if you want to improve people’s lives, make energy available,” he says.

Hiranandani is cognisant of the fact that big belief needs to make a large-scale impact to justify itself. And his major gamble is that “for the next 50 years, the energy source with the lowest carbon impact will continue to be natural gas.” It’s why he chose his native India to be the test bed for his grand plan. “India has a huge need for energy. And there is no future for people in India unless we can make a lot of energy available to them,” he says.

The world’s fifth largest GDP by nominal value is already energy efficient per capita but that’s because it uses too little, according to Hiranandani. “So to me wanting to get into the gas game was about providing an energy solution that created a very large impact.”

Getting H-Energy to where it is today has been a process of trials and tribulations that included sinking $60m in a power plant facility because more homework needed to be done before Hiranandani was able to get to the heart of how India’s LNG market operated.

“Between 2011 and 2013 I was trying to operate a power plant. I had everything ready and had even decided on a construction deadline. I even had a power purchase agreement lined up, but I couldn’t get gas to operate it. This was because there were two large players in India that had the capacity I needed, and who had blockaded me because they insisted I buy gas based on their prices which were linked to crude oil. My power purchase agreement was linked to coal, because up to 70 percent of power in India came from coal. I also couldn’t import any gas from traders willing to deal with me because both those players operated the only gas terminals and refused me third party access.” he says.

So what did Hiranandani do? “I built my own terminal.”

“Basically, we needed to think of what was required to supply gas to our customers in India in various models linked to their business needs, such as selling energy linked to ammonia prices that farmers could then use. We could then go out in the world, buy that and bring it here. So our first objective, and my only objective, is to supply to my customer. And in the process we’ve become the builders of strategic infrastructure in the industry in India,” he says.

To understand how H-Energy has done over the last decade needs to be explained in the context of how successful Darshan Hiranandani’s father, Niranjan Hiranandani is in India. A former accounting teacher, over roughly four decades, the founder of the dynasty has created a property empire that counts him among India’s top ten developers.

He’s worth more than $1.23bn and has built a whole 250 acre city in the family name on the outskirts of Mumbai with several more underway.

Since the younger Hiranandani decided to venture into the energy industry, the family has committed to pumping in upwards of $800m into the business. H-Energy today is on the verge of completing one LNG terminal in 2019 and is on the way to complete two more energy terminals by mid-2021, and is working on constructing over 900 kms of gas pipelines in Maharashtra, Goa, Karnataka and West Bengal.

“It is a big diversification of the group. If it succeeds in the way he (Darshan) plans to do, in five years’ time, he will be bigger than me in terms of volume of turnover at least,” Niranjan Hiranandani said in an interview last year.

Creating a business that could direct an entire dynasty’s future is a thought that does inspire some pride in the younger Hiranandani. But he’s careful to seem too eager about it.

“I don’t think that’s very important. It may be true sooner or later, but let me put it this way, I don’t want to make X or Y amount of money,” he says. “I just want to make sure that whatever I do makes enough money so I can move on to the next thing. And right now, the reality is that there is a lot of opportunity in the gas space.”

H-Energy is creating its own spinoffs too

Darshan Hiranandani’s vertical integration has seen him set up a trading office out of Dubai where H-Energy’s traders bring down the cost of procuring LNG for its terminals by optimising shipping costs.

“The trade entity has a very important role to play because we want to provide the safest, most reliable and most efficient or economical infrastructure. So if I’m getting gas for cheap in the US, it will still cost me a lot of money to ship it all the way to India. I’ve got a 30-day roundtrip 47 days, lead time, and a full ship that comes to India will need to go back empty. Meanwhile, from Oman to India, it will take me just three days. So we save on shipping by selling that into the UK, then buying it from out here.

Could this separate business ever become a revenue generating unit under H-Energy? “It could, but that’s not our goal right now. Our current goal is to make it cheaper for us to ship gas into India. In the future, there might be further room for it to grow if we decide to take our LNG business into East Africa.”

The first steps into and out of real estate

Hiranandani went to school in Rochester, New York, at the RIT and studied science. When done, he moved back to Mumbai to work with his father, whom he calls “my best friend”.

However, a few months into working together, there was a “friction” that emerged in the working relationship between father and son. In March 2003, they decided to take a break and holiday in Egypt while transiting through Dubai. The two had dinner with Abdullah al Ghurair who asked the elder Hiranandani why he hadn’t considered developing property in a booming Dubai?

“Two days later, my father asked me ‘Why don’t you go to Dubai?’ I was 23 years old and I gave it some thought and asked my father how much money he was prepared to lose. At the point he offered me what was the equivalent then of AED22m. In June, I came to Dubai where Abdullah Al Ghurair said he’d be our local sponsor to take care of any issues and would put in the same amount in the business. In August I had my residence visa,” says Hiranandani.

“So I went around and found a plot in the Marina which an Emirati seller said he would part with for AED50m. I offered to pay him AED2m the next day and more every three or four months. And I said I’d pay him AED57m because he was agreeing to deferred payments,” he adds.

“We sat in some parking lot of some shady café in Deira where I signed the deal on the back of a car’s trunk. I gave him a cheque for AED2m and he said he wanted to cash. So I went back to Standard Chartered asked them to cash the cheque for me and went back to that place to pay him. And I never saw him again after that. He got my cheques on time and I guess he was happy,” Hiranandani continues.

That’s the property that the 90-storey 23 Marina stands on. The plans for the building were delayed for every possible reason including a recession, according to Hiranandani, after his contractor went bankrupt because of a liquidity crisis where a lot of entities that he worked with weren’t able to pay him.

“One morning after it was all complete I woke up and thought I’m done. I had done extremely well. I returned my father’s cash with interest four years after I had borrowed it from him. But it’s not where my heart was,” he says. “And that’s when I started looking at what could make a bigger impact into people’s lives.”

Why LNG?

In his own words, Hiranandani explains why LNG will remain the ideal “battery” to power the world’s future

For the next 50 years the lowest carbon footprint fuel will still be natural gas. It has a lower carbon footprint than renewables when you consider all that goes into (and is spent in terms of carbon) to manufacture a solar cell, for instance. Same goes with electric energy.

In two minutes the amount of energy that reaches from the Sun to the Earth is enough to power the whole Earth for two hours. Each and every energy source is directly or indirectly powered by the Sun. This also goes for fossil fuels which are just fossilised carbon from all the matter that has been compressed over the years. For example, an oil field is basically a lake where the carbon component was primarily all the fish and formerly living material in it. Over millennia, it became oil, the vapors of which became gas, and the hardest part, coal. Now to create energy, the first thing we need to figure out is how to collect the sun’s energy most efficiently. Solar technology in its current form is still not the answer. We take up a lot of land when we build solar parks, and there’s a cost component in terms of carbon and silicon when manufacturing the cells. They’re also not very efficient, and that’s why we still need to keep washing the solar cells because if there is dust on them, they can’t collect any energy.

The second major consideration is how to create the right battery. And that’s where natural gas comes in. Because what is natural gas, oil, diesel, coal, after all? They are all batteries. They are stores of energy.

Now, every battery has side effects. The lithium batteries used to power phones have side effects when they are disposed because the lithium is toxic. But in my opinion, unless technology evolves faster than I can imagine, natural gas will remain the most environmentally friendly battery.

Will it get overtaken? It will, and I hope it does get overtaken. But that’s still a long way away. I don’t believe those batteries will be lithium, iron or cobalt. The new batteries will be hydrogen. And our same infrastructure systems will ultimately use hydrogen. It’s why there are currently parallel programmes, attempting to blend natural gas with hydrogen. It’s still not there yet, but it’s very likely that will be the way of the future.