Module : 1 - City Gas Distribution Business Perspective

•Introduction : Fast Growing emerging

economies are driving growth in global
natural energy demand. In India, The
manufacturing, commercial, domestic
and transportation sector has created a
large natural gas market. By
conducting bidding rounds and
providing GAs, Govt. organizations like
PNGRB are making great effort to
increase this business.
 NATURAL GAS AND ITS
PROPERTIES
Natural gas is one of the most important energy sources for the future and a clean fuel with
less carbon dioxide than oil. Natural gas is clean, nontoxic, odorless, colorless fuel.
Natural gas is used as a low carbon cooking fuel and transportation fuel. Natural gas demand
has increased significantly in recent years due to the increase in the development of
transmission and distribution infrastructure. Natural gas primarily consists of methane gas.
 It burns with blue flame
 Natural gas is about 40% lighter than air.
 The density and boiling point of natural gas is 0.717 kg/m3 and – 161.60°C respectively. It
has a high ignition temperature of 580°C.
 Natural gas have a flammability range of 5-15% mixture in air. It has a high calorific value of
a about 950-1150 BTU/Ib.
 Natural gas Is harmless to human body, but it may lead to asphyxiation (Suffocation) in
confined space.
 Table 1.1: Physical and Chemical Properties of Natural Gas
Malecular Formula CH₄
NATURAL GAS AND ITS PROPERTIES
Molecular weight of mixture 18.2
Boiling Point at 1 atmosphere -160.0 °C
Melting Point -180.0 °C
Vapor density (Air =1) at 15. 5 0.61
Liquid density (Water =1) at 0°/4 °C 0.554
Expansion ratio 1 liter of liquid becomes 600 liters of gas
Table 1.2: Typical composition of Natural Gas
Water solubility at 20 °C Sightly soluble (0.1 to 1.0%)
Sl. No. Name of the constituent Chemical Formula Percentage
Appearance and Color Colorless, odorless and tasteless
1 Methane CH₄ 70-90%
2 Ethane C2H6 0-20%
3 Propane C3H8 0-20%
4 Butane C₄H₁₀ 0-20%
5 Carbon Dioxide CO2 0-8%
6 Oxygen O2 0-0.2%
7 Nitrogen N2 0.5%
8 Hydrogen Sulphide H2S 0.5%
9 Water H2O Traces
10 Rare Gases A, He, Ne, Xe Traces
 NATURAL GAS SOURCING

NATURAL GAS IS DOMESTIC GAS APM & NON APM – THE VOLUME OF LNG LNG PRODUCES IF SPILLED, LNG
FOUND IN VARIOUS DIVIDED INTO 2 (ADMINISTRATIVE IS 600 TIME LESS THAN RELATIVELY LOW WOULD NOT RESULT
FORMS VIZ. DOMESTIC CATEGORIES PRICE MECHANISM) NATURAL GAS. EMISSION WHEN IN A SLICK BECAUSE
GAS (APM/NON-APM), BURNED TO HEAT AND 100 PERCENT OF IT
LIQUEFIED NATURAL COOL HOMES, EVAPORATES, LEAVING
GAS, GAS FROM GENERATES NO RESIDUE. WHEN
HYDRATES, COAL-BED ELECTRICITY AND EXPOSED TO THE
METHANE, SHALE GAS POWER VEHICLES. ENVIRONMENT, LNG
AND BIOGAS. RAPIDLY EVAPORATES,
LEAVING NO RESIDUE
ON WATER OR SOIL.
Evolution of CGD in India
In 1857, Piped coal gas distribution started in Kolkata by OGCL -
Oriental gas company Ltd., for Industry & Domestic consumers. In
1960 taken over by west Bengal Govt. in 1987, all asset and
operations was transferred to Greater Calcutta Gas supply co. In
1900’s Bombay Gas started gas supply from coal gasification but
was later shut down by 1935 due to environmental concerns.

In 1950’s, Vadodara Mahanagara Seva Sadan (VMSS) developed

PNG network for domestic households in the city of Vadodara-
Gujarat.
Assam Gas co. ltd. Established in Assam in 1962 owned by Assam Govt.
in 1980, British Gas (BG) group established Gujarat Gas company Ltd.
For developing CGD networks in the city of Surat and Bharuch-Gujarath.
In 1990, Tripura Natural Gas corporation Ltd (TNGCL) Started PNG
network in Agartala (Tripura). In mid-1990’s Gail formed 2 JVs with
other companies, namely, IGL & MGL for developing CGD networks in
Delhi and Mumbai respectively.

In 2005, GSPC Gas Co. Ltd, established by Gujarat. In the past few
years, Adani Gas Ltd. has established its CGD network in Gujarat,
Haryana and UP.
• Who are main players in Natural gas for sourcing & terminals in
India..?
 •1. HAZIRA LNG : Terminal capacity of 5 MMTPA

NATURAL GAS •Rs. 3000 crore Hazira LNG terminal and port facilities
•Regarded as a key FDI project and represents one of the largest international
SOURCING Table investments in India in the energy sector.
•Hazira LNG terminal was the first to introduce Spot LNG supplies into India.
1.3
Terminals which are •2. PETRONET LNG Ltd., Dahej
•Southeast Asia’s first LNG receiving and regasification terminal with original capacity
existing, under of 15 MMTPA at Dahej, Gujarath.

construction, •Terminal meets almost 40% of India’s gas requirement and around 80% of LNG
imports in the country.
planned and
•3. GSPC LNG, Mundra
proposed in India. •Jointly promoted by Gujarat State petroleum corporation Ltd (GSPC) & Adani
enterprises Limited (AEL)
•India’s largest LNG import terminal with an initial capacity of 5 MMTPS expandable to
20 MMPTA located at Mundra.
•Mechanical completion of LNG terminal is schedule to be completed by last quarter of
2016
•Plant expected to commission in 1 st quarter, 2017.
•India's annual gas consumption (Domestic production + imports) is 0.73 TCF and 80%
of India's energy demand is met through imports.
 Sl. No. Terminal Developers Capacity (MMTPA)

EXISTING TERMINALS
1 Dahej Petronet LNG Limited 15.0
Table 2 Hazira Royal Dutch Shell, Total Gaz Electricite 5.0

1.3: LNG 3
4
Dabhol
Kochi
GAIL, NTPC
Petronet LNG Limited
5.0
5.0

terminals 5 Ennore Indian Oil Corp. TIDCO

Total Existing
5.0
30.0
in India UNDER CONSTRUCTION
1A Dahej Expansion Phase II Petronet LNG Limited 2.5
6 Mundra GSPC, Adani 5.0
Total Under Construction 12.5
PLANNED
7 Kakinada APGDC 2.5
8 Dhamra Adani 5.0
9 Jafrabad (FSRU) Swan, Exmar 5.0
10 Jaigarh H Energy 2.5
Total Planned 15.0
PROPOSED
11 Gangavaram Petronet LNG Limited 5.0
12 Kolkata Port H Energy 2.5
13 Chhara HPCL & Shapoorji Palanji 5.0
14 Krishnapatnam LNG Bharat 2.5
Total Proposed 15.0
• What are the major growth drivers & cautions in CGD ?
• What are the limitation ?
 Growth Drivers and Inhibitors

Along with the growth drivers there are some inhibitors

There are various growth drivers for CGD business which
which are required understand the limitations of CGD
helps in innovative changes in this industry like:
business and which can be overcome like:
• Need for CGD players to enhance operational efficiency • Policy and regulatory risks
by reducing gas leakage, monitoring pressure flows, and • Legal risks
tracing operations • Increase in competence of alternate fuels,
• Accurate mapping of CNG and PNG supply networks • Emerging trends such as electric vehicles
• Integration of collected information with other systems • Risks with regard to domestic gas availability.
and portals
• Continuous government focus under initiatives such as
Smart Cities Mission; stringent regulations focusing on
network and asset management
• Growth of data- driven industries and analytics
• Technological developments and advancements in
network and asset management systems.
There are various key issues and challenges related to CGD sector in
various domains which are as follows;
• Irrational bidding by CGD entities – To secure bids, CGD players suppress their overall input
costs and submit low network charges. Low compression charges were mentioned by
player, this caused huge delays in authorization and expansion o CGD operations in Indian
cities.
• Delays in securing multiple clearances (The current systems NHA, MC & PWD etc needs
much time & efforts)
• Lack of well-defined market potential – (High execution risks associated with huge capital
expenditures and slow pace of pipeline build up, low scale- up of sales, low customer
penetration, and high cost of providing last- mile connectivity adversely affect the viability
of CGD projects.)
• Entity barriers – High entry barriers in the form of high initial investments and fixed costs,
long gestation period, and issues pertaining to buying or leasing land for CNG station make
it difficult for new players to enter the industry. Another significant barrier to entry
tightening of gas availability that forces new players to increase dependence on LNG
imports.
• Deficient pipeline connectivity – In terms of regional distribution of CGD operations, the
western region dominates due to its proximity to the existing pipeline network.
 The institutional framework in the CGD industry comprise various governmental
bodies overseeing the exploration, production, transportation and distribution
of gas. The function and details of each organization is described as follows:
1 Ministry of Petroleum and Natural Gas (MoPNG) – is the nodal ministry for
coordinating all activities related to gas sector value chain, including exploration,
production, transportation, distribution, marketing, export, import and

Licensing conservation.
2 Petroleum and Natural Gas Regulatory Board (PNGRB) – is an independent

Regime and
regulatory body overlooking the downstream gas segment. Its looking after the
awarding of licenses for laying and operating CGD networks, enforces service
obligations, sets technical standards, monitors prices, etc.

Institutiona 3 Petroleum Planning and Analysis Cell (PPAC) – Before formation of PNGRB the
PPAC was involved in drafting of a policy for CGD networks. At present, the cell

l maintains up to date information on important parameters relating to the CGD

sector.

Framework 4 Oil Industry Safety Directorate (OISD) – The Oil Industry Safety Directorate
(OISD) stipulates several codes and standards which need to be followed by CGD
operators in the design, construction and operation CGD networks.
5 Directorate General of Hydrocarbons (DGH) – Regulates the upstream gas
industry. It carries out functions such as licensing, investment promotion and
monitoring of overall activities in the upstream segment. Its regulation and
control over this segment indirectly influences the amount of gas supplied to the
CGD sector.
Gas Allocation Principals By MoPNG

In November 2013, as per the directives of the Gujarat High Court, MoPNG issued guidelines by which GAIL
was directed to supply gas to CGD entities across the country at a uniform rate for sale to households and
automobiles. In February 2014, the central government announced 100% allocation of domestic gas towards
the CNG and PNG segment of CGD entities an upward revision from the earlier allocation of 80%. It's
impacted the noncore sector of the economy.
The Key policy of MoPNG are given below:
1. Gas Allocation Policy – MoPNG
2. Gas Pricing Policy
3. Policy for Developing Gas Pipelines and CGD networks
In a further notification to the guidelines in June 2017, MoPNG has directed that contractors will have to
ensure a transparent and competitive process for sale of gas, with the objective of realizing the best possible
price for all parties, without any restrictive commercial practices.
1.Help Regime
Under HELP, oil companies can select blocks of their choice under this Open Area Licensing (OAL) regime.

Under NELP exploration of hydrocarbons was limited only to the blocks which have been put on tender by the
government.
In March 2016, the Union Cabinet approved the Hydrocarbon Exploration and Licensing Policy (HELP), which comprises
four key reforms for the oil and gas sector namely, uniform license, open acreage, revenue sharing and marketing and
pricing freedom.

Under HELP a uniform license will be given to companies for explorations and production of all forms of hydrocarbon
reserves such as oil, gas, shale gas and coal bed methane.

The uniform license will thus enable contractors to explore conventional as well as unconventional oil and gas resources
under a single license.

To encourage E&P (exploration, development and production) lower royalty rates as compared to NELP have been
provided keeping in mind the higher risks and costs involved in E&P from offshore areas.

The new policy expected to significantly enhance oil & gas production, improve transparency and reduce administrative
discretion and the possibility of micromanagement by the government. This is expected to create global interest in Indian
oil & gas basins.

https://www.eia.gov/energyexplained/oil-and-petroleum-products/offshore-oil-and-gas-in-depth.php
 PNGRB and Its Regulations
• PNGRB in 2008 lay down guidelines for tariff determination by CGD operations.
• In 2012 PNGRB made amendments to the existing tariff for PNG consumers, which helps LMC last mile connectivity charges not
payable. Will be considered as the entity's property and it will be required to maintain them, entities have been allowed to
collect refundable interest free security deposits.
• PNGRB’s Authorising entities to lay, build, operate or expand city or local natural gas distribution networks regulations, 2008
provide the required criteria for authorising a CGD network to operate in a GA.
Recent amendments
• In December 2015, a clause was added which barred entities which have penalised under section 28 or chapter IX of the PNGRB
Act, 2006 during the one year preceding the last date of submission of bids from participating in the bidding.
• In the case of a tie the original regulations state that entities will have to submit an additional bid bond amount, and the entity
with the highest bid bond amount will be declared as the successful bidder. The 2015 amendments add a further clause to this
direction, by stating that the entity declared successful will have to submit the quoted additional bid through written
communication, failing which the bond will be encashed or fortified and a similar opportunity will be provided to the entity
which quoted the next highest bid bond amount.
• The 2015 amendments also state that the board may exceed the time of period for submission of Performance Bond by 15 days.
Failing to submit the bond beyond this point will deem the letter of intent as withdrawn or cancelled.
• Other important regulations : CGD sector include Technical Standards and Specifications including Safety Standards for city or
Local Natural Gas Distribution Network, 2009; Access Code for city or local natural gas distribution Network Regulation 2011;
Integrity Management System for city or LNGD Network 2013 and 2015.
Proposed Regulations for LNG
• PNGRB has released draft regulations called Technical Standards and
Specifications including safety Standards for Retail Outlets dispensing
Petroleum, Auto LPG and CNG Regulations, 2016 for CNG and other
all variants.
• Technical Standards and Specifications including safety standards for
LPG storage, Handling and Bottling Facilities Regulations, 2016 have
also been released by PNGRB.
• The preliminary focus on safety aspects of the employees, public and
facilities associated with LNG terminals.
Other Proposed by Regulations by PNGRB
• Regulation to Determine Transport Rates for CGD Network and CNG-
• Enhancing Production of Existing Fields
• Proposed Initiatives to Ease Bottlenecks
Table 1.4: Current CGD Network Size

PNG Connections - Domestic 49,28,163

PNG Connections – Commercial 27,364

PNG Connections – Industrial 8,354

CNG Stations 1,508

Pipeline Infrastructure (Inch-km) – Steel 48,362

Pipeline Infrastructure (Inch-km) – MDPE 1,09,178

Current Focus
 CGD Bidding Rounds
The CGD bidding process is initiated once the entity
intending to lay, build, operate or expand a CGD
network submits and Expression of Interest (EOI) to
PNGRB.
PNGRB evaluates the EOI based natural gas
availability position and possible connectivity with an
existing and proposed pipeline and possible supply of
LNG through tank, trucks and CNG via cascades.
PNGRB either invites public consultation by open
advertisement or rejects the EOI giving reasons for the
rejection within fifteen days of the EOI submission,
owing to public consultation process, PNGRB decided
on the authorized area for the proposed CGD
network.
Till now 11 bidding rounds have been completed
where in 11th bidding more than 50 GAs are offered,
covering 124 districts and around bids 289 received
from more than 25 entities.
GAs offered and entity authorized is given in following
section (as per available data)
 Pricing Strategies of CGD
Players
According to New Domestic Natural Gas Pricing a. Internal factors including
1. Internal & external factors gas sourcing – domestic Vs
Guidelines, 2014, the Wellhead gas price P is considered while setting the imported, network operating
calculated as : PNG and CNG prices. cost, customer expectations
and long-term returns.

b. External factors includes prices

The current natural gas pricing
of alternate fuels and prices fixed
policy in India is dependent
by competitors, taxes and duties,
upon consumption and prices of
government policies, exchange
natural gas in countries like USA,
rate and crude prices, allocation of
Mexico, Canada, Europe, and
gas- domestic and PNGRB
Russia.
guidelines.

The price of imported LNG is not The major development in

regulated by the government and terms of long-term LNG
is market determined based on the contracts was the
source of cargo, sourcing of LNG renegotiation of the contract
can be done through spot cargos, between India’s Petronet LNG
which are short time contracts of and Qatar’s Ragas. The
long-term contracts which are renegotiated contract has been
spread over a period of 20 years. in effect since January 1st 2016.
 Indian CGD Key Players

Mahanagar Gas Indraprastha

Gujarath Gas Adani
Limited Gas Limited

Maharastra Assam Gas Tripura Natural

Sabarmati Gas
Natural Gas Company Gas Company
Limited
Limited Limited Limited

Atlantic Gas and

Central UP Gas
Gail Gas Limited Pacifica (AG&P) Think Gas
Limited
Pratham
Recent update reff.

HTTPS://ENERGY.ECONOMICTIMES.INDIATIMES.COM/NEWS/OIL-AND-G HTTPS://PIB.GOV.IN/PRESSRELEASEIFRAMEPAGE.ASPX?PRID=1811907
AS/FORMER-PETROLEUM-SECRETARY-TARUN-KAPOOR-TO-BE-NEW-OIL- 11TH BIDDING
REGULATOR/89336004
Movie clip:
• https://www.youtube.com/watch?v=9h1zn7l86HA
Thanks