CITY GAS

DISTRIBUTION(CGD)
MAYANK SHARMA
& Team

School of Petroleum
Management,PDPU
INDIA
Natural Gas…..basics
 It is a colorless, odorless gas that burns with a
pale, slightly luminous flame.
 It is the cleanest burning fuel.
 It is composed of :-
 Methane (CH4)
 Lower chain of hydrocarbons (ethane, propane,
butane etc.)
 CO2 (acid gas)
 Hydrogen Sulphide (H2S) (Sour Gas)
 Nitrogen
 Helium etc.
Sources of Natural Gas
 Onshore Fields
 Offshore Fields
 Coal Bed Methane
 Coal Gasification
 Shale Gas
 Gas Hydrates
 Hydrocarbon

Exploration Distillation of
Crude Oil
Natural Gas
Petroleum Gas

LPG

Industrial CNG PNG LNG Household,

NG Auto LPG

Power, Automobile Household,

Fertilizer, Commercial
Petrochemical, ?
Steel

4
City Gas Distribution…..initials
 In late 1990s Apex Courts mandated CNG concept in
Delhi to control pollution.
 GAIL- The pioneer of city gas distribution in India.
 Pilot projects launched in Delhi & Mumbai through
JVs of GAIL with IGL & MGL.
 Ministry of Petroleum & Natural Gas established
PNGRB with effect from 01.10.2007, under the
Petroleum and Natural Gas Regulatory Board Act
2006.
 It provides the legal framework for the development of
the natural gas pipelines and city or local gas
distribution networks.
PNG Supply System
Network Pressure
High Pressure- Steel Pipeline MAOP
Class 150 # : 19 Kg/Cm2
Class 300 # : 49 Kg/Cm2
Medium Pressure- PE Pipeline PE
80 / PE 100
Pressure Range 4 Bar
Low Pressure- GI & Copper
75 Mbar & 21 Mbar
PNG Transportation And Distribution
System
Field Regulating Station
FEATURES

TYPE- TWIN STREAM ACTIVE- MONITOR

REGULATORS WITH SLAMSHUT OF
VALVES AND METER

 INLET PRESSURE . 17 to 32 BAR

 OUT LET PRESSURE . 4 BAR
 DESIGN PRESSURE- 49 BAR
 MAX. FLOW- 5000 / 10000 SCMH

SAFETY FEATURES-

 ACTIVE- MONITOR REGULATION

 OVER PRESSURE SHUT- OFF
 UNDER PRESSURE SHUT-OFF
 PRESSURE RELIEF VALVE
 METER TYPE- TURBINE / RPD WITH FLOW COMPUTER
 Global scenario
• The current scenario in India is CGD has a growth rate of about 8 percent every
year which comprises of around 9 % of the gas industry in India compared to the
24 % growth rate in the world.

• The total share of CNG in India is around 4 % compared to other developing

countries like brazil which has a share of 14 %.

• The emerging CGD markets since 19 65 to 2007 has been Argentina , Brazil ,
India, Bangladesh, UAE, Egypt, Pakistan, Spain.

• Despite the economic crisis a robust growth has been shown in CGD markets in
Argentina and Brazil.

• The key market drivers for CGD in the world are the growth the ROI in India being
around 20 % globally around 13 - 20 %.
 The infrastructure lay out especially in pipelines has resulted in the growth in CGD
globally.

 The CGD caters to the industrial household and commercial markets around the
world.

 The CGD in house holds mainly used for cooking and heating in developed markets
of western Europe.

 However the rise in India in the use of CNG can be observed with 35 retail outlets
and 700000 vehicles running on CNG at present.

 For PNG from 150 cities to 200 cities with investment of 12-13 billion $ in the next 5
– 15 years.

 2000 kms of pipeline infrastructure getting laid especially for household supply.

 In industries globally, high dependence especially steel and power on gas demand
compared to other fuels like oil and crude.

 Consumption in emerging markets has grown enormously over last 30 years Key
factors impacting LDC growth & size.
  Market structure globally
COUNTRIES – Vietnam ,
Project focus
NASCENT
●
Peru , Oman , UAE
●
Integrated monopoly
Initial focus on associated gas
MARKETS
●

●
replacing oil products

COUNTRIES – India ,
Focus on economies of scale
China , South Korea ,
●

GROWING ●

●
Market development
Long-term contracts Egypt , Brazil
MARKETS ●
Exclusive supply & transportation rights for
distributors

COUNTRIES - Japan ,
DEVELOPED ●
Focus on efficiency & prices Western Europe
●
Increasing number of players
MARKETS ●
Choice for Customers
●
Access to transmission and distribution

COUNTRIES - UK USA
MATURE Focus on promoting competition
●

●
Gas-on-gas competition
Governing traded markets
MARKETS
●

●
Deregulation of prices in competitive sectors
  Gas Consumption
Status of the gas industry (1977-2007)

Countries (Bcma)

 Argentina 10.6 - 44 9 regional LDCs, 2 regional transporters and several producers.

Importing small volumes

 Brasil 0.6 - 22 25regional LDCs. One de facto transporter and supplier. Imports

represents 50% of consumption

 India 1.4 - 40 3 LDCs,3 main transporters, several producers emerging.Imports LNG, l

large latent demand.

• Pakistan 5.7 – 31 2 T&D companies. Several producers. Gas shortage. Looking for imports.

 UK 40 - 91 1 integrated transporter and distributor. Several producers and suppliers.

Importing LNG and pipeline gas.

 France 22 - 42 1 integrated transporter and distributor. Imports most of gas consumed

in country.

 Spain 1.6 - 35 1 transporter and several regional LDCs. Imports most of gas consumed
in country

 UAE 3.4 - 43 Several regional transporters and distributors. Importing by pipeline and
LNG Gas shortage.
Gas supply availability
 Firm supplies available
 ToP obligations speed LDC actions
 Gas prices competitive to other fuels
 Environmental policies towards clean fuels

Franchise exclusivity
 In warm climates, franchise should encompass industries for a
limited period
residential demand is too low
 Frequently gas transporter competes with LDC and cherry picks
consumers
 Regulation should allow for liberalisation within defined timeframe

Accelerated network expansion

 Private companies provide capital injection to build up distribution
system
 Permitting and procurement procedures can become bottlenecks

Tariffs remunerate investment

 Adequate rate of return on capital (13-20%)
 Pass-through gas costs vs. bundled prices
Historical Development of CGD in India

15
 List of Existing CGD’s in India
Company Description Operating City
BGL Bhagyanagar Gas Limited JV between GAIL & HPCL, Aug 2003 Vijayawada, Hyderabad
IGL Indraprastha Gas Limited JV between Delhi Government, GAIL & BPCL Delhi & suburbs
GGCL Gujarat Gas Company Limited British Gas Surat, Bharuch, Ankleshwar, etc.
Rajkot, Murbi, etc.
GSPC Gas Gujarat State Petroleum
Corporation Gas Gujarat Govt
GAEL Gujarat Adani Energy Limited Adani Gas Ahmedabad
MGL Mahanagar Gas Limited JV between GAIL, BG and GoM Mumbai and suburb
Agartala
JV between GAIL, Tripura Industrial
TNGCL Tripura Natural Gas Company Development Corporation & Agartala Gas
Limited Company
CUGL Central UP Gas Limited JV between GAIL and BPCL Kanpur, Bareilly
GGL Green Gas Limited JV between GAIL and IOC Lucknow, Agra
AGL Avantika Gas Limited JV between GAIL and HPCL Indore, Gwalior and Ujjain

RGCL Reliance Gas Corporation

Limited Subsidiary of RIL  
Duliajan, Digboy, Tinsukia, Dibrugarh,
AGCL Assam Gas Company Limited Government of Assam Undertaking Naharkatia, Moran, Nazira, Sivasagar etc.
Pune
MNGL Maharashtra Natural Gas JV between GAIL, BPCL, IDFC, ILFS,Axis Bank
Limited and GoM
Current Status of CGD in India
Figures

Natural Gas Consumption in

mmscmd
 Gas availability in India is expected to spur with
several domestic sources commencing production`
Gas available in India (2010-12) Estimated Gas supply (2010-12) in
mmscmd

RAJASTHAN 2010 2012

ASSAM

CBM
 New domestic gas discoveries in KG
CAMBAY TRIPURA
basin are expected to spur domestic
DAHEJ
HAZIRA supply
SOUTH
BASSEIN
 Existing LNG terminals in India are
KG
currently undergoing capacity
expansion furthering the LNG
CAUVERY capacity in the country
 New CBM finds shall also augment
the natural gas supply
With impetus from the Government, the City Gas Distribution
segment is poised for strong growth in
the near future throwing immense opportunities
CGD coverage
 Increase in domestic gas
expected to
supplies would reduce supply
increase to over
constraints
200 cities by 2025
 Regulatory and policy initiatives
to drive growth of city gas
distribution networks

 Greater sensitivity (government /

social) to environmental issues

 Superior cost economics for

Natural Gas with respect to
alternate fuels

 Increased mechanisms for gas

consumption – CNG vehicles,
appliances etc.
Regulatory Agency
 Oil Industry Development Board.
 Oil Coordination committee.
 Gas Linkage Committee

Functions
 Guidelines for Import, Transport ,Storage, Production &
Refining of petroleum
 Provides guidelines for the oilfields and development of
mineral and oil resources.
 It regulates both onshore and offshore upstream activities.
Regulatory Scenario Till 2000
●
No clear guidelines for Natural Gas

Oil Field Act,1948 No regulation for down stream activities

●

Petroleum Rules, Does not provide explicitly for framework for

●

1976 down stream petroleum and natural gas.

New Legislations that changed the face

Salient Features
National Gas
Regulatory Board
-Refining
Ordinance, June
2001. -Processing
-Storage
Common Down
stream regulatory
-Transportation
Board bill ,2002 -Distribution
-Marketing
The Petroleum -Sales of Petroleum, Petroleum
& Natural Gas
Regulatory products and Natural Gas
Board, 2006
 Petroleum & Natural Gas Regulatory Board( PNGRB)

• Protest Consumer Register Entities Jurisdiction

Interest by Ensuring • Market notify petroleum • Retail & Marketing
Transparent Pricing products and natural gas. Powers
service obligation
Mechanism • Establish LNG Terminal. • Display of retail price
Objectives • Establish storage
• Promote Competitive
facilities
market Dispute Resolution
• Enhance efficiency. • Filing a complaint within
Authorize Entities
• Encourage Investment in 60 days of Misconduct
transmission segment of
• Lay, build, operate gas
• Decision within 30 days
Natural Gas distribution network.
• Declare Pipelines as of filing a complaint
• Facilitate dispute
resolution contract carrier.
• Regulate & Access Punishment
contract carrier to as per • Operating without
the pipeline access code. registration
• Ensure Availability of •Continuing Contravention
Gas
Issues
 Jurisdiction of Centre v/s State
 Form of Regulation.
 Structure of the Industry
 Form of Access to Pipeline Infrastructure.
 Transmission Tariff
The Natural Gas market in India is influenced by two
key factors at present
1 Gas
Gas Availability
Availability

Various
Various Natural
Natural Gas
Gas
sources
sources production
production
coming
coming online
online

More
More Natural
Natural Gas
Gas
source
source finds
finds in
in near
near
future
future

2 Infrastructure
Infrastructure for
for gas
gas
transport
transport

 Pipeline
Pipeline transmission
transmission
network
network –– trunk
trunk lines
lines

 Local
Local pipeline
pipeline networks
networks

New domestic supplies are expected to fuel significant growth in Natural Gas
consumption in India - Robust growth expected in all gas consuming sectors
CGD - Marketing

Main Market Market

Application Scenario Nature

●
Domestic ●
Marketing
●

●
CNG
Commerci ●
Exclusivity
Limited
●
B2B
al Market ●
B2C
●
Industrial ●
Monopoly
Objectives
 To identify new customers and educate
them benefits of Piped Natural Gas.

 To explore new customers in industrial

and commercial segments in the region
by marketing research activities.
Marketing Research Initiatives
Marketing Research
Existing Isolated Potential Area
Major Industrial Hubs
Cluster of Major & Mini Industrial Estates

Interaction with Probable Customers

One 2 One
Industrial Association

Demand Assessment
Segment wise Demand
Categories of I & C Customers
 Strategy for Customer Acquisition
 Scope Clarity
 Payback Calculation
 Advantages of PNG
 Alternative Fuel Parity
IGL financial review
 Challenges in CGD Business
1. Need of creating vast CGD network with
accelerated pace, commensurate to wide
public demand

2. Developing safety standards CGD specific and

developing & multiply their monitoring by the
third party

3. Developing & multiplying core competence of

skilled manpower to handle the operations in
cities after cities

4. Meeting public expectations;

• Cheaper fuel / competitive prices by

multi operators

• Easy availability anywhere

• Foolproof safety everywhere

• Expectations are to be met by the

Government, by Regulator & by CGD
operators
Challenges in CGD Business

5. Proper understanding of regulatory act

& mechanism to avoid contradictions
for synergy with the objectives:

• Logical clarity in the regulations

to manage contradictions for win-
win situation

• Common understanding of the act

to be read as a whole to make it
effective & workable for the public
good

• Natural justice appear to prevail

for comparing equals with equals
and not with un-equals

• Too much control not to dampen

the spirit of free competition
 Challenges in CGD Business

6. Regulatory systems to have:

• Gas availability / allocation to all

CGD entities, which are not gas
producer or marketer

• Gas purchase pricing for CGD at

affordable price for public good

• Single window clearance from

various statutory bodies

• Sharing of resources like

equipment, inventories at
reasonable prices

• Pipeline connectivity from

pipeline infrastructure provider
Challenges in CGD Business

7. Prioritization of what is expected of

CGD:

• CNG – PNG – Industrial segments

8. Regulatory controls looked to be

facilitator of expansion:

• Keeping public good in view, even

limited monopoly of entity for a
limited period may not be bad, so
also by the existing proven track
record CGD companies for
meeting public expectations fast

• But abuse of monopolistic attitude

is bad for which regulator is
empowered to control & check
 Opportunities in CGD Business

1. More than 200 cities may be

implemented with CGD Projects with
investments of Rs. 20,000 Cr. plus in
next 5-15 years

2. Gas demand anticipated – 30 to 40

mmscmd

3. Approx. 20,000 direct jobs & more than

lakhs of indirect jobs

4. Developing CNG corridors along with

national highways

5. Growth to national exchequer by high

revenue earning, attractive returns to
investors and less expensive & clean
fuel to the public
Opportunities in CGD Business

1. Various Stakeholders in CGD Business:

 Gas Suppliers
 CGD infrastructure developing
entities/ operators
 Consultants: Feasibility Report,
Basic Engg., Project Management,
Network Design…..
 Equipment Manufacturers:
Pipelines, Fittings, Compression &
Dispensing Equipments, CNG Kit
Suppliers, CNG Cylinder
manufacturers/ suppliers, NGV
Manufacturers
 Contractors: Pipeline execution,
plumbing, CNG station
construction, tubing
contractors…..
 Users: NGV users, Households,
Commercial corporations,
Industrial users…..
 Government/ Exchequer
 Statutory Authorities/ Civic Bodies
 Financial Stakeholders/ Investors
Recommendations
 Proper gas pricing formula
 Importance to infrastructure
 Policies to attract foreign investment &
technology
 Separate board for upstream & downstream
 Simplified procedure for merger with foreign
companies
Role of a Manager
  Directing the project team to ensure that their responsibilities to attain objectives of organization
for execution of respective project. Consulting assignments are met as per planned
targets keeping in view long term and short term plan.

Analyze and appraise regularly and systematically the effectiveness of all technical aspects for
execution of projects and ensure regular compliance of all obligations as per project requirement.

Coordinate project assignment. Monitor the various assignments being executed under Project
department.

Initiate programs that need to improve quality and overall efficiency of the department with respect to
execution of various project assignments.

Be fully involved in the elaboration of various reports and documents.

Carryout studies for site selection, plant layout, feasibility of project.

Review and evaluate contracts and acquisition related to technical matters

Formulation of project /departmental budgets.

Co-ordinate with Engineering Department for project execution.