Views of D.K. Sarraf

“Gas is going to be the preferred fuel across industries and consumers”

The city gas distribution (CGD) segment has witnessed a plethora of noteworthy developments in the past few years. More than 150 new geographical areas (GAs) have been awarded over the past two years, particularly under the ninth and tenth rounds of bidding. Further, the Petroleum and Natural Gas Regulatory Board (PNGRB) has taken a number of positive regulatory steps to address industry concerns. At a recent conference, “Gas in India”, organised by India Infrastructure, D.K. Sarraf spoke about the existing CGD infrastructure, the augmentation plans, key initiatives, changes due to the outbreak of Covid-19, and the PNGRB’s future plans. Excerpts…

Current infrastructure and augmentation plans

Gas is becoming the preferred fuel in India and globally, as it is cleaner and cheaper than competing fuels. Ironically, gas accounts for just 6 per cent of India’s primary energy mix, against the global 24 per cent. No wonder our government has the ambitious target of increasing this share to 15 per cent by the year 2030. Considering the growth in overall energy use over the years, India has to increase the consumption of gas to three and a half times of its current level to achieve the target. Adequate infrastructure support in terms of pipelines, liquefied natural gas (LNG) import terminals, CGD facilities, etc. is thus required to achieve this ambitious target.

The prospects of the CGD segment have also improved in the past couple of years. Currently, the country has a total of 230 GAs, as compared to just 76 two years ago. Besides, the percentage of the population with access to the CGD network has increased significantly, from 17 per cent to 71 per cent over a span of two years. Due to considerable commitment made by the bidders in the ninth and tenth CGD bidding rounds, the number of domestic piped natural gas (PNG) connections will rise from 6 million to around 50 million in the next six years. The number of compressed natural gas (CNG) stations will also increase from the current 2,300 to 10,000.

With respect to trunk pipeline infrastructure, the PNGRB has plans to increase the operational network from the current 17,000 km to 35,000 km in the next three to four years. In the past two years, around 9,000 km of pipeline network has been authorised. These pipelines will primarily pass through areas that currently have either zero or very low pipeline density. Meanwhile, authorisation for the Jagdishpur-Haldia-Dhamra pipeline has been granted. The project has also received viability gap funding from the government. The authorisation to lay this pipeline has since been extended till Guwahati. This major pipeline will thus cover various districts in Uttar Pradesh, Bihar, Jharkhand, West Bengal, Odisha and Assam. In another development, authorisation for the Mumbai-Nagpur-Jharsuguda cross-country pipeline, with branch lines to Jabalpur and Raipur and covering the states of Maharashtra, Madhya Pradesh, Chhattisgarh and Odisha, has been awarded to GAIL.

Authorisation for the 1,656 km Northeast Gas Grid, which aims to provide natural gas to the eight north-eastern states, has been granted to a consortium of public sector undertakings. In the meantime, GAIL’s Kochi-Mangaluru pipeline has almost been completed and will be ready for commissioning soon. Similarly, the progress on GSPL’s Mahsana-Bathinda and IOCL’s Ennore-Tuticorin pipelines is also encouraging.

Infrastructure for handling the import of LNG is also expanding in the country. Against effectively only two terminals in the past, namely, Petronet LNG Limited’s (PLL) Dahej and Shell’s Hazira terminals in Gujarat, the country is now significantly enhancing its LNG import capacity. GSPL’s Mundra terminal in Gujarat and IOCL’s Ennore terminal have been commissioned; PLL’s Kochi terminal (Kerala) will now be effectively utilised after the commissioning of the Kochi-Mangaluru pipeline; and the capacity of GAIL’s facility at Ratnagiri may also be increased. Besides this, H-Energy’s Jaigarh (Maharashtra), Swan’s Jafarabad, HPCL-Shapoorji’s Chhara (Gujarat) and Adani’s Dhamra (Odisha), among others, are all at different stages of construction.

“The regulatory authority has identified the GAs as well as the regulatory changes for the eleventh CGD bidding round.”

A string of initiatives

The PNGRB has initiated several gas market reforms. One such initiative, which is in fact a package of reforms, is establishing a gas trading exchange. This is going to be an electronic platform where buyers, sellers, producers and importers will meet and trade in natural gas. The exchange is expected to be instrumental in transparent discovery of gas prices, boosting the confidence of energy consumers in gas as an excellent fuel alternative, boosting gas consumption, increasing the capacity utilisation of pipelines, conserving the country’s precious forex, and saving the environment.

To enable efficient functioning of the gas exchange, several other reforms are being simultaneously launched in the gas market. These include a unified tariff, which would make gas affordable in far-flung areas; the Gas Access Bulletin Board, an online system showing the available capacity in the gas pipelines in real time, thus resolving buyers’ concerns about non-availability of capacity in the pipelines; and the standardised gas transportation agreement (GTA), which ensures fair terms to both transporters as well as shippers. The regulatory authority also plans to enable LNG trade on the exchange. This is expected to integrate the LNG import market with the gas market and also enable the CGD GAs that are not yet connected to gas pipelines to buy LNG from the exchange and supply it in their GAs, either as LNG or gas. Another step taken by the PNGRB to increase the share of gas in the transport sector is facilitating the setting up of LNG stations by any entity anywhere in India, irrespective of whether the area has been authorised for CGD or not. Clarifications have been issued by the PNGRB on the same.

PNGRB is also working with an international consultant to assess the demand for natural gas in various areas in India in the years up to 2040, and thus determine the additional gas pipeline requirement across various regions. This is going to be a major step in the development of infrastructure in the country.

“The gas trading exchange is expected to be instrumental in transparent discovery of gas prices, boosting gas consumption, increasing the capacity utilisation of pipelines, conserving the country’s precious forex, and saving the environment.”

Steps taken to deal with the Covid-19 scenario

The Covid-19 pandemic has been considered a force majeure event by the PNGRB. In a recent development, it has approved the guidelines to be followed by entities in case of force majeure events. These guidelines are expected to be available on the regulator’s website soon.

The way ahead

The regulatory authority has identified the GAs as well as the regulatory changes for the eleventh CGD bidding round. PNGRB is keeping a watch on the situation in light of the Covid-19 pandemic and the bidding process for the round will soon be initiated as the position improves.

Going forward, fertiliser companies can buy natural gas on the upcoming gas exchange. These companies can either become members or trade as clients of members, like other buyers on the exchange.

GET ACCESS TO OUR ARTICLES

Enter your email address