Indian Oil Corporation Ltd, Refinery HQ, Scope Complex, New Delhi 

Demand analysis and selection of city for CGD network establishment on proposed Dadri-Panipat (RLNG) pipeline  

(Report submitted in partial fulfilment of Masters in Business Administration (MBA) in Oil and Gas )  

Subodh Maithani, 8/1/2008

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DECLARATION

I, Subodh Maithani, hereby declare that the project titled “Demand analysis and selection of city for CGD network establishment on proposed Dadri-Panipat (RLNG) pipeline” is an original work done during my organization training as component of Masters in Business Administration (MBA) in Oil & Gas Management of University of Petroleum and Energy Studies, Dehradun from June 2, 2008 to July 31, 2008 with Indian Oil Corporation Ltd.  

Place: Delhi

Date: July 31, 2008 (Subodh Maithani)

Class of 2009

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EXECUTIVE SUMMARY

Amidst increasing prices of crude oil and increasing environmental concerns Natural Gas has been considered as one of the possible solution to the predicament. Many steps have been taken all around the globe to combat the situation created by diminishing Oil reserves. Cross border pipelines have now become so fissile and feasible to lay just because of the seriousness of the existing energy conditions.

In India, several steps have been taken in an order to curb the energy scarcity out of which introduction of NELP rounds, NGH Programme, CBM exploration programme and harnessing of renewable sources of energy are commendable. Similarly, on the front of downstream operations steps have been taken for making easy availability of natural gas to the common people. The study on demand analysis and selection of city for CGD network establishment on proposed Dadri-Panipat (RLNG) pipeline also covers on e of the major portion of the City gas Distribution laying process.

The study covers the current scenario of Oil and Gas industry with a brief introduction to the sources and existing statistical figures of Crude Oil and Natural Gas. It also covers the CGD structure in detail and provides an easy access to the CGD network processing.

The study encapsulate the rationale and current status of proposed RLNG pipeline of IOCL and carry out SWOT analysis of the organization regarding the City Gas Distribution network establishment. It also calculates the potential demand of Natural Gas in probable areas and cities.

The study proposes few suggestions regarding the marketing of Natural Gas and comes out with a conclusion about the city selection for establishment of CGD network on the basis of demand figures and some external factors.

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ACKNOWLEDGEMENT

The summer training at Indian Oil Corporation Ltd. (IOCL) had been a great exposure and learning for me of working in a professional corporate environment. I take this opportunity to express my gratitude to Mr. Manish Grover, Sr. Manager (BD-Gas Marketing), IOCL for providing me this opportunity to undertake this study assignment “Demand analysis and selection of city for CGD network establishment on proposed Dadri-Panipat (RLNG) pipeline”.

Though the subject was difficult, but with the dedicated support and guidance from Mr. Manish Grover, IOCL helped me in delivering the best.

I would also like to thank Mr. Alok Kumar Roy, Dy. Manager (BD- Gas), IOCL, my reporting officer, for his continuous guidance and motivation all through the study.

There are many people who have contributed to the success of my study, I would like to acknowledge my sincere thanks to ICICI officials especially to Mr. Pankaj Mathur, Mr. Aqueel Ahmad, Ms. Seema Dikshit Venkatesh, Mr. Suman Kumar Mishra. Mr. Rajendra Sharma, Mr. Kuldeep Verma, Mr. Navneet, Mr. Jayant and Mr. Praveen Kumar for providing their valuable inputs and time.

I am also thankful to Mr. Indra Prakash, Chief Marketing Manager, Green Gas Ltd. I am indebted to University of Petroleum and Energy Studies (UPES), Dehradun for providing me an opportunity to work on this study.

Last but not least, I thank my family and friends for their moral support.

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TABLE OF CONTENTS

 

DECLARATION .............................................................................................................................................. II 

 

EXECUTIVE SUMMARY ................................................................................................................................ III 

 

ACKNOWLEDGEMENT ................................................................................................................................. IV 

 

LIST OF FIGURES .......................................................................................................................................... VI 

 

CHAPTER 1 ................................................................................................................................................... 1 

 

CHAPTER 2: NATURAL GAS ......................................................................................................................... 3 

 

CHAPTER 3: CITY GAS DISTRIBUTION .......................................................................................................... 12 

 

CHAPTER 4: INDIAN OIL CORPORATION LTD. .............................................................................................. 24 

 

CHAPTER 5: DADRI‐PANIPAT PIPELINE PROJECT .......................................................................................... 26 

 

CHAPTER 6: HARYANA (HRY) ...................................................................................................................... 29 

 

CHAPTER 7: UTTAR PRADESH (U.P.) ......................................................................................................... 35 

 

CHAPTER 8: REGULATIONS ......................................................................................................................... 46 

 

CHAPTER 9: SUGGESTIONS AND CONCLUSION ............................................................................................ 60 

 

ANNEXURE1. REFERENCES .......................................................................................................................... 63 

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LIST OF FIGURES

Figure 1. LNG Supply Chain ..................................................................................................... 6 Figure 2. Interstate Gas Grid Envisaged by GAIL .................................................................... 7 Figure 3. Proposed route for IPI and TAPI pipelines ................................................................ 9 Figure 4. Distribution of Organic Carbon in Earth reservoirs to total Organic Carbon(18776.6 Gigaton ..................................................................................................................................... 10 Figure 5. Indian Gas Chain ..................................................................................................... 12 Figure 6. Segment size and profitability ................................................................................. 14 Figure 7. Process description of CNG network ...................................................................... 16 Figure 8. CNG process network............................................................................................... 19 Figure 9. Haryana ..................................................................................................................... 29 Figure 10. District map of Panipat ........................................................................................... 30 Figure 11.Estimated industrial demand distribution of NG for Panipat district ..................... 31 Figure 12. Estimated Industrial demand Distribution of NG in Sonepat District ................... 33 Figure 13. Estimated Industrial demand distribution of NG in Baghpat district in year 2012-13.............................................................................................................................................. 36 Figure 14.Estimated industrial demand distribution of NG for Meerut district ...................... 39 Figure 15. .Estimated industrial demand distribution of NG for Ghaziabad district .............. 41 Figure16.Estimated industrial demand distribution of NG for G.B. Nagar district ................ 43 Figure 17. Estimated industrial demand distribution of NG in Bulandshahr district ............. 44 Figure 18. Procedure for cancellation of exclusivity ............................................................... 57

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CHAPTER 1

1.1 INRODUCTION

The study titled “Demand analysis and selection of city for CGD network establishment on proposed Dadri-Panipat (RLNG) pipeline” was intended to zero potential areas for Indian Oil Corp. Ltd. in the possible and prolific state of Haryana and Uttar Pradesh and finding out the best possible way to implement the CGD network. The study also provides an insight on the selection procedure of a District/City for the establishment of CGD network on a proposed pipeline and the rationale behind the selection. Promoting increasing and extensive consumption of Natural Gas in Indian cities, the study provides a profitable channel to the company to achieve desired goals with the fulfillment of its social commitment towards the citizens of the state itself.

1.2 OBJECTIVES

The objective of this study can be stated as:

• To elaborate the CGD network establishment process; • To analyze the sales potential in different parts of state of Haryana and Uttar Pradesh

along the Dadri-Panipat pipeline; • To establish a study coherent to the existing work in an order to strategically

implement the CGD network in the prolific state; • To provide an insight into the selection criteria of the city/district for CGD

establishment and; • Suggesting some of the possible methods to be considered while making of the

implementation strategy.

1.3 METHODOLOGY

The study was a desk based research. Information on various aspects related to demand for Natural Gas was collected through various reliable sources. Data regarding the existing demand from IOCL senior decision makers is collected via e-mails and personal contact. Though, due to non-disclosure policy of the organization not much of the information was made available.

1.4 STRUCTURE OF THE REPORT

Chapter 2 introduces Natural Gas (NG) as a fuel of future in terms of its available resources and benefits associated with it.

Chapter 3 gives an overview of the city gas distribution network with appropriate examples

Chapter 4 talks about the Indian Oil Corp. Ltd and its interest in CGD network establishment. It also include SWOT analysis of IOC in terms of CGD network.\

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Chapter 5 briefly introduces Dadri-Panipat RLNG pipeline project and covers the rationale and current status of pipeline laying process.

Chapter 6 covers the state of Haryana and two of its districts in order to ascertain the demand of natural gas in those districts, covering Industrial, CNG and PNG demand.

Chapter 7 talks about Uttar Pradesh (UP) as one of the option available to the IOC Ltd. for CGD network establishment and calculates the estimated NG demand for 6 cities.

Chapter 8 deals with the regulations laid down by PNGRB board, mandatory to any entity interested in laying pipeline.

Chapter 9 comes out with conclusion and key learnings from the study.

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CHAPTER 2: NATURAL GAS

2.1 INTRODUCTION

Natural gas is a mixture of hydrocarbon gases and is a colorless, odorless fuel, environment friendly energy source, which burns cleaner than many other traditional fossil fuels. It is highly flammable hydrocarbon gas chiefly consisting methane CH4 and on the basis of the concentration of methane it is also termed as Dry and Wet gas. In addition to it natural gas may also include other gases such as oxygen, nitrogen, hydrogen, ethane, ethylene, propane and even some helium. As far as its occurrence is concerned it occurs deep below the surface of the earth in three principal forms- associated gas, non-associated gas and gas condensate. Associated gas is found in crude oil reservoirs, either dissolved in the crude oil or in conjunction with the crude oil deposits while Non-Associated gas occurs in reservoirs separate from crude oil wells. It is also termed as dry gas. Gas Condensate is the hydrocarbon liquid dissolved in saturated natural gas that comes out of solution when pressure drops below dew point. Natural gas is used mainly in the industrial, commercial, transportation, and domestic sectors out of which power and fertilizer sector consume maximum amount of natural gas in India.

Natural Gas occupies about 8.5% of the total energy basket of the country which is much lesser than the world average of 24%. However, the scenario is fast changing, largely because of the expected increase in the availability of natural gas in the country. The structure of primary energy consumption in India shows that coal (51%) still dominates as the major energy source. Hydrocarbon (45%) is the next available energy provider of the nation. Natural gas is fast emerging as an alternative; it meets around 9% of the primary energy needs. Considering the global trend of shift in energy axis from oil to gas, the share of gas in consumption pattern, in the Indian context is expected to increase gradually in the days to come.

2.1.1 Applications of Natural Gas

Natural gas is used by the end user in different ways as per need. The various ways or applications of natural gas in industry as well as household needs are:

1. Natural gas as a fuel in electricity generation by utilities; 2. Natural gas as a clean fuel in cooking and household needs in the form of Piped

Natural Gas (PNG); 3. Natural gas as a fuel for the boilers, furnaces, baking ovens and air conditioning in

Industries; 4. Natural gas as a motor fuel in the form of Compressed Natural Gas (CNG) and; 5. As a petrochemical and fertilizer industry feedstock.

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2.2 SOURCES AND SUPPLY

Natural gas in India is available through different channels. The two conventional ways of sourcing natural gas are:

1. Exploration and production activities in India itself. 2. LNG supplies from different parts of world.

In addition to the above mentioned sources and supply modes some other means are also followed by the Govt. of India in an order to ensure future energy securities which are:

1. Coal Bed Methane to ensure the availability of gas through large coal reserves available in the country itself.

2. Transnational NG pipelines (eg. Turkmenistan-Afghanistan-Pakistan-India pipeline, Iran-Pakistan-India pipeline etc.)

3. Natural Gas Hydrates Programme (NGHP) is employed in order to evaluate NG hydrate resources and the possible ways to exploit them.

4. Underground Coal Gasification Programme.

2.2.1 Exploration and Production (E&P) sector of India

The E&P activities were promoted with the introduction of New Exploration and Licensing Policy (NELP I) in 1997 which became effective in year 1999. So far 6 NELP rounds have been successfully undertaken in which 162 shallow water, deepwater and onland blocks are awarded to the National Oil Companies (NOC), PSUs, JVs and other foreign exploration companies. The initial discoveries of Cambay basin, Mahanadi basin and Krishna Godavari (KG) offshore were found to be interesting enough to promote more and more NELP bidding rounds. Similarly, significant discoveries were also made in Rajasthan. As per the draft utilization Policy-2007 of GoI E&P activities accounts for nearly 36% of total estimated demand for the current year and it is supposed to increase in the coming future. Recently NELP-VII was introduced with attractive offers and regulations which will definitely enhance the E&P activities associated with the gas production. According to the sources GoI is committed to offer exploration blocks in coming years and in the next five years, area under exploration for Indian sedimentary basins is expected to increase from 44% at present to 80%. By 2015, whole sedimentary basin area is planned to be brought under exploration. Currently the Indian gas industry is eyeing on the supply from Reliance KG basin block which will start supply of 8 MMSCMD of natural gas from the second half of the year 2008.

2.2.2 LNG supply scenario in India

With the growing energy demand and the current state of energy deficienc, LNG came out as a boon for a country like India. From the current statistics it can be easily inferred that the future of Indian energy scenario heavily depends on the LNG supplies. The current gas availability position from various sources in country is as follows:

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                                                                                                                                         (in MMSCMD) Source   Present ONGC/OIL  53 Pvt./ JVs  20 Total Availability  73LNG imports by PLL (long term1)  18 Spot LNG2  05 Grand Total  96 Table 1. Gas Availability Position in India (Source: Draft Paper on Utilization of Natural Gas- India-2007)

Since gas supplies through spot cargoes depends on the international market conditions, India is focusing on the development of other gas terminals with long term contracted LNG supply in addition to existing terminals of Dahej, Hazira and Ratnagiri. Similarly, consideration about the estimated demand increase lead to the selection of Kochi and Mangalore for development of LNG regassification/liquefaction terminals which will start its operations from the year 2010-11 and 2011-12 respectively. The overall LNG projections associated with the vision are3:

LNG Supply source 

2007‐08  2008‐09  2009‐10  2010‐11  2011‐12 

Dahej  5.00  5.00  7.50  10.00  10.00 

Hazira  2.50  2.50 2.50 2.50 2.50 

Dabhol   1.20  2.10  5.00  5.00  5.00 

Kochi   ‐‐‐‐‐‐  ‐‐‐‐‐‐ ‐‐‐‐‐‐ 2.50 2.50 

Mangalore  ‐‐‐‐‐‐  ‐‐‐‐‐‐ ‐‐‐‐‐‐ ‐‐‐‐‐‐ 1.25 

Total LNG supply (MMTPA) 

8.70  9.6  15  20  21.25 

Total LNG supply (MMSCMD)  

30.45  33.60 52.50 70.00 74.375 

Table 2. . LNG Projections (Source: Draft Paper on Utilization of Natural Gas- India-2007)

Currently Dahej PLL is the major regassification terminal of India having long term contract of 25 years with RasGas of Qatar for the supply of 5 MMTPA of LNG but with the advent of a more active spot LNG market Shell Hazira regassification plant also came into existence in an order to maintain the LNG supplies in the country.

1 Long term contract is one of the types of contract usually signed by the customer with the supplier in an order to ensure LNG supplies for a long period of time. 2 Spot LNG is the LNG produced in excess of contractual arrangements &, therefore, available for sale outside these long term contractual arrangements. 3 Hazira expansion plan to 5.00 MMTPA is not considered in the 11th plan while Mangalore terminal will partially be commissioned in year 2011-12.

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Figure 1. LNG Supply Chain

The above figure shows the normal LNG supply chain network which comprises of different facilities for the whole setup. In order to ensure perfect distribution to the end user a robust pipeline network is required which is still a major challenge to India. Currently India has a domestic gas pipeline network of 10500 km with current pipeline density of 116 km/MMSCMD. The total domestic gas pipeline network of India in comparison to some other countries is shown below:

Country   Domestic gas pipeline network (in km) 

Domestic gas pipeline density  (in km/MMSCMD) 

USA  18341138  1086 UK  265155  1016Germany  230448  1015 Italy  171699  975 France  155943  1405Pakistan  56400  1044Spain  16295  319 India  10500  116 Table 3. Comparison of Gas Pipeline Network (Source: assocham.org, press release, May 5, 2008)

In order to cope with the inefficiency generated due to inefficient pipeline infrastructure PSUs started working on the pipeline laying work and contributed significantly in its development. The HVJ and DVPL pipelines are the best example of the pipelines laying ability of the PSUs. The map shown below describes the interstate gas grid envisaged by GAIL in year 2006 which was focusing on the coverage with a pipeline with a length of 1500 km.

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Figure 2. Interstate Gas Grid Envisaged by GAIL (Source: Corporate Presentation on National Gas Pipeline and LNG by Mr. B.S. Negi (Dir. BD, GAIL India ltd.) on October2006)

The vision of GAIL generates a pipeline network of 15204 km length. Some of its projections were based on the effective establishment of transnational pipeline (eg. Myanmar-Bangladesh-India) which ensures the commitment of GoI in bringing Natural gas from external sources.

Sl. No   Description   Pipeline Length (km)  

1   HVJ Pipeline (HVJPL   2700 

2   Dahej‐Vijaipur P/L project (DVPL)   610  

3   Dahej – Uran P/L Project (DUPLP)   474  

4   Dabhol‐ Panvel P/L Project  (DPPLP)   322  

5  Vijaipur –Kota Mathania (Rajasthan Sector) 565

6   Dadri‐ Nangal P/L Project (DNPLP)   572  

7   Kakinada‐Pune ‐Uran P/L project (KUPLP)   1024  

8   Kakinada–Chennai P/L project(KCPLP)   580  

9   Dabhol‐ Bangalore–Cannai P/L Project (DBCPLP)  1100 

10   Dahej‐Jamnagar‐Porbandar P/L Project (DJPPLP)   685  

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11   Jagdishpur‐Haldia  P/L project (JHPL)  876 

12   Vijaipur‐Auraiya –Jagdishpur P/L Project (VAJPLP)   571  

13   Kakinada –Haldia  P/L Project (KHPLP)   1037  

14   Kochi‐ Kanjjirkkod – Mnagalore  425 

15   Bangalore‐ Coimbatore – Kochi  440 

16   Chennai‐ Tuticorin   550 

17   Hyderabad‐ Vijaipur   1100  

18   Myanmar‐India Border to Gaya  1573 

  Total Pipeline Length  15204 

Table 4. Description of Envisaged Gail Pipeline Network (Source: Corporate Presentation on National Gas Pipeline and LNG by Mr. B.S. Negi (Dir. BD, GAIL India ltd.) on October 2006)

2.2.3 Upcoming Resources

1. Coal Bed Methane (CBM): Coal Bed Methane (CBM) is NG found in coal beds and used for a variety of purposes that range from domestic, commercial, industrial to electrical power generation. Other gases that may exist in coal gas deposits in trace amounts are ethane, propane, butane, carbon dioxide and nitrogen. Coal Bed Methane (CBM) is natural gas found in coal beds and used for a variety of purposes that range from domestic, commercial, industrial to electrical power generation. In 1997 Indian government formed a CBM policy that established the Ministry of Petroleum and Natural Gas as the CBM administrative agency. Key elements of that policy are:

• No upfront bonus. • No signature bonus. • No participating interest of the GoI. • CBM development blocks awarded through a competitive bidding process. • A 7 year tax holiday, beginning with the date of commercial CBM production. • Freedom to market in domestic market at market determined prices. • Imported equipment for CBM development exempted from customs duty

(DGH, 2004-05).

In May 2001, the Indian government for the first time offered blocks for exploration and production of CBM through an international bidding process. Reliance Industries, Essar, and ONGC won the bids for the blocks. The government launched a second round of bidding on nine CBM blocks in May 2003. Eight blocks were awarded to Reliance and ONGC. The third bidding round of CBM blocks was offered in February 2006 in which GoI offered 10 blocks. Out of these, two blocks each were located in the States of Andhra Pradesh, Chhattisgarh, Madhya Pradesh & Rajasthan and one block each in Jharkhand & West Bengal.

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2. Transnational Pipelines: With the growing demand of NG as 21st century fuel the need of laying transnational pipeline from the neighbouring gas rich countries was experienced. Since pipelines provide natural gas at a lower cost than in other modes they are much more preferred than other competitive modes of transporting natural gas. Geographically, India is flanked by large gas reserves to the East, West and North and thus strategically located to meet its natural gas requirements through transnational pipeline. These sources include the leading countries in terms of their proven gas reserves, viz., Iran (15% of world’s reserves) and Qatar (14% of world’s resources). Similarly, Bangladesh and Myanmar on the Eastern side, and the Central Asian Republic of Turkmenistan in the North hold substantial gas reserves. Considering that the Indian gas markets, especially those in the Northern and Eastern parts of the country are at economic pipeline distance from regional gas reserves, there is a price advantage of gas imports through pipelines vis-à-vis LNG route for these markets, and therefore, all possibilities including need to be explored for import of natural gas through pipelines. In these TAPI Gas Pipeline and IPI Gas pipelines are the possible opportunities. The primary purpose of both the pipelines is to fulfill the requirement of Gas deficit Northern India & Pakistan.

3. Natural Gas Hydrates: A gas hydrate is a crystalline solid; its building blocks consist of a gas molecule surrounded by a cage of water molecules. Thus it is similar to ice, except that the crystalline structure is stabilized by the guest gas molecule within the cage of water molecules. Many gases have molecular sizes suitable to form hydrate, including naturally occurring gases such as carbon dioxide, hydrogen sulphide, and several low-carbon-number hydrocarbons, but most marine gas hydrates that have been analyzed are methane hydrates. The reasons for increasing efforts in the part of Methane Gas Hydrates are:

• It contains a great volume of methane, which indicates a potential as a future energy resource.

• It may function as a source or sink for atmospheric methane, which may influence global climate

• It can affect sediment strength, which can initiate landslides on the slope and rise.

• The worldwide amounts of carbon bound in gas hydrates is conservatively estimated to total twice the amount of carbon to be found in all known fossil fuels on Earth.

Figure 3. Proposed route for IPI and TAPI pipelines

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specialized core repository is also being constructed in Panvel, Mumbai for storing all the valuable gas hydrate cores for future studies.

2.3 ADVANTAGES OF USING NATURAL GAS

Natural Gas offers multitude of advantages pertaining to the environment as well as the energy efficiency. Some major advantages or benefits that it offers are:

1. It is a clean, efficient, safe and environment friendly fuel hence offer more efficiency without sacrificing the environmental concern;

2. It does not required storage yard as the gas is directly delivered to the pipeline hence offer less chances of any mishap due to storage leakage and spillage of storage tanks;

3. There is no risk of breakdown in fuel supply due to order processing delays to replenish the fuel inventory;

4. It minimizes the manpower and mechanical power required for handling the fuel; and, 5. In terms of the current global oil scarcity it offers the advantage of being the most

efficient and profitable alternative fuel.

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CHAPTER 3: CITY GAS DISTRIBUTION

3.1 INTRODUCTION

With the growing concern about environmental aspect GoI started CNG rollouts in cities suffering from increasing pollution. The CNG demand got a boost with the Supreme Court directive on pollution reduction in 12 major cities in India and hence provided a platform to a highly ambitious sector of City Gas Distribution in cities like Delhi. Mumbai, Surat, Lucknow etc. Various organizations like GAIL, IOCL, BPCL, GGCL entered into this sector by forming JVs with other players and provided the sector the necessary thrust it deserve.

The CGD network caters to the supply of Piped Natural Gas (PNG) to domestic Households (HH) & small commercial/industrial establishments & CNG to automobile sector. Considering CGD as the last milestone of Indian gas chain lot of efforts has been done by various players and GoI to ensure last mile connectivity of gas which has been substantial in the current decade.

Figure 5. Indian Gas Chain (Source: GGCL Investors Meet, March27, 2008)

With the introduction of PSUs in all of the sectors of the Indian gas chain the gas chain has become more structured and organized. Currently major oil PSUs like Indian Oil Corporation Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd are providing substantial support in all parts of the gas chain with the formation of JVS like Green Gas Ltd (GGL) in Lucknow & Agra, Indraprastha Gas Ltd (IGL) in Delhi-NCR etc. With a vision to empower most of the cities and the citizens by providing access to natural gas oil PSUs are coming up with more plans on CGD network development.

The demand pattern (Gas) zeroed by the Ministry of Petroleum and Natural Gas (MoPNG) in its Draft Paper on Utilization of Natural Gas-2007 for CGD network is as follows:

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Year  Estimated Demand of Natural gas (In MMSCMD) 

2006‐07  11.00 2007‐08  12.082008‐09  12.93 2009‐10  13.83 2010‐11  14.80 2011‐12  15.83Table 5. Estimated Demand Pattern of NG in CGD Networks (Source: Draft paper on utilization of natural gas in India-2007)

Considering the above stated projections for the growing demand of NG it has been evident that the CGD networks are going to get a special place in the Indian national government policies. The table shown below will show the picture of estimated NG demand on a macro level and will provide the comparative analysis of demand increase in CGD sector with respect to the other sectors.

Sector wise Gas Demand Projections 2007‐12 (in MMSCMD)   2007‐08  2008‐09  2009‐10  2010‐11  2011‐12 Power  79.70 91.20 102.70 114.20  126.57Fertilizer  41.02  42.89  55.90  76.26  76.26 CGD  12.08  12.93  13.83  14.80  15.83 Industrial  15.00  16.05  17.17  18.38  19.66 Petrochemicals/Refineries/Internal Consumption 

25.37 27.15 29.05 31.08  33.25

Sponge iron/Steel  6.00 6.42 6.87 7.35  7.86 Total  179.17  196.64  225.52  262.07  279.43 Table 6. Source: Draft paper on utilization of Natural Gas in India-2007

  2008‐09  2009‐10  2010‐11  2011‐12  Average Percentage increase 

Power  14.43 12.60 11.19 10.83  14.70Fertilizer  4.56  30.33  36.42  0.0  21.481 CGD  7.03  6.96  7.01  7.0  7.76 Industrial  7.00 7.00 7.04 6.96  7.76 Petrochemicals/Refineries/Internal Consumption 

7.01 7.00 6.99 6.98  7.76 

Sponge iron/Steel  7.00  7.00  6.99  6.94  7.76 Table 7. Percentage increase in estimated gas demand in different sectors

The above drawn tables show that the projections are based on the estimated 7.0 percent growth rate in sectors other than power and fertilizers. The inference that can be drawn easily is that while the demand in power and fertilizer sectors will grow sharply because of more and more requirements and introduction of CCGT (Combined Cycle gas Turbine) plants in power sector the development work in establishing the CGD networks will be done in a consistent and phased manner.

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The consumers of NG via CGD network are classified into different categories based on their capacity and end use. They are broadly classified as:

Serial No.  Type of Consumer  Description 

1  Domestic consumers  Consumers  demanding  NG  for  cooking  as  well  as  for heating water etc. 

2  Commercial consumers While  Hotels,  Restaurants,  Sweetshops,  Hospitals, Offices etc. would primarily require gas  for the Cooking and Hot Water requirement, there are  large number of applications within such segments that can use gas.   

3  Industrial consumers   Industrial  Consumers  are  classified  in  two  primary categories, the Large Scale  Industries  (LSI) & Medium & Small Scale Industries5 

4   Transport Sector  Transport  Sector  need  NG  for  the  transportation purpose  and  catered  through  the  development  of Compressed Natural Gas stations network.  

All four types of consumers consume different amount of Natural gas in performing their operations. They need NG via different channels and the form in which they receive NG is also different (like automobiles receive it in the form of CNG while domestic HH receives it in the form of PNG) leading to a different prices for them and creates a different margin with each MMSCMD of gas supplied to them. In a nutshell, the profitability reduces from commercial consumer to bulk consumer. The picture shown below will establish the relation between some major factors considered while developing CGD network in a city.

Figure 6. Segment size and profitability (Source: GGCL Investors meet, March27, 2007)

5 The Large Scale Industrial units demand (more than 50,000 SCMD) would be supplied gas from trunk pipeline i.e. Steel Grid at relatively higher pressures as compared to the other industrial segment while The Medium & Small industrial units demand (less than 50,000 SCMD) would be met from distribution network having a mix of Steel & Poly-Ethylene pipes depending on the need of the consumer in terms of pressure as well as volume of Gas required.

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3.2 COMPRESSED NATURAL GAS (CNG)

Compressed Natural Gas, in short CNG is nothing but Natural gas compressed for the use of transport sector. Due to its low density, it is compressed to a pressure of 200-250 kg/sq. cm to enhance the vehicle on-board storage capacity. Principal constituents of NG are Methane and Ethane, but most gases contain varying amounts of heavier hydrocarbons that are normally removed by processing. After recovery of the heavier hydrocarbons, the remaining gas, known as lean gas, is returned to the pipeline system. Natural gas is drawn from pipeline system for compression and distribution as CNG. Predominantly Methane is available in the lean gas; hence CNG contains mostly methane (normally not less than 85%).

CNG is one of the safest fuels as it has a high auto-ignition temperature of about 540 degree centigrade and a very narrow range of flammability (i.e. 5% to 15%). In other words, if CNG concentration in the air is less than 5% or above 15%, it will not burn. Further, it is lighter than air and in case of any leakage, natural gas will go up in the air and chance of any ignition is remote.

3.2.1 Types of CNG stations

CNG stations are of four major types depending upon the structure and operations:

1 CNG Mother Stations: Mother Stations are connected to the pipeline and have high compression capacity. These stations supply CNG to both vehicles and daughter stations through mobile cascades 6 . The Mother Station requires heavy investment towards compressor, dispensers, cascades, pipelines etc.

2 CNG Online Station: CNG vehicle storage cylinders need to be fitted at a pressure of 200 bars. Online stations are equipped with a compressor of relatively small capacity, which compresses low-pressure pipeline gas to the pressure of 250 bars for dispensing CNG to the vehicle cylinder.

3 CNG Daughter Station: The Daughter Stations dispense CNG using mobile cascades. These mobile cascades at daughter stations are replaced when pressure falls and pressure depleted mobile cascade is refilled at Mother Station. The investment is least among all types of CNG stations.

4 CNG Daughter-Booster Station: Installing a booster compressor can eliminate drawbacks of daughter stations. The mobile cascade can be connected to the dispensing system through a booster. Daughter booster is designed to take variable suction pressure and discharge at constant pressure of 200 bars to the vehicle being filled with CNG.

The diagram shown below represents the actual flow of NG from trunk pipeline right up to the end user.

6 Mobile cascades are cylinders mounted on a vehicle to transport CNG from mother station to daughter and daughter-booster stations.

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Figure 7. Process description of CNG network (source: corporate presentation by A.K. De, IGL)

3.2.2 Design parameters for CGD network

Pipeline pressure  Specifications Main transmission grid line pressure (High Pressure System) = 14‐19 bar, Steel Distribution/Service line pressure  (Medium Pressure System) = 4 to 1.5 bar, MDPE Domestic connection pressure  (Low Pressure System) = 21 mbar, GI Installation Supply pressure (large commercial consumer)  2 bar Supply pressure (small commercial consumer) 300 mbar 

CNG dispensing facilities specifications Inlet Pressure: 14‐19 Kg / cm2

Outlet Pressure: 255 Kg/cm2

 

Cascade capacity specifications4500 liters of water / cascade (around 31 cylinders)= 500 kg 2200 liters of water / cascade (around 31 cylinders) = 350 kg 

 

Average filling capacity (in kg) Bus  80 Car  8 Auto  3.5

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Total filling cycle time per vehicle (in minutes) Bus   8Car   4 Auto  2 Table 8. Specifications related to the CGD network

3.2.3 Characteristics of CNG vis-à-vis Petrol

The quantity of CNG filled by the dispenser during refueling also depends upon pressure at the dispensing station. At maximum permitted filling pressure (200 bar), an amount of 8/9/10 Kg CNG is stored in 40/50/60 liter size cylinders respectively which is equivalent (approximately 11.2/12.5/14 liters of petrol equivalent. However the gas quantity depends on ambient condition and actual fill pressure.

Since CNG is a gaseous fuel, storage capacity for CNG in a vehicle is comparatively less than that of petrol. A Fuel switch on the dashboard is fitted to enable the vehicle to run on petrol, in case it runs out of CNG. CNG has a much higher-octane value than petrol, making it a superior fuel. Due to absence of any lead content in CNG, the lead fouling of plugs is eliminated. Being a gaseous fuel, CNG mixes with air easily even at very low temperatures.

Main features distinguishing CNG from Petrol and Diesel are:

Properties  Unit  CNG Petrol Diesel Liquid specific gravity 

‐‐‐  ‐‐‐  0.74  0.84 

Heat of evaporation 

BTU/lbs  ‐‐‐  160  200 

Density relative to air 

Air = 1  0.6  3.4  3.9 

Auto ignition temperature 

0C  540  232‐282  225 

Flammability limit  % in Air  5 – 15  1 – 8  0.6 – 5.5 Flame temperature 

0C  1790  1977  2054 

Octane no.  ‐‐‐  127  87  ‐‐‐ Cetane no.  ‐‐‐  10 10 45 Table 9. Comparison of CNG with respect to Petrol and Diesel

3.2.4 Economies of CNG

The energy content per Kilogram (Kg) of CNG is very similar to that of petroleum based fuels, but it has lower energy content per unit of volume. The excellent knock resisting property of CNG allow use of a higher compression ratio resulting in an increased power output and greater fuel economy when compared to petrol. CNG can be used in engines with a compression ratio as high as 12:1 compared to normal gasoline (7.5:1 to 10:1). At this high

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compression ratio, natural gas-fuelled engines have higher thermal efficiencies than those fuelled by gasoline. The fuel efficiency of CNG driven engines is about 10-20% better than diesel engines.

Use of CNG in vehicles results in higher mileage per unit due to its superior characteristics. The cost of CNG is also very competitive to that of petrol and diesel. Following table depicts the price advantage of CNG vis-à-vis other petroleum fuels currently being used in vehicles.

FuelPrice (Delhi) per Kg

Mileage (km per unit)

Cost per Km (in Rs)

Annual expenses

Petrol 50.62 18 2.81222222 98427.78Diesel 34.86 14 2.49 87150Auto LPG 16.5 0 0CNG 18.2 25 0.728 25480

Economies of CNG car

Table 10. Average distance traveled is 100 km/day. 350 operational days in a year

FuelPrice per unit (Delhi)

Mileage (Km per unit) Cost per Km

Annual expenses

Diesel  34.86 4 8.715 915075CNG 18.2 4.4 4.13636364 434318.1818

Economies of CNG bus

Table 11. Average distance traveled is 300 km/day. 350 operational days in a year

It’s been evident from the above shown table that CNG offers more mileage and since per unit price of CNG is lesser than the price of petrol and diesel in most of the cities the savings get more escalated. In a nutshell, CNG offers more savings with better mileage in comparison to other competitive fuels.

3.3 STRUCTURE OF CGD NETWORK

Setting up of a CGD network is a big task in itself in terms of management of public private interest. It is not only a matter of distribution and marketing of the product it is also about creating a feeling of security in the mind of prospective customers. PNGRB board has provided the guidelines in the form of its “Draft Paper on Access Codes” which has clearly mentioned the responsibilities associated with the transporter and shipper making things more clear to both parties. The essential elements of a CGD network are:

1. Steel grid pipeline

2. City Gate Station (CGS)

3. District Regulating Station (DRS)

4. CNG stations

5. Service Regulator (SR)

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All of the above mentioned facilities are directly related to each other and thus have a deep impact on the functioning of the whole CGD network. As far as the cost is concerned the establishment of these fundamental facilities bring major cash outflow to the distribution company. The networking is defined as:

Figure 8. CNG process network

The above figure shows constituents of an effective CGD network where each unit perform its job to ensure the proper working of the system. A brief description of some of the units mentioned above is given below:

1. City Gate Station: The point where custody transfer of NG from high / medium pressure transmission pipeline to the CGD network takes place.

2. Distribution Pressure Regulating Station/ District Regulating Station: “Distribution Pressure Regulating Station or District Regulating Station (DPRS)” means a station located within authorized area for CGD network having isolation, metering, pressure regulating and overpressure protection devices.

3. Service Regulator: It reduces the gas pressure from 4 BAR to 100 mBAR and ensures the flow of gas at constant pressure at all time.

4. Meter Regulator: Installed before the meter, the meter regulator reduces the gas pressure from 100 mBAR to 21 mBAR.

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3.4 INDRAPRASTHA GAS LIMITED (IGL)

Indraprastha Gas Ltd. is one of the leading gas distribution companies in India performing the business of City Gas Distribution. It was incorporated in 1998 and took over Delhi City Gas Distribution Project in 1999 from GAIL (India) Limited (Formerly Gas Authority of India Limited). The project was started to lay the network for the distribution of natural gas in the National Capital Territory of Delhi to consumers in the domestic, transport, and commercial sectors.

The prime business objectives of the company are:-

• To provide a safe, convenient, reliable natural gas supply to our customers in domestic and commercial sector; and,

• To facilitate conversions of commercial and private vehicles to CNG through external agencies.

IGL got listed in December 2003 in BSE and became a public limited company. With a public shareholding of 55% its gross income increased to Rs 596 crore in financial year 2007 (April-December) from Rs 7 crore in year 1999-00. As per the data available 92% of its revenue comes out of CNG business while commercial sector contributes meager 6% in the total revenue; 2% of its business comes out of its PNG distribution network.

The success story of IGL can also be termed as the after effect of the order of Hon. Supreme court of India which forced Indian commercial vehicle owners to turn to CNG. In less than 10 years the total number of CNG vehicles in Delhi (including buses, autos, RTVs and others) increased by more than 30 times of the total number of CNG vehicles present in year 1999-2000.

In less than 10 years IGL has developed its own 64 CNG station and crossed the 150 mark on account of total number of CNG dispensing station in Delhi. Currently IGL boasts of a chain of 166 CNG dispensing stations with a total average daily CNG sale of 1.05 million kg/day (FY 2008).

On the front of Piped Natural Gas (PNG), IGL serves the interest of 110000 domestic, 250 small commercial and 46 large commercial consumers and sells 31 MMSCM of PNG to the customers. In last few years the status of the company rose up to a great extent which is evident from its dividend distribution in last5 years. The dividend which has been paid to its share holders has been increased to 30% of equity from 5% of equity in financial year 2003. With a great success in Delhi IGL also set up its stations in NOIDA as a step towards the future.

In terms of coverage IGL provide CNG to the consumers of Delhi, NOIDA, Greater Noida, Ghaziabad, Gurgaon and Faridabad directly and indirectly. It envisages a dream of adding highway mobile dispensing units and has a target of providing PNG to 3 lakh user families in 2010.

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The best part of IGL is its supply; the gas it delivers comes from the nominated fields which enable it to provide NG at a cost much lower than the market price of NG.

3.4.1 Future Outlook

IGL is now focusing on conversion of private vehicles (private cars) to CNG. In this connection efforts are being made on the private vehicle front encouraging them to convert to CNG mode. IGL has been coordinating with CNG kit suppliers, Transport Department, Automotive Research Association of India (ARAI) and Vehicle Research and Development Establishment (VRDE) to ease the process for endorsement of the same on Registration certificate of the vehicle.

The company is in the process of enhancing its compression capacity by adding new stations and also by converting the daughter and daughter booster stations to mother and online stations.

IGL is also working towards expanding its gas retail network to the other cities of National Capital Region (NCR) viz. Noida including Greater Noida, Gurgaon and Faridabad. The Company aims to lay natural gas pipe grid in these cities to set up CNG stations and providing PNG to domestic, commercial and industrial sectors. Recently IGL has got approval from MoPNG to develop 50 more CNG stations in NCR region and ministry has also directed Delhi state urban development minister to support IGL’s expansion program by providing land to the company at affordable price.

3.5 MAHANAGAR GAS LIMITED (MGL)

The MGL project started in 1995 from Chembur and now it has covered major parts of Mumbai through its distribution network i.e. from South Mumbai to Mira Road and Sion to Mulund & Thane. Today MGL has become a leading consumer friendly gas company with a customer tally of 3.52 lakhs connected PNG users and around 970 small industrial & commercial customers. It powers over 53,942 taxis/cars , over 1.28 lakh autorickshaws, 597 BEST buses,50 TMT Buses, 260 Private Buses and 45 Mini Buses across the city through its network of 130 CNG stations having 637 dispensing points, thus contributing to more than 760 metric tonnes reduction of pollutants every day. MGL recently launched Piped Natural Gas in South Mumbai to bring the convenience of Natural Gas to South Mumbaikars & is expanding the pipeline network in Navi Mumbai.

In less than 2 decades MGL has established 130 CNG outlets in Mumbai, Thane, Mira-Bhavander and Navi Mumbai in which 118 outlets exists in Mumbai only catering 1,59,850 CNG vehicles of Mumbai only. In gross figures MGL provide CNG to the existing 1,86,467 CNG vehicles in Maharashtra.

Out of the total number of CNG stations of MGL online stations account for 113 stations while Mother and Daughter booster stations account for 4 and 13 stations respectively.

Over the years MGL has also made significant growth in PNG sector. MGL has laid network of over 2299.74 km of medium pressure and lower pressure PE pipelines & 238 km of High Pressure steel network to cater to over 6 lakh potential consumers in the city. It has already

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covered more than 3.52 lakh domestic, 934 commercial and 36 small industrial consumers. With this MGL has become the largest city gas distribution company in India with reference to consumer base. In addition to it MGL also provide services like Voluntary Deposit Scheme (VDS) to its PNG customers to make the bill payment process more easy and convenient.

3.5.1 Future Outlook

MGL has made ambitious plans for CNG & PNG expansion in Mumbai, Thane & Navi Mumbai. It has laid around 238 km of steel pipeline and 2299.74 km of polyethylene pipeline. Further, the plan includes setting up of more number of CNG outlets as well as enhancing CNG compression capacity and dispensing points to provide CNG to the vehicles with minimum possible dry run and waiting. MGL has also started looking for opportunities to expand its area of operations in the areas adjoining Mumbai city as well as providing value added services to the consumers.

3.6 CITY GAS ACTIVITIES IN INDIA

The following cities are covered for City Gas Distribution in India.

S.No.  Cities  Company Company incorporated on1.  Delhi  IGL (JV of GAIL and BPCL)  Dec 1998 

2.  Mumbai  MGL (JV of GAIL and BG)  May 1995 3.  Lucknow & Agra  Green Gas Limited (JV of GAIL 

and IOC) Oct 2005 

4.  Kanpur  Central UP Gas Limited (JV of GAIL and BPCL) 

Feb 2005 

5  Hyderabad, Vijaywada 

Bhagyanagar Gas Limited (JV of GAIL & HPCL) 

Aug 2003 

6  Ahmedabad  Adani Energy Limited  Jan 2004 7  Surat, Ankleshwar, 

Bharuch Gujarat Gas Company Limited (A Company controlled by BG, 

UK) 

1988 

8  Tripura  Tripura Natural Gas Company Ltd ( JV of GAIL, Govt. of 

Assam and Govt. of Tripura 

July 1990 / restructured and inducted GAIL as a majority partner (29%) in Feb 2005 

9  Duliajan, Digboi, Dibrugarh, Moran, 

Naharkatiya, Sivasagar, Nazira, Simaluguri and Tinsukia Town 

Assam Gas Company Ltd.  March 1962 

9  Pune  Maharashtra Natural Gas Limited (MNGL), JV of GAIL 

and BPCL 

Jan 2006 

10  Indore / Madhya Pradesh 

Aavantika Gas Ltd (AGL), JV of GAIL and HPCL 

June 2006 

11  Gandhinagar,  Sabarmati Gas Ltd, JV of GSPC  June 2006 

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Mehsana & Sabarkantha (in 

Gujarat 

and BPCL

12  Rajkot, GandhiNagar, NH in 

Gujarat 

GSPC Gas  2006 

13  Ahmedabad  HPCL  2006 14  Vadodara   GAIL  1969‐70 

Table 12. Cities covered for city Gas Distribution in India (as on April, 2007)

From the above shown table, it is clear that the CGD networks are successfully established in more than 15 cities and producing very good results for the entities developing these networks. With a vision to increase the number of cities covered by the CGD network about 74 more cities are zeroed by GAIL India Ltd. On the other hand Reliance Industries Ltd. has proposed to lay a city gas distribution network in around 100 cities and towns during the XI five-year plan. The details of the applications are as follows:

City(ies) targeted for  Gas source  Pipeline connectivity 

(Andhra Pradesh) Vishakhapattnam,  Kakinada,  Vijayawada, Nalgonda, Hyderabad 

KGD/6 Kakinada‐Ahmedabad 

(Maharashtra) Sholapur, Pune, Thane 

KGD/6  Kakinada‐Ahmedabad 

(Tamil Nadu) Chennai and 25 selected cities of Tamil Nadu 

KGD/6  Kakinada‐Chennai pipeline 

(West Bengal) Kolakata, Midinapur, North 24 Paragana & Bardhaman 

NEC‐25 Kakinada‐Basudebpur‐Howrah

(Karnataka) Bagalokot,  Bhatkal,  Kollegal,  Belgaum,  Bidar, Mangalore,  Bellary,  Channapatna,  Mysore, Gulbarga,  Chikmangalur,  Nanjangarh,  Hatti, Dandeli,  Puttur,  Hospet,  Devanhalli,  Sirsi, Mudhol,  Dod  Ballapur,  Tumkur,  Ramdurg, Hassan,  Dasarahalli,  Sankeshwar,  Hoskote, Bommanahalli,  Wadi,  Hubli‐Dharwad, Krishnarajapura,  Adyar,  Hunsur, Byatarayanapur,  Bangalore,  Karwar, Davangere 

KGD/6 Chennai‐Bangalore‐Mangalore

Table 13. Details of proposed CGD network by RIL (as on April, 2007)

Out of the above mentioned cities, Reliance has already submitted EOIs for 52 cities to the PNGRB Board for the development of CGD network. The above shown facts create an aura of increasing number of CGD networks by the end of XI five year plan and thus making CGD a promising venture to the companies eyeing for it in the coming future.

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CHAPTER 4: INDIAN OIL CORPORATION LTD.

4.1 INTRODUCTION

From refining and marketing activities to E&P activities in India and overseas, Indian Oil Corporation has registered itself in every field of operation in petroleum sector. Its ubiquitous presence in Oil & Gas industry and leadership in its all downstream operations is leading it towards the overall success in every aspect. Presently IOC is the largest commercial enterprise with leading market share of 44% in downstream sector. It is the highest ranked Indian corporate in Fortune’s list of World’s 500 Largest Companies (#135). It is also ranked as the 20th largest petroleum company in the world by Fortune Global 500. On domestic grounds it has been quoted as India’s Most Trusted Fuel Pump Brand by ET brand Equity-AC Nielson Survey 2007.

The major role that it plays in Gas sector ranges from sourcing to marketing. It has got 12.5% stake in Dahej-PLL and is in the process of sourcing more LNG, building LNG infrastructure and expanding the customer base further. An LNG import terminal is planned at Ennore near Chennai. IOC has incorporated a Joint Venture named as Green Gas, (GGL) with GAIL for City Gas Distribution at Lucknow and Agra. GGL has already commissioned 4 CNG Stations (Mother Station – 1 no and Daughter Booster Station – 3 Nos) at Lucknow. In Agra, GGL has commissioned 3 CNG Stations (1 Mother Station and 2 Daughter Booster Stations). The average sale of CNG at Lucknow and Agra is approx. 31,000 & 24,000 Kg / day respectively. Considering the current operation, the projected sale is around Rs 55 Cr. However, it is estimated that after the development of the planned project activities in 4 to 5 years, the turnover would be in the range of Rs 400- 500 crore.

IOC has Franchise Agreements with IGL and MGL for installation of CNG Dispensing facilities at the existing retail outlets of MS / HSD in Delhi & Mumbai respectively. Further, IOC has executed Franchise Agreements with Adani Energy Limited and Gujarat State Petroleum Corporation (GSPC) for providing CNG Dispensing facilities at the retail outlets in Ahmedabad City / R.O. at National Highways of Gujarat. It is also in discussion with Green Gas Limited, SITI Energy Limited and GEECL to sign the Franchise Agreements for Agra & Lucknow, Moradabad and West Bengal.

IOC and GAIL has also agreed to develop the CGD projects in other Eastern States i.e. Assam, Bihar, Jharkand, Orissa. It has executed MoU with Great Eastern Energy Company Limited (GEECL) for joint development of City Gas Project based on Coal Bed Methane in Assansol and Burdawan. Finalization of Joint Venture Agreement for incorporation of a JV Company for the purpose is in advanced stage. It is also in discussion with a company (having gas reserves in India) to jointly develop city gas projects in various cities / states and union territories like A.P., Maharashtra, Karnataka, Tamil Nadu, Kerala, Rajasthan, Madhya Pradesh, Punjab, Haryana, Chandigarh, Himachal Pradesh, Uttaranchal.

4.2 SWOT

SWOT analysis of the OMC in context of the City Gas Distribution is discussed in the following table.

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Strengths • Presence in most of the states. • Prior experience as a partner in GGL. • Stake in Dahej‐PLL and existing 

exploration blocks in India and overseas. 

Weaknesses• Scarcity of experienced individuals in 

CGD. • Currently no other gas source except 

Dahej‐PLL is available. 

Opportunities • Increasing demand for NG in Indian 

cities. 

Threats • Increasing competition in CGD 

business. • Increasing NG prices.  

Table 14. SWOT analysis of IOCL in terms of CGD network operations

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CHAPTER 5: DADRI-PANIPAT PIPELINE PROJECT

5.1 INTRODUCTION

To feed the increasing demand of Natural Gas, Dadri-Panipat RLNG pipeline marketing and laying rights were awarded to IOCL. The pipeline will be of 132 km length and will provide an economic means of feeding NG to the captive power plant at Panipat refinery. The major purpose behind the laying process of Dadri-Panipat spurline is to replace Naphtha with NG. The RLNG pipeline will receive NG through HVJ pipeline at Dadri and will cater the needs of about 7 districts falling in the vicinity of the proposed pipeline. Major districts which will fall in the vicinity of the proposed pipeline are:

• Panipat (HR) • Sonipat (HR) • Baghpat (UP) • Meerut (UP) • Ghaziabad (UP) • Gautam Budh Nagar (UP) • Bulandshahr (UP)

The proposed pipeline route (as decided by the organization) originates from GAIL's Dadri terminal and traverse towards north, crosses NH 24 near village Masuri, Hapur-bypass-road (NH 58), River Hindon, River Yamunna, NH-1 and enters the ROW of MJPL at MJPL Chainage 87.70 km ex-Bijwasan and continues up to MJPL Chainage 106.00 km ex-Bijwasan and thereafter in common ROW of MDAJ hook-up line for approx. 5.5 km. A branch pipeline to NFL will take off at Village Diwana near Panipat from the Dadri-Panipat R-LNG pipeline. The pipeline route has been finalized so as to avoid human habitation, factories etc., as far as possible.

The proposed pipeline work is under progress and the plans for setting up robust CGD network in some of the cities close to the proposed pipeline are under consideration. Currently, IOC is considering overall demand of NG in the above mentioned districts and has plans to set up CGD network starting from the selected cities in a phased manner. The cities of the district that would be selected for the development of CGD network would be covered in a multi phased format and will be supplied NG as per the requirement of the city itself. On some technical and commercial grounds7 it has been calculated that the area within 25 km range (on each side) of pipeline would be best for the initial phase of the CGD network setup process and thus facilitate further establishment of the CGD network in whole district. On the similar grounds industrial customers with demand of more than 3000 SCMD were zeroed to find out the potential of NG demand in respective districts. Major cities complying with the norms and regulations of PNGRB and satisfying the minimum Return on Investment (RoI) requirement will be considered as the first preference. The study is aimed to investigate the profitable and compatible aspects of cities and districts and thus provide the reasons and rationalé for selection of the best possible choice.

7 The decision is taken after considering the limited supply in first phase of CGD network setup and the industries located near the pipeline. PNGRB regulations are also considered while taking decision

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There are several reasons associated to the development of CGD network in the above mentioned districts. The reasons range from the micro and macro economic impact to the brand positioning and stretching of IOC product line. The selection of districts/cities would be done on the basis of total NG demand assessment including Industrial, Domestic and Automobile sector demand in the form of NG, PNG and CNG respectively and some other factors. The overall NG demand potential for the above mentioned districts for particular cities is calculated through the analysis of data available to the organization. While districts are undertaken in an order to ascertain the total maximum potential for NG market, cities are being focused after due considerations to the phased improvements to the CGD network process itself.

5.2 SOURCING OF NATURAL GAS

Currently IOC is getting NG from Dahej PLL and Ratnagiri Gas and Power Pvt. Ltd. On combination of both it comes out as 5.27+1.74 MMSCMD of Natural Gas, out of which a handsome amount of gas is supplied to its existing customers. The table below shows the list of existing customers and the contracted amount of NG supplied by IOC to them;

Customer  Existing Qty in MMSCMD

Revised Qty in MMSCMD 

Essar Steel  1.5000 0.5000CFCL  1.4700 1.4700TCL  0.5300 0.5300NFL  0.3400 0.3400GSPC  0.9000 0.9000Surya Roshni  0.0240 0.0300HNGIL  0.1100 0.1100LNG by Road  0.0500 0.2000Naphtha Cracker  Nil  0.5000

Mathura Refinery  0.2500 0.2500

Gujarat Refinery  NIL  0.1500CGD  NIL  0.1500Osaram  0.0100 0.0100Bhushan Steel  0.0100 0.0100Benlon  0.0100 0.0100LM Steel  0.0080 0.0080Delta Foods  0.0070 0.0070Allied Strips  0.0030 0.0100SPL  0.0100 0.0100GGL  0.0100 0.0350Gujarat Glass  0.0100 0.0100Amgen Power  0.0100 0.0100Siti Energy  0.0100 0.0100TOTAL  5.27  5.26

Table 15. Existing and revised contracted quantity of NG by IOCL

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On the basis of the above mentioned table it’s been evident that IOCL is having spare capacity of 0.1500+1.74 MMSCMD available for CGD operations (on ad-hoc basis).

5.3 METHODOLOGY FOR CALCULATION OF POTENTIAL NG DEMAND

The potential industrial NG demand for year 2012-13 is taken from the report submitted to IOCL by MDRA group out of which three scenarios were drawn having a switching over pattern of 45-59%, 60-74% and 75-89% for pessimistic, realistic and optimistic scenarios respectively.

The PNG demand is calculated from the Indane LPG sales in the respective towns and cities which were extrapolated to the total sales in that city/town by the market share of Indane LPG in respective town/city. The result thus procured is converted into the total LPG demand after considering the fact that domestic LPG accounts for 96% of the total LPG consumption. The figures thus obtained are converted into NG equivalent using conversion factors and total PNG demand is calculated.

CNG demand in the city/town is calculated from the vehicular population profile of the city and some statistics related to it (mileage, avg. daily distance travelled). The total CNG demand is thus converted to NG to calculate the potential NG demand.

While determining the PNG and CNG demand the switching over pattern is taken constant (at 10% upto year 2012-13) to create parity amongst all the cities/towns considered in the study.

5.4 CRITERIA FOR CITY SELECTION

While total expected demand of NG can be one of the major benchmark for the selection of town/city for CGD network establishment some other factors like current status in terms of EOIs and State Govt. policies and moves can also play major role in making decision. On the basis of the experiences of IGL and MGL a checklist is prepared covering most important aspects of city town selection in addition to the expected NG demand.

S. No.  Selection Criteria 

1  Closeness to the proposed RLNG pipeline 2  Administrative action by the state to promote NG in the city/town 3  Total population of the city/town4  Status of the city/town in terms of EOI to the PNGRB Board 5  Existing LPG and CNG demand 6  Infrastructure of the city/town 7  Level of urbanization in the city/town

Table 16. Possible selection criteria for Cities/Towns for CGD network establishment

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CHAPTER 6: HARYANA (HRY)

6.1 INTRODUCTION

Located in northern part of India, Haryana emerged as a separate state in the federal galaxy of the Indian Republic after being carved out of the state of Punjab on November 1,1966. With just 1.37% of the total geographical area and less than 2% of India’s population, Haryana has carved a place of distinction for itself during the past three decades. Today Haryana is among the most prosperous states in India, having per-capita income of Rs 49038 at current prices (Source: Economic Survey of Haryana, 2007-08) in the country. It is a leading manufacturing hub as it is also home to Maruti Suzuki India Limited, India's largest automobile manufacturer, and Hero Honda Limited, the world's largest manufacturer of two-wheelers. Panipat, Panchkula and Faridabad are also industrial hubs, with the Panipat Refinery being the second largest refinery in South Asia. There is also an established steel and textile industry in the state of Haryana.

When it comes to financial health Haryana one among the three best performing states in the country. Haryana had the minimum fiscal deficit of 0.6 per cent in financial year 2006-07. Haryana tops the list in terms of per capita investment in the fiscal year 2007 with an investment of Rs 1,86,045 crore. Ninety-three of top Fortune 100 companies already have their corporate offices and production bases in Haryana. In 2006-07 Haryana received foreign direct investment projects of over Rs 11,000 crore in the state and corporate sector.

Recently, Haryana has come up with New Industrial Policy (NIP) which is formulated for generation of rapid industrialization and jobs to the people of Haryana. As per the data available Haryana is equipped with 682 new industrial units with an investment of 230 crore.

Famous for its industries and its cultural values, Haryana is one of the most prolific and growing states of India. The fact file of Haryana and its growth statistics corroborates the claims ade by the Haryana Govt. Development of Industrial estates like Precision Tools Complex at Rohtak, Footwear Park at Bahadurgarh and Aparel Park at Barhi (Sonipat) are some of the recent works that account for the increased industrial growth of the state.

When it comes to the demographic picture of this prolific states than it becomes mandatory to mention that the Haryana state is home for a population of 21,082,989 as per the census data 2001 and recorded a growth of 28.06% between 1991-

Figure 9. Haryana (Source: www.haryana.gov.in)

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2001 as compared to 21.34% of the national average during the same period. The sex ratio (number of females per 100 males) declined to 861 from 865 as at the 1991 census. Total literacy rate has increased from 55.85% to 68.59% in 2001 census.

As per the census total slum population stood as 1420407 and the urban population came out as 6115304. In terms of fuel usage 1067110 houses use LPG as cooking fuel which is next to firewood (110529 houses).

The principal cities of Haryana Include names of Faridabad, Panipat, Rohtak, Hisar, Sonipat, Karnal Yamunanagar, Gurgaon, Bhiwani and Sirsa out of which Faridabad claims of the most populated city and Panipat and Sonipat stands at third and fifth positions respectively. Considering the economic and population status of Panipat and Sonipat and the distance between the spurline and cities they have been selected for the demand estimation of NG in them.

6.2 PANIPAT

The District is situated 90 km from Delhi (NH-1) on Sher Shah Suri Marg and have significant place in history of India. Panipat district was once a part of district Karnal till 31 October 1989 but then upgraded as a separate district including Assandh tehsil of district Karnal. It was reformed on January 1, 1992 and this time Assandh tehsil was excluded from the district. Panipat city is also famous as “City of weavers” and it has a significant place in international market for handloom production. Darri, carpet mat, table cover, bed sheet, bed cover curtain etc. produced in panipat are exported to Canada, Japan, Germany and Australia.

The area of Panipat district is 1268 sq. km. and the total population of the district as per census 2001 was 967,449 out of which male population accounted for 54% of the total population. In terms of Agriculture, Panipat district boasts of an agricultural land of 2,664,398 hectare out of which 26,000 hectare of land is cultivated through canal while 77,124 hectare of land is cultivated through tubewell. Panipat district has 25,000 units of Hand looms and 40,000 units of Pit looms. The total number of Small Industrial Units (SMIs) in Panipat district was found as 2,899 and 37 large and medium Industrial Units are registered in Panipat district. Some other Industries which are found in Panipat district are Power loom, Shoddy spinning Unit, Carpet Industries, Open End Spinning Units, Barrack Yarn spinning units, Carpet Spinning Units, Pickle Unit, Dying/printing Unit, Weaver Service Centre and NITRA Lab & Training centre.

Figure 10. District map of Panipat

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The areas developed for Industry in Panipat are as under:

S.No.  Name of Estate  No. of total plots 1  Industrial Area, Panipat 2382  Sector 25, HUDA. P‐I, Panipat  162 3  Sector 25, HUDA, P‐II, Panipat  519 4  Sector 29, HUDA. P‐I, Panipat  277 5  Sector 29, HUDA. P‐II, Panipat 6706  HSIDC, Samalkha  77 Table 17. Industrial estates of Panipat (source: panipat.nic.in)

6.2.1 Panipat Refinery

Located 20 km from the town of Panipat amidst lush emerald fields, India’s most modern refinery, IOC Panipat Refinery, is located with a capacity of 12 MMTPA. Panipat refinery was built at a cost of 3,868 crore and fulfils the long felt needs to meet the petroleum demand of not only Haryana but also the entire north-west of India including Punjab and the states of Jammu and Kashmir. The best part of the refinery is its ability to control the effluent discharge rate and keeping it close to zero mark. The refinery has also made significant contribution in social welfare of the people of Panipat by establishing a township close to Panipat refinery and hence upgraded the standard of living by making consistent efforts to raise the bar.

6.2.2 Demand estimation for Industrial Consumers in Panipat District

As per the results of the study carried out by MDRA (Marketing and Development Research Associate) on behalf of Indian Oil Corp. the total estimated industrial demand for Panipat district in year 2012-13 stands for 1.3456 MMSCMD of NG out of which three scenarios (Pessimistic, Real, Optimistic) were predicted. The picture below describes the distribution of projected industrial demand for 2012-13 presented by the MDRA group.

Figure 11.Estimated industrial demand distribution of NG for Panipat district (Source: MDRA report)

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The above mentioned figure clearly states that Gohana Road Ind. Area is going to have maximum demand of natural gas in the coming future. After that Asan Ind. Area and Madana Ind. Area stands for the maximum NG demand potential. The projected demand under different demand scenarios is :

Scenario Projected NG demand for 2012-13 (in SCMD) Pessimistic 645911Realistic 847758 Optimistic 1049605 In the above mentioned scenarios, the conversion rate is calculated as:

• Pessimistic Scenario: 45-59% of total estimated demand projection • Realistic Scenario: 60-74% of total estimated demand projection • Optimistic Scenario: 75-89% of total estimated demand projection

Out of the above mentioned scenarios the pessimistic scenario predicts the most likely demand figures for NG in which National Fertilizer Ltd (NFL) acts as a major contributor to the estimated industrial demand of Panipat district.

6.2.3 PNG demand estimation for Panipat City

No. of existing customers for Indane  69937 Sale of Indane LPG in last one year (in MT)  9814.427 Per capita consumption  140.3324Market share of Indane In LPG business (in %)  50 Total domestic LPG demand  in one year  19628.85 Total LPG demand in Panipat City8  20446.72Total demand of NG in SCMD (1 MT LPG= 1250 SCM NG)  70023.00952 Total demand of NG for PNG supply (in MMSCMD)  0.070023009 Expected contribution upto 2012‐13 @10%  0.007002301 

Table 18. Estimated PNG demand for Panipat City

6.2.4 CNG demand estimation for Panipat city

Type of vehicle 

No. of Vehicle 

Daily  average dist.  Covered by  vehicle  (in km) 

Mileage (in km/kg) 

Total consumption of  CNG  in  kg per year9   

Total consumption  of NG in SCMD (1kg CNG=1.28  SCM of NG) 

Expected contribution upto  2012‐13 @ 10% in SCMD 

Bus  ‐‐‐‐‐‐  300  4  ‐‐‐‐‐‐‐‐‐  ‐‐‐‐‐‐‐‐‐‐  ‐‐‐‐‐‐‐‐‐‐ 3‐wheeler  ‐‐‐‐‐‐‐  100  40  ‐‐‐‐‐‐‐‐  ‐‐‐‐‐‐‐‐‐‐‐  ‐‐‐‐‐‐‐‐‐ 4‐wheeler  ‐‐‐‐‐‐‐  100  21 ‐‐‐‐‐‐‐‐‐‐ ‐‐‐‐‐‐‐‐‐‐‐ ‐‐‐‐‐‐‐‐‐Total  ‐‐‐‐‐‐‐‐           Table 19. Estimated CNG demand for Panipat city

8 The total LPG demand in Panipat city is calculated by considering that domestic LPG demand accounts for 96% of the total LPG demand. 9 [(daily avg dist/mileage)*365*no. of vehicle]

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6.3 SONEPAT

Sonepat, located in the south-eastern part of Haryana, came into existence in 1972. Formerly Sonepat was a part of Rohtak district. The number of sub-divisions of Sonepat is three. They are Sonipat, Ganaur and Gohana. Among which Sonepat is the largest Tehsil. The town of Sonipat acts as the district headquarter. The total area of Sonepat is 2,13,080 hectare.

According to the census of 2001, the total population of Sonepat is 12, 78,830, among which 6, 95, 314 are male and 5, 83, 516 female. About 75 % of total population of Sonepat belongs to the rural part of it while only 25% of the population is considered urban. The major towns of the Sonepat districts are Sonepat, Kharkoda, Gannaur and Gohana which accounts for about 25% of the total urban population of the whole Sonepat district. The primary activity of the people of Sonepat is agriculture.

On the front of industrial growth Sonepat is like a mixed bag of industries. With the development of HSIIDC in Kundli the industrial growth of Sonepat is supposed to shoot up in the coming years. Out of the major developing areas of Haryana Sonepat have a special potential for accelerated socio-economic development.

6.3.1 Industrial demand estimation of NG in Sonepat district

As per the results of the study carried out by MDRA (Marketing & Development Research Associate) on behalf of Indian Oil Corp. the total estimated industrial demand for Sonepat district in year 2012-13 stands at 0.427427 MMSCMD of NG out of which three scenarios (Pessimistic, Real, Optimistic) were predicted which states that the demand will touch the mark of 0.269278 MMSCMD as per the realistic scenario. The picture below describes the distribution of projected industrial demand for 2012-13 presented by the MDRA group.

Figure 12. Estimated Industrial demand Distribution of NG in Sonepat District (Source MDRA Report)

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Out of the above mentioned demand three different scenarios were projected in which the overall Industrial demand came out as:

Scenario  Projected NG demand for 2012‐13 (in SCMD) Pessimistic  205164 Realistic  269278Optimistic  333394 

The above table shows a demand of 0.2051 MMSCMD, 0.2692 MMSCMD and 0.3334 MMSCMD of NG in the Pessimistic, Realistic and Optimistic scenarios out of which realistic figures predict the most likely demand of NG in year 2012-13. The major contributors to the expected industrial demand of NG are Fresh and Healthy Enterprise Ltd, Avtar Steels Pvt. Ltd and Bush Foods Pvt. Ltd.

6.3.2 PNG demand estimation for Sonepat City

No. of existing customers for Indane  50035 Sale of Indane LPG in last one year (in MT)  5238.668 Per capita consumption  104.7001Market share of Indane In LPG business (in %)  50 Total domestic LPG demand  in one year  10477.34 Total LPG demand in Sonepat City  10913.9 Total demand of NG in SCMD (1 MT LPG= 1250 SCM NG) 37376.35274 Total demand of NG for PNG supply (in MMSCMD)  0.037376353 Expected contribution upto 2012‐13 @10%  0.003737635 

Table 20. Estimated PNG demand for Sonepat City

6.3.3 CNG demand estimation for Sonepat city

Type of vehicle 

No. of Vehicle 

Daily average dist. Covered by vehicle  (in km) 

Mileage  (in km/kg) 

Total consumption of CNG  in kg per year   

Total consumption of  NG  in SCMD  (1kg CNG=1.28 SCM of NG) 

Expected contribution upto  2012‐13 @ 10% in SCMD 

Bus  525  300  4 14371875 50400 5040 3‐wheeler  3646  100  40  3326975  11667.2  1166.72 4‐wheeler  7881  100  21  13697928.57  48036.571  4803.657 Total  12052        110103.771  11010.377 Table 21. Estimated CNG demand for Sonepat city

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CHAPTER 7: UTTAR PRADESH (U.P.)

7.1 INTRODUCTION

Uttar Pradesh also called as U.P. is a state located in the northern part of India. With over 160 million people (as per census 2001), it is India's most populous state. Uttar Pradesh covers an area of 236286 sq km with 70 districts and 631 cities. Out of its 166052859 population 52% of the population belongs to male section of the society while 48% of females are registered in the overall picture of the state population.

Uttar Pradesh consists of 183100 km of road network and 8152 km of railways network. Main industries in U.P. are Cement, Vegetable oils, textiles, Cotton Yarn, Sugar, Jute, Lock & Scissors, Carpet, Brasswares, Glasswares and Bangles. Uttar Pradesh covers a large part of the highly fertile and densely populated upper Gangetic plain and shares an international border with Nepal. It is also bounded by the Indian states of Uttarakhand, Himachal Pradesh, Haryana, Delhi, Rajasthan, Madhya Pradesh, Chhattisgarh, Jharkhand and Bihar. Its major cities include the names of Agra, Alahabad, Bareily, Ghaziabad, Gorakhpur, Jhansi, Kanpur, Lucknow, Mathura, Merut, Moradabad, NOIDA and Varanasi while the other important cities include the names of Kanpur, Aligarh, Azamgarh, Bahraich, Ballia, Banda, Barabanki, Bijnor, Bulandshahr, Deoband, Etawah, Faizabad, Farrukhabad, Fatehghar, Firozabad, Ghazipur, Gola, Gonda, Gorakhpur, Hameerpur, Kannauj, Khurja, Kushinagar, Lalitpur, Mainpuri, Mirzapur, Moradabad, Muzaffarnagar, Noida, Orai, Pilibhit, Raebareli, Rampur, Saharanpur, Shahjahanpur and Sultanpur.

7.2 BAGHPAT

Baghpat district is spread in an area of 1321 sq. km and lies in the east of Sonepat. It is also the transit point for the proposed pipeline between Haryana and Uttar Pradesh. The main commercial activity of the people living in this region is making and selling GUD and Sugar. Apart from this, there are certain units who are involved in the making of shoes and agricultural equipments. About 75% of its units are cottage units and produce Handloom cloth.

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According to the current statistical figures there are about 200 handlooms and powerlooms unit in Khekra Tehsil which mainly produce Rugs, Bed sheets, Bed-covers etc. All these units export their products to Europian countries but lack in basic infrastructure which in turn hampers the production capacity of these looms.

The population of Baghpat district is 1164000 (as per census 2001) and the population density of Baghpat is 742 per sq km. from demand potential view Khekra and nearby Dhundera industrial area may come out as two promising industrial clusters but considering the major push towards the loom sector the demand of NG may not shoot up in the coming years in Baghpat District as compared with other districts of Uttar Pradesh.

7.2.1 Industrial demand estimation of NG in Baghpat district

As per MDRA report submitted to IOCL the total industrial demand of NG in Baghpat district stan35599 SCMD or 0.0356 MMSCMD which is quite lower than the demand calculated for the districts of Haryana. The distribution of NG demand for year 2012-13 in Baghpat district is shown in the picture below:

Figure 13. Estimated Industrial demand distribution of NG in Baghpat district in year 2012-13 (Source: MDRA report)

The demand for three different demand scenarios stands at:

Scenario  Projected NG demand for 2012‐13 (in SCMD) Pessimistic  17448 Realistic  22900 Optimistic  28353

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The major contributors to the expected demand of NG in Baghpat district are Si-Al SBEC Bionergy Ltd. and Baghpat Co-operative Sugar Mill Ltd. with an estimated demand of 965144 SCMD and 501875 SCMD respectively.

7.2.2 PNG demand estimation for Baghpat City No. of existing customers for Indane  11141 Sale of Indane LPG in last one year (in MT)  1423.351 Per capita consumption  127.7579Market share of Indane In LPG business (in %)  60 Total domestic LPG demand  in one year  2372.251 Total LPG demand in Baghpat City  2471.094 Total demand of NG in SCMD (1 MT LPG= 1250 SCM NG) 8462.651Total demand of NG for PNG supply (in MMSCMD)  0.008462651 Expected contribution upto 2012‐13 @10%  0.0008463 

Table 22. Estimated PNG demand for Baghpat city

7.2.3 CNG demand estimation for Baghpat city

Type of vehicle

No. of Vehicle

Daily average dist. Covered by vehicle (in km)

Mileage (in km/kg)

Total consumption of CNG in kg per year

Total consumption of NG in SCMD (1kg CNG=1.28 SCM of NG)

Expected contribution upto 2012-13 @ 10%

Bus  200  300  4  5475000  19200  1920 3‐wheeler  100  100  40  91250  320  32 4‐wheeler  200  100  21  347619.0476 1219.047  121.9047 Total  2300    5913869.048 20739.047  2073.9047Table 23. Estimated CNG demand for Baghpat city

7.2.4 PNG demand estimation for Baraut town

No. of existing customers for Indane  29920 Sale of Indane LPG in last one year (in MT)  2719.243 Per capita consumption  90.88379Market share of Indane In LPG business (in %) 60Total domestic LPG demand  in one year  5302.563 Total LPG demand in Baghpat City  5523.503 Total demand of NG in SCMD (1 MT LPG= 1250 SCM NG) 18916.10616 Total demand of NG for PNG supply (in MMSCMD)  0.01891610616 Expected contribution upto 2012‐13 @10%  0.001891610616 

Table 24. Estimated PNG demand for Baraut town

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7.2.5 CNG demand for Baraut town

Type of vehicle

No. of Vehicle

Daily average dist. Covered by vehicle (in km)

Mileage (in km/kg)

Total consumption of CNG in kg per year

Total consumption of NG in SCMD (1kg CNG=1.28 SCM of NG)

Expected contribution upto 2012-13 @ 10%

Bus  100  300  4  2737500  9600  960 3‐wheeler  50  100  40 45625 160 16 4‐wheeler  3000  100  21  5214285.714 18285.714  1828.5714 Total  3300      7997410.714 28045.714  2804.5714 Table 25. Estimated CNG demand for baraut town

7.3 MEERUT

Meerut district is located 72 km North-east of Delhi. It is spread across an area of 3,911 sq km and has a population of 1,074,229 (as per census 2001). Meerut district is famous for sports goods, musical instruments and Sugar industry. It is one of the principal cities of Uttar Pradesh. It is also known as sports capital of India and due to its close proximity to Delhi it is experiencing a rapid growth in all the sectors. Total population of commercial establishment in Meerut comes out more than 500.

Meerut has also developed its base in handloom and powerlooms as well. The district has also established considerable amount of industries including manufacturing, smelting, rubber, paper, metal, engineering, handicrafts and milling of sugar, cotton, flour and oilseeds.

When it comes to petroleum products consumption Meerut figures very low because of the unavailability of heavy major industries. The major industries available in Meerut accounts for Sugar and Gur manufacturing unit which produce the required electricity from its own byproduct Bagasse.

Meerut Urban Agglomeration which includes Meerut Cantonment area too has a population of 1161716.and claims for the most populated cities of Meerut district

7.3.1 Industrial demand estimation of NG in Meerut district

As per MDRA Industrial Demand Analysis Report the total industrial demand of NG for Meerut district stands at 82086.85 SCMD which is 0.082086 MMSCMD. The distribution of NG in different demand centre is shown in the figure below mentioned;

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Figure 14.Estimated industrial demand distribution of NG for Meerut district (Source: MDRA report)

The industrial NG demand as per the three predicted scenario stands as:

Scenario Total expected Industrial demand of NG (2012-13) in SCMD

Pessimistic 39401.685 Realistic 51714.71 Optimistic 64027.74

The above shown figures give a brief idea of the industrial demand of NG in year 2012-13 as per different switch-over ratios and the realistic scenario gives a figure of 0.05 MMSCMD for Meerut district which is not so encouraging. The major contributors to the NG demand in Meerut are UP State Sugar Corporation and Mayur Textiles Processors with a demand of 1082517 and 21233 SCMD respectively.

7.3.2 PNG demand estimation for Meerut City

No. of existing customers for Indane  185293 Sale of Indane LPG in last one year (in MT)  21197.248 Per capita consumption  114.3985Market share of Indane In LPG business (in %)  60 Total domestic LPG demand  in one year  35328.75 Total LPG demand in Meerut City  36800.78 Total demand of NG in SCMD (1 MT LPG= 1250 SCM NG) 126030.0719 Total demand of NG for PNG supply (in MMSCMD)  0.126030072 Expected contribution upto 2012‐13 @10%  0.0126030072 

Table 26. Estimated PNG demand for Meerut city

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7.3.3 CNG demand estimation for Meerut city

Type of vehicle 

No. of Vehicle 

Daily average dist. Covered by vehicle  (in km) 

Mileage  (in km/kg) 

Total consumption of CNG  in kg per year   

Total consumption of  NG  in SCMD  (1kg CNG=1.28 SCM of NG) 

Expected contribution upto  2012‐13 @ 10% 

Bus  3150  300  4  86231250  302400  30240 3‐wheeler  2856  100  40  2606100  9139.2  913.92 4‐wheeler  27435  100  21 47684642.86 167222.85  16722.285Total  33441      136521992.9  478762.05  47876.205 Table 27. Estimated CNG demand for Meerut city

7.4 GHAZIABAD

Ghaziabad, declared as a district in year 1976 and is one of the most important districts of Uttar Pradesh. The major reason for being boastful is the development of industries in it which ranges from Iron and steel industries to food processing and Automobile parts. The population as per census 2001 stands at 3290256 and is still increasing due to the increasing rate of employment.

The major contributing factors to the increasing population of Ghaziabad are its closeness to the national capital (it is the part of NCR) and the Industrial Policy of Delhi state which restricted the growth of heavy and medium industries to control pollution. All this contributed to the ever growing industries in Ghaziabad District.

According to the Census 2001, the urban population of Ghaziabad district is higher than the rural population and the population growth that has been registered in the time period between 1991-2001 is 47.47%. Out of the major towns Ghaziabad (M. Corp.) is the most populated town with the maximum exposure to the industries. The total population of the Ghaziabad town as registered in census 2001 stands at 968256 which is phenomenal.

7.4.1 Industrial demand estimation of NG in Ghaziabad district

The total demand of NG in Ghaziabad district (as per MDRA report) stood at a level of 1.172616 MMSCMD and the distribution of NG demand in different demand centers is shown in the picture below:

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Figure 15. .Estimated industrial demand distribution of NG for Ghaziabad district (Source: MDRA report)

The above shown picture also illustrates the probable NG demand for the upcoming industrial areas. Out of the above mentioned demand centers Sahibabad Site IV Ind. Area and South GT Road Ind. Area may prove out to be the best pick. Rathi Thermex Super and Modi Industries Ltd. are the major promoters of the expected NG demand in Ghaziabad district with a potential of 84880 and 61000 MMSCMD respectively.

The probable NG demand as per the three scenarios is:

Scenario  Total expected Industrial demand of NG (2012‐13) in SCMD 

Pessimistic  562856 Realistic  738748 Optimistic  914642 

7.4.2 PNG demand estimation for Ghaziabad City

No. of existing customers for Indane 261537Sale of Indane LPG in last one year (in MT)  39989.472 Per capita consumption  152.9018 Market share of Indane In LPG business (in %)  60 Total domestic LPG demand  in one year 66649.12Total LPG demand in Ghaziabad City  69426.17 Total demand of NG in SCMD (1 MT LPG= 1250 SCM NG)  237760.8445 Total demand of NG for PNG supply (in MMSCMD)  0.2377608445 Expected contribution upto 2012‐13 @10% (in MMSCMD) 0.0237760845 

Table 28. Estimated PNG demand for Meerut city

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7.4.3 CNG demand estimation for Ghaziabad city

Type of vehicle 

No. of Vehicle 

Daily average dist. Covered  by vehicle  (in km) 

Mileage (in km/kg) 

Total consumption of CNG  in kg per year   

Total consumption of  NG  in SCMD  (1kg CNG=1.28 SCM of NG) 

Expected contribution upto  2012‐13 @ 10% 

Bus  7228  300  4  197866500  693888  69388.8 3‐wheeler  11165  100  40  10188062.5  35728  3572.8 4‐wheeler  50479  100  21 87737309.52 307681.523  30768.1523Total  68872        1037297.523  103729.7523Table 29. Estimated CNG demand for Meerut city

7.5 GAUTAM BUDH NAGAR

Gautam Budh Nagar is a district of Uttar Pradesh in northern India. Noida is the administrative headquarter of the district and the part of NCR too. It is spread in an area of 1354 sq km. the total population of Gautam Budh Nagar as per census 2001 is 1202030 in which male population accounts for 54% of the total population.

The importance of Gautam Budh Nagar is due to its inclusion in the proposed Delhi-Mumbai Industrial corridor. The growth of industries in the district has been such that I is not restricting itself to the earlier designated industrial area of Noida further industrial areas like Greater Noida and Taj Expressway Ind. Area are developed.

Noida is among the principal agglomerations of Uttar Pradesh state. As per the published statistics Gautam Budh Nagar district boasts of 6218 Small Scale Industrial (SSI) units with an investment of 2315 crore. Till date there are around 302 High Investment Projects in the district and many of them are either functioning or about to start production in coming five years.

7.5.1 Industrial demand estimation of NG in G. B. Nagar district

Total expected Industrial demand of NG in G. B. Nagar district for year 2012-13 stands at 6.537308 MMSCMD which is quite higher. The distribution of industrial NG demand in G. B. Nagar district is shown below:

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Figure16.Estimated industrial demand distribution of NG for G.B. Nagar district (Source: MDRA report)

The demand for different scenarios come out as:

Scenario  Total expected Industrial demand of NG (2012‐13) in SCMD 

Pessimistic  3137908 Realistic  4118504 Optimistic  5099100

Gautam Budha Nagar consists of three big industrial areas- Noida, greater Noida and Dadri. All of these have become destination for huge investments by MNCs. Dadri also incorporates NTPC which has huge requirement of energy for power generation.

7.5.2 PNG demand estimation for Noida

No. of existing customers for Indane  52338 Sale of Indane LPG in last one year (in MT)  7305.729 Per capita consumption  139.5875Market share of Indane In LPG business (in %)  60 Total domestic LPG demand  in one year  12176.22 Total LPG demand in Noida   12683.56Total demand of NG in SCMD (1 MT LPG= 1250 SCM NG) 43436.86788 Total demand of NG for PNG supply (in MMSCMD)  0.0434368678 Expected contribution upto 2012‐13 @10% (in MMSCMD)  0.00434368678 

Table 30.Estimated PNG demand for Noida

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7.5.3 CNG demand estimation for Noida

Type of vehicle 

No. of Vehicle 

Daily average dist. Covered  by vehicle  (in km) 

Mileage  (in km/kg) 

Total consumption of CNG  in kg per year   

Total consumption of  NG  in SCMD  (1kg CNG=1.28 SCM of NG) 

Expected contribution upto  2012‐13 @ 10% 

Bus  3158  300  4  86450250  303168  30316.8 3‐wheeler  484  100  40 441650 1548.8 154.884‐wheeler  2754  100  21 4786714.286 16786.285  1678.6285Total  6396        321503.085  32150.3085 Table 31. Estimated CNG demand for Noida

7.6 BULANDSHAHR

District of Bulandshahr is situated between 28.4 degrees south and 28.0 degrees north latitude and between 77.0 degrees and 78.00 degree longitude. The district is about 84 km in length and 62 km in breadth. The geographical area of the district is around 4353 sq km.

As per census 2001 the total population of Bulandshahr district is 2,913,122 out of which male population accounts for 53% while female population accounts for 47% of the total population. The major towns of Bulandshahr district are Bulandshahr City and Khurja having population of 176,425 and 98,610 respectively. Out of the total households of Bulandshahr district 71.8 % of Households are of permanent status.

The cities of Bulandshahr are dominated by agricultural practices and does not reflect (except Sikandarabad) very high industrial growth. There are mainly small, tiny cottage and handicraft units are spread across the district.

7.6.1 Industrial demand estimation of NG in Bulandshahr district

Total estimated industrial demand of NG in Bulandshahr district stands at 0.137954 MMSCMD. The distribution of Industrial NG demand in the district is mentioned in the picture.

The demand estimation as per the pessimistic, realistic and optimistic scenario is given in the table below;

Figure 17. Estimated industrial demand distribution of NG inBulandshahr district (Source: MDRA report)

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Scenario  Total expected Industrial demand of NG (2012‐13) in SCMD 

Pessimistic  96316.28 Realistic  126415.1Optimistic  156514 

The major contributors in the estimated industrial demand of NG in Bulandshahr district are Orient Ceramics and Industries Ltd and U.P. Twiga Fiber Glass Ltd. having a demand of 60,786 and 24,142 SCMD.

7.6.2 PNG demand estimation for Bulandhahr city

No. of existing customers for Indane  25130 Sale of Indane LPG in last one year (in MT) 3181.538Per capita consumption  126.6032 Market share of Indane In LPG business (in %)  60 Total domestic LPG demand  in one year  5302.563 Total LPG demand in Bulandshahr city 5523.503Total demand of NG in SCMD (1 MT LPG= 1250 SCM NG)  18916.10616 Total demand of NG for PNG supply (in MMSCMD)  0.018916106 Expected contribution upto 2012‐13 @10% (in MMSCMD)  0.001891611 

Table 32. Estimated PNG demand for Bulandshahr city

7.6.3 CNG demand estimation for Bulandshahr city

Type of vehicle 

No. of Vehicle 

Daily average dist. Covered  by vehicle  (in km) 

Mileage  (in km/kg) 

Total consumption of CNG  in kg per year   

Total consumption of  NG  in SCMD  (1kg CNG=1.28 SCM of NG) 

Expected contribution upto  2012‐13 @ 10% 

Bus  ‐‐‐‐‐‐‐‐‐‐‐  300  4  ‐‐‐‐‐‐‐‐‐‐  ‐‐‐‐‐‐‐‐‐‐‐  ‐‐‐‐‐‐‐‐‐‐‐ 3‐wheeler  ‐‐‐‐‐‐‐‐‐  100  40  ‐‐‐‐‐‐‐  ‐‐‐‐‐‐‐‐  ‐‐‐‐‐‐‐‐‐‐ 4‐wheeler  ‐‐‐‐‐‐‐‐‐‐  100  21 ‐‐‐‐‐‐‐‐‐‐ ‐‐‐‐‐‐‐‐‐‐  ‐‐‐‐‐‐‐‐‐‐‐Total  ‐‐‐‐‐‐‐‐‐‐           Table 33. Estimated CNG demand for Bulandshahr city

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CHAPTER 8: REGULATIONS

8.1 PETROLEUM & NATURAL GAS REGULATIONS BOARD (PNGRB) ACT

PNGRB act was enacted on 31st March 2006 to serve as a platform for the establishment of Petroleum & Regulatory Board (PNGRB) to regulate the Midstream and downstream operations (refining, processing, storage, transportation, distribution, marketing and sale) of petroleum, petroleum products and natural gas. The PNGRB act was established to protect the interest of consumers and entities engaged in specific activities relating to petroleum, petroleum products and natural gas and to ensure uninterrupted and adequate supply of petroleum, petroleum products and natural gas in all parts of the country and to promote competitive markets and for matters connected therewith or incidental thereto.

The act provides the framework for the PNGRB Board by providing all essential elements of a board ranging from the elementary definitions to the steps to authorizing an entity laying or setting up a pipeline network. The PNGRB act also provides the structural framework of the board and defines the powers associated with the board.

The PNGRB board thus formed falls under the purview of MoPNG and act as an independent authority which acts as a watchdog for the entities engaged in any of the operations mentioned above.

8.2 THE PNGRB BOARD

The PNGRB board came into action on 1st October, 2007 and as it has been prescribed by the PNGRB act itself, the board came out with all the powers and duties associated to it. The board came out with an objective of regulating the Refining, processing, storage, transportation, distribution, marketing and sale of petroleum products, natural gas excluding production of crude oil and natural gas so as to protect the interest of consumers and entities engaged in specified activities and to ensure uninterrupted & adequate supply and to promote competitive markets.

The board consists of a Chairperson, a Member (Legal) and three other members appointed by the Central Government. The chairperson is awarded with powers such as the powers of general superintendence and directions in the conduct of the affairs of the Board and in addition to presiding over the meetings of the Board, exercise and discharge such other powers and functions of the Board, as may be assigned to him by the Board.

8.2.1 Functions of the board

The functions of the board mentioned in the PNGRB act are as follows:

1. protect the interest of consumers by fostering fair trade and competition amongst the entities;

2. register entities to-

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• market notified petroleum and petroleum products and, subject to the contractual obligations of the Central Government, natural gas;

• establish and operate liquefied natural gas terminals; • establish storage facilities for petroleum, petroleum products or natural gas

exceeding such capacity as may be specified by regulations; 3. authorise entities to-

• build, operate or expand a common carrier or contract carrier; • lay, build, operate or expand city or local natural gas distribution network;

4. declare pipelines as common carrier or contract carrier; 5. regulate, by regulations,-

• access to common carrier or contract carrier so as to ensure fair trade and competition amongst entities and for that purpose specify pipeline access code;

• transportation rates for common carrier or contract carrier; • access to city or local natural gas distribution network so as to ensure fair trade

and competition amongst entities as per pipeline access code; 6. in respect of notified petroleum, petroleum products and natural gas-

• ensure adequate availability; • ensure display of information about the maximum retail prices fixed by the

entity for consumers at retail outlets; • monitor prices and take corrective measures to prevent restrictive trade

practice by the entities; • secure equitable distribution for petroleum and petroleum products; • provide, by regulations, and enforce, retail service obligations for retail outlets

and marketing service obligations for entities; • monitor transportation rates and take corrective action to prevent restrictive

trade practice by the entities; 7. levy fees and other charges as determined by regulations; 8. maintain a data bank of information on activities relating to petroleum, petroleum

products and natural gas; 9. lay down, by regulations, the technical standards and specifications including safety

standards in activities relating to petroleum, petroleum products and natural gas, including the construction and operation of pipeline and infrastructure projects related to downstream petroleum and natural gas sector;

10. perform such other functions as may be entrusted to it by the Central Government to carry out the provisions of PNGRB Act.

8.2.2 Powers of the board

Powers of the board mentioned in the PNGRB act are as follows:

1. The Board have jurisdiction to- • adjudicate upon and decide any dispute or matter arising amongst entities or

between an entity and any other person on issues relating to refining, processing, storage, transportation, distribution, marketing and sale of petroleum, petroleum products and natural gas according to the provisions

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mentioned in Chapter V of the PNGRB act, unless the parties have agreed for arbitration;

• receive any complaint from any person and conduct any inquiry and investigation connected with the activities relating to petroleum, petroleum products and natural gas on contravention of-

i. retail service obligations; ii. marketing service obligations

iii. display of retail price at retail outlets; iv. terms and conditions subject to which a pipeline has been declared as

common carrier or contract carrier or access for other entities was allowed to a city or local natural gas distribution network, or authorisation has been granted to an entity for laying, building, expanding or operating a pipeline as common carrier or contract carrier or authorisation has been granted to an entity for laying, building, expanding or operating a city or local natural gas distribution network;

v. any other provision of the PNGRB Act or the rules or the regulations or orders made there under.

2. While deciding a complaint under sub-section (1) of the PNGRB act, the Board may pass such orders and issue such directions as it deems fit or refer the matter for investigation according to the provisions of Chapter V of the PNGRB act.

8.3 REGULATIONS FOR AUTHORIZING THE DEVELOPMENT OF CGD NETWORKS

These regulations are applicable to an entity which is laying, building, operating or expanding, or which proposes to lay, build, operate or expand a city or local natural gas distribution network (hereinafter referred to as CGD Network). The regulations also introduce the fact that the consumers having NG requirement of less than 50,000 MMSCMD will be supplied through the CGD network while the customers having requirement of 50,000-100,000 MMSCMD can be supplied through the CGD network or a separate NG pipeline but customers with a requirement of more than 100,000 MMSCMD of NG will be supplied by a separate NG pipeline only.

8.3.1 The Authorization process

Process  Time (in Days) 

EOI submission  0 

Preliminary assessment  15 

public consultation process  30 

invitation for bids  15 

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submission of application cum bid  60 + 3010 

grant of authorization  30 

Total number of days  150+30 

Table 34.The authorization process chart (Source: PNGRB notification 19th March, 2008)

In addition to the above mentioned process and timeline the entity is also supposed to get the financial closure of the project from a bank or any other financial institution within a period of 120 days of the grant of authorization. In case of internally financed project the entity should submit the approval of its Board of Directors’ for the detailed feasibility report of the project alongwith its financial plan within one hundred and twenty days of the authorization: Provided that the Board may ask the entity to submit any further details or clarifications on the financial closure.

8.3.2 Qualifying criteria for preliminary assessment

The board carries out a preliminary assessment of the EOIs with respect to the following criteria:

1. Availability of NG. 2. Possible connectivity to an existing or proposed NG pipeline for supply of NG upto

the city gate of proposed CGD network, including LNG supply, tank wagons etc. 3. Any other relevant issue considered necessary by the board.

8.3.3 The Qualifying criteria for submission of application-cum-bid

The qualifying criteria for the submission of application cum bid for the development of CGD network in a city is mentioned below:

A. Payment of application fee alongwith application-cum-bid (no need if paid earlier)

B. Technical capabilities

1. Entity should have laid HC pipeline of not less than 300 km on cumulative basis or developed a CGD network in the past;

1. Shall have a joint venture (not less than 11% equity) with a technically capable firm having experience of 300 km HC pipeline laying or development of CGD network;

2. Have intended to lay or build the CGD network on lump sum, turnkey or project management basis through one or more technically competent firms which should have a prior experience of laying not less than 300 km (on a cumulative basis) of HC pipeline or developed a CGD network in the past; or

3. Or it should have at least three technically qualified personnel on its permanent rolls having experience of not less than one year in:

10 If only a single bid is received in response of original advertisement published by PNGRB board.

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• ROW acquisition and clearance. • Design and acquisition of HC pipeline project. • Pre-commissioning including hydro-testing and restoring. • Safety of HC pipeline and installations.

4. Entity should be technically capable of operating & maintaining a CGD network as per criteria namely:

• At least one year experience in operation and maintenance of a CGD network; • Shall have a joint venture (not less than 11% equity) with a technically capable firm

having experience of not less than 1 year in operations and maintenance of a CGD network;

• Entity intends to operate and maintain the proposed CGD network through an appropriate technical assistance agreement for a period of at least one year with another party having experience of at least one year in operations and maintenance of a CGD network; or

• Entity has an adequate number of technically qualified personnel with experience in commissioning, and operation and maintenance (O&M) of hydrocarbon pipelines and also has a credible plan to independently undertake the O&M activities for a CGD project on a standalone basis. It should have at least three technically qualified personnel on its permanent rolls having experience of not less than one year in:

I. Commissioning of HC pipeline II. Operations and Maintenance of NG pipeline and NG installations including

gas compressors. III. Commercial issues including gas pricing, gas measurement accounting,

billing & collection. IV. Safety of NG infrastructure.

C. The entity should meet the financial criterion mentioned in draft issued by PNGRB Board.

D. The companies must be registered under Companies Act-1956 and if it is not; than it shall become a registered company under the act mentioned above.

E. The entity shall furnish a bid bond for an amount equal to:

• Rupees 50 million for a population of 5 million and subsequently higher for the proportionate higher value of population.

• Rupees 30 million for a population of 1 million or more but less than 5 million. • Rupees 20 million for a population of .5 million or more but less than 1 million. • Rupees 15 million for a population of .25 million or more but less than .5 million. • Rupees 10 million for a population of .1million or more but less than .25 million. • Rupees 5 million for a population less than .1 million.

F. The entity should not have been imposed by any penalty under section 28 or chapter 9 of the PNGRB act.

The bid bond mentioned above is-

• Encashed if an entity submitting the bid walks out. • Released in case of the unsuccessful entity submitting the bid. • Retained till the prescribed performance bond is furnished at the time of authorization

by the successful bidder.

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8.3.4 Bidding Criteria

The board has specified the areas of concern on the basis of which it identifies the best entity for authorizing of CGD network. The points on which substantial emphasis is given thus act as benchmark for evaluating the financial bids of the interested entities.

Bidding criteria  Weight assigned Lowness of the present value of the overall unit network tariff for usage of the proposed CGD network by all categories of customers of natural gas (including supply of natural gas to online compressor for CNG) over the economic life of the CGD network project. 

40% 

Lowness  of  the  present  value  of  the  compression charge  for CNG  for dispensing  in the CNG stations  in the proposed CGD network over the economic  life of the project. 

10% 

Highness of the present value of the inch kilometer of steel pipelines proposed to be laid in the CGD network during the period of exclusivity in terms of an exemption from the purview of the common carrier or contract carrier as specified in the Petroleum and Natural Gas Regulatory Board (Exclusivity for City or Local Natural Gas Distribution Networks) Regulations, 2008. 

20% 

Highness of the present value of the number of domestic customers proposed to be connected by PNG by the entity during the period of exclusivity in terms of an exemption from the purview of common carrier or contract carrier as specified in the Petroleum and Natural Gas Regulatory Board (Exclusivity for City or Local Natural Gas Distribution Networks) Regulations, 2008. 

30% 

Total  100% 

On the basis of above mentioned criterion points the score for each participating entity is calculated which highly depends on the weight assigned to each of the above mentioned criteria. Entity with highest composite score is declared successful in the bid.

The grant of authorization is issued to the selected identity after it furnishes a performance bond of an amount equal to:

• rupees one hundred million or five percent of the estimated project capital cost, whichever is higher in respect of an authorized area with a population of five million or more;

• rupees sixty million or five percent of the estimated project capital cost, whichever is higher in respect of an authorized area with a population of one million or more but less than five million;

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• rupees forty million or five percent of the estimated project capital cost, whichever is higher in respect of an authorized area with a population of half a million or more but less than one million;

• rupees thirty million or five percent of the estimated project capital cost, whichever is higher in respect of an authorized area with a population of quarter of a million or more but less than half a million;

• rupees twenty million or five percent of the estimated project capital cost, whichever is higher in respect of an authorized area with a population of one-tenth of a million or more but less than quarter of a million;

• rupees ten million or five percent of the estimated project capital cost, whichever is higher in respect of an authorized area with a population less than one-tenth of a million.

Considering the basis of the performance bond it has been considered that that the performance bond shall be revised by applying the above mentioned basis in case of experiencing any change in the estimated cost project on completion of financial closure.

The rationale behind the introduction of this performance bond is to guarantee the timely performance by the selected entity so that it would meet the targets and service obligations as desired by the PNGRB board.

8.3.5 Pre and post commissioning activities

There are certain obligations which are imposed on the selected entities by the PNGRB board in an order to protect the interest of consumers of NG. Some of the mandatory clauses which provide the guidelines regarding the transfer of grant of authorization obtained by the entity and submission of financial approval are as follows:

• The entity should achieve a firm natural gas contract with its supplier in a transparent manner on the principal of “at an arm’s length” for a period equal to or more than its exclusivity period within 90 days of authorization. The volume of the gas supply under the agreement should be equal to at least 50% of the volumes considered for defining the network tariff bid for each year of the exclusivity period.

• The grant of authorization to the entity cannot be renunciated by way of sale, assignment, transfer or surrender to any other person or entity during the period of 3 years by the date of its issue.

The pre-commissioning activities/obligations of authorized entity includes submission of progress report on quarterly basis including clearances obtained, targets achieved, expenditure incurred, work in progress etc. The pre-commissioning activities also include the compliance of entity to the relevant regulations for technical standards and specifications regarding health and safety concerns to ensure smooth commissioning and operation of CGD network. The board also monitor the progress of entity in achieving various targets with respect to the CGD network project and can provide remedial action in case of any deviations or shortfall from the mentioned targets.

Service obligations for the entity with respect to the PNG and CNG supply are as follows:

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• The entity may take an interest-free refundable security deposit from domestic PNG Customer towards security of the equipments (riser isolation valve before the metering unit; ten meters of pipe up to the metering unit; metering unit; five meters of pipe or tube from the metering unit up to the excess flow check valve-cum-isolation valve; excess flow check valve-cum-isolation valve; and suraksha hose pipe of standard size connecting the domestic PNG burner) and facilities including the labour cost of installation towards last mile connectivity, that is, between the riser isolation valve before the metering unit and the suraksha hose pipe connecting the burner in the customer’s premises for an amount not exceeding rupees five thousand for a single connection.

• The entity shall not exert any undue influence on any domestic PNG customer to purchase natural gas burner stove or avail of any other service not connected with the supply of natural gas.

• The entity shall convert the existing LPG burner stove of a prospective domestic PNG customer into natural gas burner stove free of charge.

• The entity should maintain separate account books including detailed activities-based costing records to segregate direct, indirect and common costs alongwith the basis of allocation and the revenues earned.

• The authorized entity is not allowed to cross subsidize the costs between activity of transportation and marketing of NG in CGD network.

• There would be no preferential access allowed to the entity itself or to any other entity for the activity of transportation of NG in CGD network.

• The authorized entity is solely responsible for carrying out the technical and safety audits.

• The authorized entity is bound to meet the service standards prescribed in PNGRB regulations 2008.

8.3.6 Consequences of default or termination of authorization procedure

In case the authorized entity does not comply by the rules and regulations set by the board or failure in doing the mentioned activities except for force majeure will lead to the following procedure:

• The board will issue a notice to the default entity providing it a reasonable time to take remedial action.

• No action will be taken if remedial action is taken by the default entity in the stipulated timeframe.

• In case of failure to take remedial action the board may encash the performance bond as per the mentioned basis: For first default  25% of the performance bond For second default  50% of the performance bond For third default  100% of the performance bond + 

termination of authorization The entities have to replenish the performance bond within 15 days; after that their authorization will be terminated. The procedure for the termination of the authorization includes:

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• Submission of details of the CGD operations and activities by the entity as per the directions of the board within a period of 30 days of from the date of receipt of notice of termination.

• Entity should continue the work until another entity is awarded with the authorization by the board itself.

• The default entity shall have to provide an undertaking to indemnify the newly authorized entity for any liability which may arise later as a result of its past actions.

8.4 EXCLUSIVITY

The PNGRB board offers some exclusive rights to the authorized entity in an order to maintain the interest of the entity laying or building the CGD network. This exclusivity is offered in the form of Marketing exclusivity and exclusivity for laying and building the CGD network. The rationale and reasons behind offering of these exclusivities to the authorized entity are explained below:

• The exclusivity offered is envisaged with a view to facilitate the development of a planned and integrated CGD network alongwith the vision of providing some incentives to the entity for its investment.

• The exclusivity also facilitates the integrated work by the same and hence leaves minimum space for any delay in work progress.

• Exclusivity also offers the pace and speed required in the initial phase of the development of CGD network in a particular city and makes the authorized entity solely responsible for not meeting the desired targets.

• The exclusivity for the laying and construction of the proposed CGD network is offered keeping the economic life of the project and hence offered for the time period of 25 years (economic life of the project) while the marketing exclusivity is offered with keeping NG demand build up in the city or local area and hence offered for the time span of 5 years only (for the entity operating after the appointed day11).

8.4.1 Exclusivity for laying, building or expansion of CGD network

The board may allow the entity laying, building or expanding the CGD network for the economic life of the project in subject to the following terms and conditions:

• The entity will continue the expansion work throughout the economic life of the CGD project by technically upgrading the network on time to time basis and will carry out the replacement work needed to ensure the smooth operation of the CGD network irrespective of the requirements pre and post-exclusivity period. The entity is also supposed to meet the service obligations even during the post-exclusivity period.

• The economic life of a project starting on or after the appointed day commences from the grant of authorization to the entity.

11 “Appointed day” stands for the day of establishment of the PNGRB Board (01-10-2007)

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• The further extension of the period of exclusivity solely relies with the decision of the PNGRB Board. The board may or may not extend the period of exclusivity in a block of ten years at a time, depending on the satisfactory compliance of the entity with the service obligations and quality of service norms provided in the PNGRB notifications.

• Non compliance to the service obligations may lead to the cancellation of the authorization and exclusivity of the entity.

8.4.2 Exclusivity from the purview of common or contract carrier

The PNGRB Board can allow exclusivity for an entity laying, building and expanding the CNG network from the purview of common or contract carrier. The exclusivity thus offered known as marketing exclusivity and provide exclusive NG marketing rights to the entity for the time period mentioned as per the regulations and norms. The marketing exclusivity offered to the entities as per their date of authorization is:

Date of authorization  Marketing exclusivity (in Years) Entity operating before the appointed day and authorized by the GoI  

3 years from the date of issue of letter by the PNGRB Board if the entity is operating for 3 years or more before the appointed day and 5 years if the entity is operating for less than 3 years before the appointed day. 

Entity authorized on or after the appointed day 5 years from the day of authorization.   

8.4.3 Service obligations

The entity allowed exclusivity to the entity proposing to lay, build or expand the CGD network after the appointed day under the consideration of common or contract carrier should comply with the below mentioned service obligations:

• The entity should provide domestic PNG connections as per the bid; • Entity should lay and build pipeline as per the inch-kilometer bid; • Entity should provide piped natural gas connection on demand to a domestic

consumer for cooking purposes within a distance of twenty five meters of the metering unit at the consumer’s end till the tap-off in the pipeline; and

• The entity must reach all charge areas or wards in the authorized area through pipelines of adequate size to meet the demand of the consumers in these charge areas or wards.

• During the period of exclusivity allowed under regulation 6, the authorized entity may supply compressed natural gas for dispensing either through CNG dispensing facilities owned by itself or by any other entity and in the latter case, the other entity shall be required to pay the compression charge for CNG to the authorized entity and enter into a mutually agreeable commercial contract with the authorized entity for either having the online compression facilities installed in its own dispensing facilities wherein the online compression facilities shall be owned, installed and operated by the authorized entity, or take delivery of CNG ex-online compressor station of the authorized entity for subsequent dispensing in the authorized area.

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• After the expiry of the exclusivity period allowed under regulation 6, any entity using the CGD network for transportation of natural gas may use the online compressor facilities of the authorized entity against payment of compression charge for CNG for dispensing of CNG either by itself or by any other entity.

With the service obligation during the exclusivity period the entity is also awarded with the post-exclusivity service obligations too which states that:

• The entity have to continue the expansion work of pipeline network by increasing the penetration within all charge areas based on the demand of PNG domestic; beside laying the necessary infrastructure for the adequate availability of CNG and at adequate pressure in the CGD network, which could emerge out of entity’s own requirement or that of other entities which may use the CGD network in the post-exclusivity period.

• The entity has to allow third party access on a non-discriminatory basis to any entity in its CGD network.

• The entity must provide piped natural gas connection on demand to a domestic consumer of any entity within any charge area; provided that the distance from the metering unit from the consumer-end to the tap-off point in the pipeline shall not be more than twenty five meters.

8.4.4 Cancellation of exclusivity

The exclusivity offered to the entities can be cancelled on the below mentioned grounds:

• The exclusivity to the entity operating before the appointed day can be cancelled either for the entire authorized area or some of the part, if the entity refuses or fails to lay, build or expand the CGD network to meet the natural gas demand requirements including the requirements of other entities allowed to use the CGD network post exclusivity.

• Non compliance with the above mentioned service obligations.

The procedure for the cancellation of the exclusivity rights is mentioned in the next page:

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The above mentioned flowchart explains the procedure for the termination of the entity that has been found guilty of not performing as per desired standards. In addition to the above mentioned procedure it has been made clear by the board that any of the entity losing its exclusivity for laying, building or expanding its pipeline network will automatically lose its marketing exclusivity too.

8.5 NETWORK TARIFF AND COMPRESSION CHARGE FOR CNG

The cost of NG supplied in its compressed form is determined on a different basis which is been exhaustively referred in process of authorization by the PNGRB Board. The basis for determination of CNG price are clearly mentioned in the notification (dated March, 2008) of PNGRB Board. The entity to which these regulations apply is supposed to submit all

Notice by the Board Remedial action taken by the entity in stipulated time

No remedial action taken by entity

Deduction of 25% of performance bonus on 1st default

Replenishment of the performance bond within a week

Non replenishment of performance bond

Deduction of 50% of performance bond on 2nd default

Non replenishment of performance bond

Replenishment of the performance bond within a week

Deduction of 100% of the performance bond with the cancellation of exclusivity

Replenishment of performance bond within 15 days

Non replenishment of performance bond

Deduction of remaining amount and cancellation of exclusivity and authorization

Deduction of remaining amount and cancellation of exclusivity and authorization

Termination of authorization

Continuous flow of work

Figure 18. Procedure for cancellation of exclusivity

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technical, operating and financial data of the CGD network project required by the board for the determination of the network tariff and compression charges for CNG. The Discounted Cash Flow12 methodology has been adopted by the PNGRB board in calculating the network tariff.

8.5.1 Procedure for determination of network tariff and compression charge for CNG The network tariff and compression charge for CNG in a CGD network shall be determined by considering a Reasonable Rate of Return13 on normative level of capital employed plus a normative level of operating expenses in the CGD network.

1. Return on total capital employed for network tariff and compression charge for CNG

• Return determined separately for capital employed in common infrastructure (pipeline from tap-off point to the City Gate Station), online compressor and related facilities excluding land for online compressing etc.

• Reasonable rate of return is applicable on total capital employed and the entity is free to leverage the financing in any suitable manner.

• Total capital employed = Gross fixed assets in project - Accumulated depreciation + Normative working capital14

• Gross Fixed Assets shall be equal to their actual historical cost of acquisition (including cost of replacement and improvement) or that normatively assessed by the board, whichever is lower.

2. Operating Cost • Cost incurred in operation and maintenance of common infrastructure of CGD

network is computed separately in determination of network tariff while it should be computed separately for online compressor facilities (for compressing NG into CNG) in determination of compression charges for CNG over economic life of project on actual or normative basis whichebver is higher over the specified cost heads (e.g. consumables, utilities, salaries and wages, repairs and maintenance, depreciation on fixed assets etc.)

3. Volume to be considered

The volume is used as a divisor for determination of unit network tariff and unit compression charges should be equal to:

• Actual volume of NG transported in the network 12 Discounted Cash Flow refers to equating the inflows from the projected revenue earnings out of network tariff and compression charge for CNG with the outflows of capital and operating expenditures over the economic life of the project by discounting these flows at the reasonable rate of return. The volumes and outflows are estimated over the economic life which results in the determination of the network tariffs and compression charge for CNG required to be earned by the project to achieving the reasonable rate of return. 13 Rate of return on capital employed == 14% post tax (Remain fixed for economic life of network), considering rate of return on long term risk free govt. securities. 14 Normative Working Capital = 20 days of operating cost excluding depreciation.

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• Actual volume of NG compressed 4. Review of network tariff

• Review of network tariff is carried out separately for each review period. • The review period normally considered for 5 years • Past and present performance of the entity is monitored by the Board. • Board can carry out the review in between two review periods in case of any

emergent condition mentioned in the draft

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CHAPTER 9: SUGGESTIONS AND CONCLUSION

9.1 LEARNINGS FROM THE STUDY

As the time is passing by the competition in City Gas Distribution business is increasing. Recently the EOIs submitted by Reliance confirm stiff competition in near future. Now the decision to set up CGD network in a particular city has become mandatory to the already existing companies having a robust LPG and Liquid fuel retail network. Peeking into the future gives an impression that the consumption of Petroleum liquid fuels and LPG is going to decrease due to the increase in consumption of much safer and cleaner form of fuel like Natural Gas.

The OMCs like IOCL, BPCL and HPCL which are having control in LPG and liquid fuel retailing in most of the states are now forced to introduce their own CGD network in prospective cities and thus increase their product line in an order to maintain their revenues. Similarly industrial consumers are supposed to be tapped first, as industries shows increasing economies of scale and have shorter span of payback period.

In addition to above, increasing demand of NG in states also pushing the retail companies to go for more and more LNG contracts to ensure required NG supply as per their future vision and local demand.

9.2 CONCLUSION

The table shown below compares the total estimated NG demand for year 2012-13 in different districts for the development of CGD network and thus provides data regarding one of the major benchmark for the decision.

City/Town  Estimated Industrial demand of NG in the district in MMSCMD (Realistic Scenario) 

Estimated NG demand for PNG distribution (in MMSCMD) 

Estimated NG demand for CNG distribution (in MMSCMD) 

Total Estimated NG demand  (in MMSCMD) 

Panipat City   0.847758  0.007002301  ------------- -------- Sonepat City  0.269278  0.003737635  0.011010  0.2837 Baghpat City  0.022900  0.000846265  0.00207  0.025816 Baraut Town  0.022900  0.001616749 0.002804 0.0273207Meerut City  0.05171471  0.012603007  0.047876  0.112189 Ghaziabad town  0.738748  0.023776084  0.1  0.8625 Noida   4.118504  0.004343686  0.032150  4.15499 Bulandshahr City  0.1264151 0.001891611 -------------- 0.1283015

Table 35. Comparison of total estimated NG demand of cities

15 Figure incomplete due to unavailability of data

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From the above shown table few trends can be estimated which are;

Cities scoring maximum estimated industrial demand of NG: Noida > Panipat > Ghaziabad > Sonepat > Bulandshahr > Meerut > Baraut > Baghpat

Cities scoring maximum estimated PNG demand: Ghaziabad > Meerut > Panipat > Noida > Sonepat > Bulandshahr > Baraut > Baghpat

Looking from the Company’s perspective the total estimated industrial demand of NG has maximum importance as it will provide the necessary thrust required in the preliminary stage of the CGD network establishment. The CNG and small commercial customers come after the industrial or bulk customers and the PNG customers are provided with the least priority amongst the other form of NG requirement. Similarly other conditions like existing and planned coverage of IGL in NCR region also affect the decision of CGD network establishment.

Considering the estimated industrial NG demand as one of the most important factor, Noida, Panipat, Ghaziabad and Sonepat come out with promising figures. The future development of Noida and Ghaziabad sounds promising but with the increasing operations of IGL and existing coverage of Adani Energy in Noida it may be difficult for IOCL to establish CGD network, Similarly with the growing interest of IGL in developing its CGD network to the NCR a major portion of Ghaziabad may be lost because of undue forces. Recently MoPNG has directed Delhi Govt. to provide land to IGL in Delhi and NCR to avoid long ques of vehicles. Another point which puts these two districts of UP in defensive state is the non-existence of any legislation regarding the implementation of CGD network by the Uttar Pradesh Govt.

Considering the options of Panipat and Sonepat city the first positive aspect which comes out Panipat especially is existing infrastructure and facilities of Indian Oil Corporation Ltd. in the form of Panipat Refinery and its township. Where Panipat refinery is one of the largest refineries of India it also has a township which can be undertaken for PNG distribution in the preliminary stages. Another major factor that has been associated with Panipat is the fact that the pipeline is being laid for the upcoming Naphtha Cracker project which is to be installed in the Panipat refinery itself and since Panipat city is not very far away from Panipat refinery it may prove out to be matter of increasing Economies of scale with lesser payback period. Sonepat being the next place to the Panipat refinery and with growing statistics may also prove out to be the next possible option.

Another factor that adds up to the kitty of these two districts of Haryana is the industrial Policy of Haryana State which promotes the use of Natural Gas in the state hence making working conditions much better.

On the basis of above mentioned points it sounds feasible to employ CGD network establishment in Panipat city and if possible then to follow it with Sonepat city. Leading the total capacity to be installed to be dedicated to the CGD operations on yhe proposed RLNg pipeline as………..

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9.3 SUGGESTIONS

The author recommends the following measures for the PSU to establish sound market portfolio in Gas marketing;

• The OMC should equip its existing ROs on National Highways connecting the above selected city to Delhi with CNG dispensing facilities. In this way the OMC will be able to register its presence in the city from the neighboring state itself and hence will catch the interest of all types of CNG customers. The move will also work out in a positive manner for the industrial consumers and will facilitate the need of NG in their existing or future industrial plans.

• The PNG distribution process should be started from the Panipat refinery township in first phase of development in an order to achieve increasing economies of scale. This move will enable the OMC to get authorization by the PNGRB Board.

• Simultaneously during the course of upgrading existing ROs on highways, existing ROs of different companies having location in remote area of the city or outskirts should be contacted for franchise option. In this way the OMC will be able to generate a good amount of money during the initial stages which will be a profitable venture with the outlets of other OMCs. In return the company will receive increasing market presence and credibility.

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ANNEXURE1. REFERENCES

1. Market Demand Study (industrial Demand) for RLNG on proposed Dadri-Panipat pipeline-March 28, 2008 by MDRA group.

2. http://www.censusindia.gov.in last accessed on June 30, 2008. 3. http://www.panipatrefinery.net/left.asp?mSection=Highlights last accessed on July

14, 2008. 4. http://www.infraline.com, last accessed on July 17, 2008. 5. Sanketak-2007, a ready reckoner to the growing districts in Uttar Pradesh. 6. Basic datasheet of Ghaziabad, Meerut, Gautam Budh Nagar, Bulandshahr, Baghpat,

Panipat, Sonepat from Census of India 2001 7. Statement of Dr. U. D. Chaubey, General Manager, Indraprastha Gas Limited on 8th

annual general meeting. 8. http://iglonline.net last accessed on June 12, 2008. 9. Corporate presentation, IOCL, March 14, 2008. 10. Corporate presentation by Om Narayan, IGL. 11. Press release in http://www.assocham.org on June 19, 2008 12. http://www.indianelpvii.com last accessed on June 23, 2008 13. http://www.petroleum.nic.in last accessed on June 6, 2008. 14. http://mahanagargas.com last viewed on June 26, 2008. 15. http://www.gglonline.net last viewed on June 26, 2008. 16. http://www.sonipat.nic.in last viewed on June 30, 2008. 17. http://www.haryanaindustries.nic.in last viewed on June 30, 2008. 18. http://pngrb.gov.in lat accessed on July 8, 2008. 19. Expression of Interest (EOI) submitted by GAIL India Ltd. and RGCL to the PNGRB

Board for CGD network development in Ghaziabad, Noida, meerut, Sonepat. 20. Corporate Presentation by Mr. B.S. Negi on cross border pipelines. 21. Internal Document on City Gas Operations in India by IOCL. 22. Dadri-Panipat pipeline map via http://infraline.com 23. PNGRB regulations on exclusivity, authorization and network tariff estimation. 24. PNGRB Draft Paper on Natural Gas Utilization Policy-2007.