Growing the Network: New GAs and smart cities offer opportunities for CGD development

New GAs and smart cities offer opportunities for CGD development

In its Vision 2030 document, the Petroleum and Natural Gas Regulatory Board (PNGRB) has set a target of increasing the share of natural gas in the country’s energy mix, from the present 6 per cent to 15 per cent in the medium term and further to 24 per cent in the long term.

In the past few years, industry confidence, low global liquefied natural gas (LNG) prices, the ability of the Indian government to renegotiate LNG prices on the global platform, and clear-cut policies have helped in the growth of the city gas distribution (CGD) industry.

Smart cities

Under the Smart Cities Mission, four cities in Rajasthan – Jaipur, Ajmer, Kota and Udaipur – have been selected to be developed as smart cities. As part of the mission, the government plans to encourage the use of clean energy in the state by developing CGD networks in the selected cities. Rajasthan State Gas Limited (RSGL), which is the authorised entity for CGD network development in the state, has formulated plans for setting up compressed natural gas (CNG) highways (green highway zones with CNG stations along the route) along the Kota-Jaipur, Kota-Baran-Indore-Mumbai, Jaipur-Ajmer, Jaipur-Sikar and Bhilwara-Chittorgarh-Udaipur stretches.

In March 2016, RSGL completed construction work on a mega CNG station at Neemrana and CNG facilities at Kukas and Jaipur. The facility at Neemrana will supply CNG to industrial clusters along National Highway (NH)-8. With the commencement of commercial operations at the Neemrana CNG station, natural gas will now be available to all the industrial zones at Behror, Sotanala, Keshawana and Kukas.

Further, the Kota-Jaipur and Kota-Baran-Indore-Mumbai CNG highways are expected to be commissioned by the last quarter of 2017.

Once the proposed CNG facilities are operationalised, Rajasthan will become the first state to use clean energy in each of the proposed smart cities.

New GAs

In August 2016, Unison Enviro Private Limited was granted the authorisation for laying, building, operating and expanding the CGD network in the Ratnagiri geographical area (GA). The proposed network will cover an area of 8,276 square km. Further, 1,800 inch-km of pipeline will be laid as part of the project. Over the next five years, Unison has set a target of providing 19,856 domestic piped natural gas (PNG) connections across the city. The primary source of natural gas supply for the Ratnagiri CGD network will be GAIL (India) Limited’s Dabhol-Bengaluru natural gas pipeline. Unison is also looking for LNG supply as a secondary source of gas supply for the upcoming Ratnagiri CGD project.

Unison is expected to start the sale of CNG from May 2017. However, in case of macroeconomic disturbances, the supply could be delayed to October 2017.

Issues and challenges

The lack of availability of domestic gas and inadequate pipeline connectivity are the major challenges in the development of CGD networks in several GAs. Besides, owing to factors such as low capacity utilisation rates, absence of incentives for using green fuel, and the lack of a carbon tax levy for the emission of greenhouse gases also add to the low level of stakeholder participation and slow network development.

The way forward

In light of these challenges, the preparation of a master plan has been proposed to ensure synchronisation between activities of CGD entities and state governments. Issues such as land availability, delays in securing financial closure, etc. are expected to be addressed with improved stakeholder coordination. Also, a clear roadmap stating the roles and responsibilities of the central government, the PNGRB, state governments and CGD entities is required for the effective development of networks.

Going forward, the identification and establishment of various industrial clusters along the pipeline corridor with common manufacturing facilities has been proposed for meeting the growing demand for natural gas. The development of industrial clusters will help establish an efficient supply chain and thereby bring in manufacturing efficiency. It will also lead to the consolidation of manufacturing activities in the vicinity of suppliers which will ensure better cooperation among manufacturers.