The state of Gujarat has always played an important role in the gas sector. Gujarat’s transmission pipeline infrastructure is the most extensive in the country. It also has the largest city gas distribution network in the country. Further, the state is one of the largest producers and consumers of gas. In an interview with Indian Infrastructure, Dr J.N. Singh, chief secretary, Government of Gujarat, and chairman, Gujarat State Petroleum Corporation (GSPC), shares his views on the current state of gas infrastructure in Gujarat, the city gas distribution (CGD) segment, development of cross-country pipelines and liquefied natural gas (LNG) infrastructure, the key challenges facing the oil and gas sector and the future priority areas…
What role has gas infrastructure played in the development of Gujarat?
The state, through its proactive policies, has pioneered the development of gas-based infrastructure, which has facilitated the growth of industries, attracted investment in the state, supported the creation and expansion of the CGD network thus promoting compressed natural gas (CNG) and piped natural gas (PNG), and aided in the generation of direct employment in the gas infrastructure segment and indirect employment in other industries, thereby inducing a multiplier effect. Today, Gujarat can boast of its widespread natural gas network spread over 4,500 km across the length and breadth of the state connecting CGD and industries in the power, fertiliser, petrochemical, refinery and steel sectors. Natural gas pipelines and the CGD network cover almost 25 of the 33 districts in the state, and the CGD network in Gujarat currently accounts for 32 per cent of total CNG stations, 30 per cent of CNG vehicles and 42 per cent of PNG connections across the country. The CGD network in Gujarat is one of the most developed in the country. More than 25,000 km of distribution pipeline network has been developed in the state and has provided last-mile connectivity to most of the areas. Such high penetration levels have ensured that CGD consumption in Gujarat is more than 40 per cent of the entire CGD consumption in the country. Further, with the award of authorisations to CGD companies in the ninth bidding round conducted by the Petroleum and Natural Gas Regulatory Board (PNGRB), all districts of Gujarat will have natural gas pipeline connectivity. With such an extensive gas infrastructure, Gujarat accounts for almost one-third of the total gas consumed in the country.
The state is home to two full-time operational LNG terminals of the country located in Dahej and Hazira, which account for more than 90 per cent of the LNG imports in the country. Further, with the expansion of these terminals and setting up of new LNG terminals along the coast of Gujarat, the state is poised to become the “LNG Gateway of India”.
What is your perspective on the CGD sector in general and the efforts of Gujarat Gas in particular?
The CGD segment has witnessed tremendous growth during the past few years, accounting for 16 per cent of the total gas consumed in the country in 2017-18. The sector is on the threshold of a new era. The central government has also accorded the highest priority to the fulfilment of the CNG and PNG (domestic) requirement and 100 per cent domestic gas allocation is being made for this purpose.
Further, the CGD sector will play a critical role in realising the government’s vision to increase the share of natural gas in the energy mix to 15 per cent by 2030. Accordingly, the PNGRB launched the ninth CGD bidding round in April 2018 for 86 geographical areas (GAs) in 174 districts across 22 states/union territories, covering 24 per cent of India’s total geographical area and 29 per cent of its population. The PNGRB also issued a letter of intent to successful bidders in 78 of the 86 GAs in August 2018. With the completion of the ninth CGD bidding round, CGD networks will be available in 178 GAs across 280 districts spread over 26 states and UTs, covering more than 35 per cent of India’s geographical area and 50 per cent of the population.
Gujarat Gas Limited (GGL) has made persistent efforts to provide last-mile connectivity across the state and has the biggest CGD network in India with the highest volume and customer base. GGL accounts for 63 per cent of the total CNG stations and 69 per cent of total PNG connections in the state. Most importantly, the company has focused on both the urban and rural areas of the state, owing to which around 1,000 villages in the state have access to PNG.
What are your views on the development of cross-country pipelines and GSPL’s efforts in particular?
Interstate pipelines are essential for the energy security of the country as they ensure availability of natural gas across the commercial, domestic and transport sectors and create future demand. Such pipelines create a multiplier effect by way of industrialisation and socio-economic development.
A Gujarat State Petronet Limited (GSPL)-led consortium comprising national oil companies Indian Oil Corporation Limited, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited has been authorised by the PNGRB to develop the Mehsana-Bhatinda-Jammu pipeline (MBJPL) and the Mallavaram-Bhilwara-Bhopal-Vijaipur pipeline (MBBVPL). The consortium formed two special purpose vehicles – GSPL India Gasnet Limited (GIGL) to execute MBJPL and GSPL India Transco Limited (GITL) to execute MBBVPL. These pipelines would traverse through several states including Gujarat, Rajasthan, Punjab, Haryana, Maharashtra, Telangana, and Andhra Pradesh. These interstate pipelines would enable gas flow from Rajasthan (Vedanta’s Barmer field and other gas fields in Rajasthan), existing and upcoming LNG terminals in Gujarat and demand centres in the northwest hinterland through the new regions in Rajasthan, Haryana, Punjab, etc. that have no pipeline connectivity.
These are the longest pipeline projects bid out by PNGRB. More than 800 km of pipelines are at advanced stages of completion. Of this, 440 km of pipeline sections are being implemented by GIGL and 365 km by GITL. The company has put utmost efforts in implementing the projects despite facing several constraints including change in market conditions, which affected the viability of the projects.
What is your opinion on the development of LNG infrastructure, especially the multiplicity of terminals in Gujarat?
Natural gas accounts for almost 6 per cent of India’s energy mix, well below the world average of around 24 per cent. One of the main reasons for the low contribution of natural gas in the energy mix is the lack of natural gas and LNG infrastructure in the country.
Currently, there are only two LNG terminals operational full-time in the country, at Dahej and Hazira in Gujarat. Of the country’s other two terminals, the Kochi terminal remains underutilised owing to a lack of pipeline connectivity and Dabhol owing to a lack of breakwater facilities. Besides these, a greenfield LNG terminal is being set up by GSPC LNG at Mundra, and will be commissioned in a couple of months.
There are capacity constraints that are hampering the growth of gas consumption periodically. New terminals will support the development of gas markets with improved availability of LNG. These LNG terminals will meet the gas demand across the country as around 60 per cent of LNG imported on Gujarat coasts flows to the rest of India.
In such a scenario, setting up more LNG terminals along the coast of Gujarat makes sense as the state has a rich coastline, an established gas grid, existing interstate pipelines that can transport gas to the central, northern, western, southern markets, and new interstate pipelines under development to efficiently transport gas to many newer markets. Currently, LNG accounts for 50 per cent of the country’s total gas consumption and hence it is imperative to meet the burgeoning energy requirement of the country as domestic gas alone cannot fulfil it.
Therefore, it makes sense to have as many LNG terminals in the state as possible keeping in mind the energy security of the country. In fact, Gujarat also introduced the LNG Terminal Policy in 2012 to encourage investment by entities in the development of LNG terminals in the state.
What are the key issues and challenges in the oil and gas sector?
It has been seen in the past that domestic gas acts as a catalyst for the development of the gas sector. However, India has not seen significant commercial success in oil and gas discoveries in almost a decade. On one end, the LNG terminals have been marred by capacity constraints, while the slow pace of infrastructure development is an issue (transmission and distribution) on the other end.
The gas industry is facing infrastructure bottlenecks owing to the non-availability of pipeline connectivity in major demand centres, which is preventing natural gas from reaching the end consumer. However, the government has taken many initiatives to encourage investments, including expediting environmental clearances for critical infrastructure projects and enabling momentum in development. The lack of private participation in the development of pipeline infrastructure is also an issue that needs to be addressed.
What are the strategies/policy measures needed to address these challenges?
The government is working towards encouraging investments in the exploration and production segment to explore the potential of Indian hydrocarbon reserves. It has also been working on several policies/initiatives to ensure that the three crucial pillars for attracting investments in the development of oil and gas reserves are in place that is, fiscal stability, marketing freedom and gas pricing.
Support from the government in the form of monetary assistance and demand will encourage investments in the segment and lead to faster roll-out of infrastructure projects.