Views of D.K. Sarraf

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

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

Current infrastructure and augmentation plans

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

The prospects of the CGD segment have also improved in the past couple of years. Currently, the country has a total of 230 GAs, as compared to just 76 GAs two years ago. Besides, the percentage of the population with access to the CGD network has increased significantly from 17 per cent to 71 per cent over a span of two years. Due to considerable commitment made by the bidders in the 9th and 10th CGD Bidding Rounds, the number of domestic piped natural gas (PNG) connections will rise from 6 million to around 50 million in the next six years. Alongside, number of compressed natural gas (CNG) stations would increase from existing 2,300 to 10,000.

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

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

Infrastructure for handling import of LNG is also expanding in the country. From effectively only two terminals in the past i.e. – Petronet LNG Limited’s (PLL) Dahej, and the Shell’s Hazira terminals in Gujarat, now country’s LNG import capacity is on the increase. GSPL’s Mundra in Gujarat and IOCL’s Ennore terminals have since been commissioned; PLL’s Kochi (Kerala) would now be effectively utilised after the commissioning of Kochi-Mangalore pipeline; the capacity of GAIL’s facility at Ratnagiri may also increase. Besides this, H-Energy’s Jaigarh (Maharashtra), Swan’s Jafarabad, HPCL-Shapoorji’sChhara (Gujarat) and Adani’sDhamra (Odisha) are at different stages of construction, amongst others.

A string of initiatives

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

To enable the gas exchange functions efficiently, several other reforms in the gas market are being simultaneously launched. For example, unified tariff which makes gas affordable in far flung areas; Gas Access Bulletin Board – an online system which would show the real-time available capacity in the gas pipelines resolving the buyers’ concern on non-availability of capacity in the pipelines; standardised gas transportation agreement (GTA) which ensures fair terms to both transporters as well as shippers, etc. If all goes as planned, PNGRB would notify the exchange regulation by September-end and authorise a gas exchange by November this year. The regulatory authority plans to enable LNG trade on the exchange. This is expected to integrate LNG import market with gas market in India and also enable the CGD GAs which are not yet connected to gas pipelines to buy LNG from the exchange and supply in their GAs either as LNG or gas.

Another step taken by the PNGRB to increase the share of gas in the transport sector is facilitating the set-up of LNG stations by any entity anywhere in India, irrespective of whether the area has been authorised for CGD or not. Clarifications have been issued by PNGRB on the same.

The PNGRB is also working with an international consultant to assess demand of natural gas in various areas in India for the years up to 2040 and thus arrive at the further requirement of natural gas pipelines across various regions. This is going to be a major step in development of further infrastructure in India.

Steps taken to deal with the Covid-19 scenario

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

The way ahead

In reply to a question, MrSarraf informed that the regulatory authority has identified the GAs as well as the regulatory changes for the 11th CGD bidding round. PNGRB is keeping a watch on the situation in light of Covid-19 and the bidding process for the round would soon be initiated as the position improves.

Replying to another question he said, fertiliser companies can buy natural gas on the Gas Exchange to be launched. Fertiliser companies can either become members or trade as members’ clients like other buyers on the exchange.


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