The scale of the ninth and tenth bidding rounds has highlighted the government’s vision of creating city gas distribution (CGD) infrastructure across the country. The CGD sector has been growing by leaps and bounds in recent years. The sector is expected to emerge as the largest consumer of natural gas in the years to come. Like other sectors, the CGD sector has also been impacted by the outbreak of Covid-19, which derailed project execution and reduced earnings of CGD operators due to a considerable decline in gas consumption during the lockdown period.
While India’s total gas consumption has now returned to its pre-Covid levels, a sharp decline in domestic gas production has been witnessed, resulting in an increase in liquefied natural gas (LNG) imports. The government continues to promote the use of natural gas with the aim to increase its share in the country’s energy mix to 15 per cent by 2030.
Indian Infrastructure presents a snapshot of the existing and upcoming CGD networks of some companies…
THINK Gas
The CGD sector is India’s fastest growing end user of natural gas, with a compound annual growth rate (CAGR) of 5.6 per cent over the past five years. The demand for natural gas has been growing steadily over the past few years. Meanwhile, the import of LNG has been increasing due to a decline in the domestic production of natural gas. The LNG import dependence stood at 53 per cent in 2019-20, 6 per cent higher than that in 2018-19. At present, India has six LNG import terminals, five on the west coast and one on the east coast. The current import capacity of the country stands at 40 million tonnes per annum. The government has provided a range of policy relaxations in an attempt to enable the shift towards natural gas.
India has an existing CGD network of 17,000 km of high pressure gas pipeline. It is expected that with the government’s drive to create more infrastructure, this number will double in the coming years. Currently, a large number of pipelines and compressed natural gas (CNG) stations are under construction in the country.
THINK Gas operates in Ludhiana, Jalandhar, Barnala, Moga, Kapurthala and SBS Nagar districts in Punjab; Baghpat in Uttar Pradesh; Bhopal, Rajgarh and Shivpuri in Madhya Pradesh; and Begusarai in Bihar. The company came into business after the ninth bidding round. It commissioned its first virtual city gas station in Bhopal on December 30, 2020. The station will be scaled up to provide full service of low pressure and medium pressure, and high pressure gas supplies, CNG cascade filling, LNG dispensing and LNG cylinder filling. As part of its eight-year targets, the company aims to connect nearly 1.6 million consumers, add 250 CNG stations, and lay a pipeline network of 6,000 inch km. Despite the roadblocks posed by the outbreak of the novel coronavirus, the company is expected to register a positive growth rate in the coming months. As of January 2021, THINK Gas has commissioned 40 CNG stations.
AG&P City Gas Limited
AG&P City Gas Limited (AG&P) operates its business in 31 districts in the country. The company was awarded three geographical areas (GAs) in the ninth round and nine GAs in the tenth round of bidding. At the end of the eighth year, AG&P intends to provide nearly 12 million domestic connections, set up 1,554 CNG stations and lay 17,105 inch km of pipeline network. Of the 12 GAs authorised to the company, four do not have a pipeline network. These are the Jodhpur, Nellore, Kanchipuram and Chittoor GAs. While there is no clarity on pipeline connectivity for the Jodhpur and Nellore GAs, Kanchipuram and Chittoor are expected to get connectivity over the next two years. Further, all GAs except Ramanathapuram have access to truck lines.
In view of this, AG&P has decided to adopt a hybrid network methodology, wherein the company will get LNG-loaded tankers from LNG import hubs to liquid-to-compressed natural gas (LCNG) stations. From the LCNG stations, the LNG will be distributed over the local area network. The gas will be distributed with the help of cascades or steel/polyethylene plastic pipelines. The hybrid network is being adopted to save time and ensure that revenue is generated.
AG&P plans to procure LNG trucks on a lease basis. In the initial phase, it has acquired 10 trucks while eight more have been ordered. The total demand estimated by the company is nearly 300 tankers. The company has signed a global MoU with Chart Industries for the supply of LNG tankers. By the end of 2020-21, the company is targeting the completion of 180 CNG and 70 LCNG stations. While the company has received some extension from the government on account of Covid-19, it is expecting more support from the Petroleum and Natural Gas Regulatory Board (PNGRB) in the future.
Unison Enviro Private Limited
Unison Enviro Private Limited (UEPL), a subsidiary of Ashoka Buildcon Limited, has been given the authorisation of three GAs by the PNGRB. The Ratnagiri GA was awarded to the company in the sixth round of bidding in August 2016. The company was then awarded the Latur and Osmanabad GA, and the Chitradurga and Devanagere GA in the ninth round of bidding. As per the minimum work programme by the PNGRB, UEPL is expected to lay an 1,800 inch km pipeline and provide 19,856 domestic piped natural gas (PNG) connections in the Ratnagiri GA by 2022. A city gate station has been set up opposite the GAIL tap-off in Dingni to cater to the demand in Ratnagiri city and the nearby area.
In the Latur and Osmanabad GAs, the company is expected to provide 9,999 domestic PNG connections, 30 CNG stations and lay a 10 inch km pipeline at the end of the eighth year. The number of charge areas in this area stands at 18 and the demand potential offered by the GA is approximately 60,000 vehicles. The tap-off for the GA is taken from the east-west pipeline. Meanwhile, in the Chitradurga and Devanagere GA, UEPL is expected to provide 101,000 domestic PNG connections, set up 42 CNG stations and lay a 75 inch km pipeline at the end of the eighth year. The number of charge areas under this area stands at 12 and the demand potential offered by the GA is approximately 67,000 vehicles.
The tap-off for the GA is taken from the Dabhol-Bengaluru pipeline, which is at a distance of 7 km from Chitradurga; Devanagere is to be served via cascades until the network is in place. As of January 2021, UEPL operates 14 CNG stations in Ratnagiri district and two each in Latur and Osmanabad and Chitradurga and Devanagere districts. It has also laid 53 km, 4.5 km and 35.9 km medium density polyethylene pipeline in the three districts respectively. By the end of 2021, the company is targeting the completion of 17 CNG and two LNG stations, and providing nearly 12,000 domestic connections.
In sum
CNG infrastructure has witnessed significant growth over the past five years. Domestic connections have increased by 20 per cent, commercial connections by 9 per cent, industrial connections by 16 per cent and CNG stations by 28 per cent (from 2015-16 to 2019-20). Increased government focus, easing of regulations, a supportive policy framework and use of gas as a fuel to curb carbon emissions are some of the factors that will further drive the growth of the sector.
More than 130 GAs were awarded under the ninth and tenth rounds of bidding. In view of the huge pressure on CGD companies and resources, and the damage caused by Covid-19, it would not be right to announce the eleventh round at this time.
Based on presentations by Pankaj Wadhwa, Senior Vice-President – Commercial & Marketing – LNG, THINK Gas; Chiradeep Datta, Chief Operating Officer, AG&P; and Mukund Chandak, Chief Executive Officer, UEPL, at a recent India Infrastructure conference