Three Reliance Industries promoter group companies RPTL, RGTIL, RUPPL merged with holding firm RIHPL

In a complex restructuring move, three entities owned by the promoter group of Reliance Industries have been merged with another group affiliate in an exercise that resulted in recognizing an impairment of about Rs 15,800 crore.
The three entities - Reliance Ports and Terminals ( RPTL), Reliance Gas Transportation Infrastructure (RGTIL) and Reliance Utilities and Power (RUPPL) - will be merged with Reliance Industries Holding ( RIHPL), a company that is, in turn, owned by the promoters of RIL, Crisil said in a statement reaffirming the credit rating.
ET NOW, this newspaper's sister concern, had first reported the restructuring plan on March 21, this year. The restructuring involves demerger of investments (including impaired investments) to reduce cross holdings and loans and advances among group companies, transfer of businesses, and changes in redemption terms of some preference shares.
All three companies will now have a common owner. The standalone net worth of the demerging companies are expected to decline. However, the aggregate external debt and cash flows for the three companies will not change materially as a result of the restructuring, Crisil said.
RIHPL's 100% ownership in PTL, RUPPL and RGTIL is in addition to the economic interest it holds in nearly 370 million RIL shares, either directly or indirectly.

A R 65 nightmare: CNG to kiss petrol prices soon?

Here's some more bad news in store for gas consumers. CNG prices in Ahmedabad, which crossed Rs50 per kg recently, are projected to rise sharply and touch Rs60 - Rs65 a kg by March next year. The prices of piped natural gas can also be expected to go northwards over the coming months.
Petronet LNG Limited (PLL), the country's biggest gas importer, has projected a 26% rise in the price at which it supplies gas to Gujarat State Petroleum Corporation from April 2012 to March 2013.

"PLL's projections show an increase of around two per cent every month in the gas supply price," said a senior official.

From Rs40 per kg in June 2011, CNG price in Ahmedabad touched Rs45 per kg in November, and crossed Rs50 a kg in April 2012.

DNA was the first to write in June 2011 that CNG price could touch Rs50 in a year. The price was almost unthinkable at the time, and even industry experts were surprised by the manner in which prices had gone up.

Interestingly, PLL had projected 22% increase in gas price for GSPC in 2011-12, while the actual increase was 27%.

And if PLL's price projections for the current year are anything to go by, CNG could cross Rs60 and even touch Rs65 per kg over a year or so.

"CNG price of Rs60 or even higher is a very distinct possibility. These are testing times, and no company can absorb this kind of hike. The only option is to pass on the hike to consumers," said an official of a city gas distribution company. However, officials warn that the rise could be even steeper if the rupee depreciated further vis-à-vis the US dollar from current levels and/or if gas prices went up. "These are factors beyond our control. All we can do is hope that gas prices cool down in international markets," the official said.

State energy minister Saurabh Patel blamed Centre's faulty policies for the spike in gas prices in Gujarat.

"This is a glaring example of Centre's discriminatory attitude towards Gujarat. Both Delhi and Mumbai get cheaper domestic gas, while Gujarat is entirely dependent on expensive R-LNG (re-gasified liquefied natural gas). The result is that Gujaratis have to pay much more for CNG than consumers in Delhi and Mumbai," Patel said. Spot LNG prices are currently in the region of $16 — 18 per Million Metric British Thermal Units (MMBTU) as against domestic gas which is priced at $4.20 — 5.75 per MMBTU. The minister claimed that CNG prices in Gujarat could come down by as much as 20 - 30% if the state was allotted domestic gas.

A CGD operator echoed the minister's view, but also pointed out the high rate of VAT on CNG in Gujarat. "Gujarat government levies 15% VAT on CNG, which is the highest in the country. CNG prices in the state can fall sharply if the tax is cut," he said.

The CNG selling price of Adani Gas, which also depends on GSPC for its gas requirements, is also seen in the range of Rs60 - 65 a kg in a year.

PNGRB slashes network tariff on piped cooking gas, CNG charged by IGL

NEW DELHI: Oil regulator PNGRB has slashed the network tariff and CNG compression charge IGL billed on sale of piped cooking gas to households and CNG to automobiles in the national capital, by over 60 per cent and asked the firm to refund to consumers the excess amount charged since 2008.
The Petroleum and Natural Gas Regulatory Board (PNGRB) in an April 9 order fixed IGL's pipeline network tariff at Rs 38.58 per million British thermal unit as against Rs 104.05 per mmBtu proposed by the company.

It also cut compression charge for CNG to Rs 2.75 per kg from Rs 6.66 per kg submitted by IGL.
PNGRB said the new charges would be applicable from April 1, 2008.
"The Network Tariff and the Compression Charge for CNG in respect of the Delhi city gas distribution network of IGL shall be Rs 38.58 per mmBtu and Rs 2.75 per kg respectively with effect from April 1, 2008," it said.
IGL, it said, shall recover the Network Tariff and Compression Charge for CNG separately through an invoice without any premium or discount on a non-discriminatory basis.
"... the difference between the Network Tariff and Compression Charge for CNG submitted by IGL and that determined by the Board ... would be reflected through appropriate reduction in selling prices from the date of issuance of this order (April 9)," PNGRB said.
The Board said the modalities and timeframe for refund of differential Network Tariff and the Compression Charge for CNG for the period from April 1, 2008, till the date of issuance of the order shall be decided and advised subsequently.

Bhagyanagar gears up for tariff order

Bhagyanagar Gas Limited (BGL), which is developing CNG and city gas distribution network for Hyderabad and Vijayawada, is expecting tariff order from the Petroleum and Natural Gas Regulatory Board (PNGRB) soon.
“We expect the tariff order to come shortly as the PNGRB had kickstarted the process of fixing tariff for city gas and CNG with Delhi’s Indraprastha Gas yesterday,” a senior official of BGL told Business Standard.
BGL is a joint venture between Hindustan Petroleum Corporation Limited (HPCL) and GAIL India Limited. Andhra Pradesh Industrial Infrastructure Corporation (APIIC) also holds 5 per cent equity in the company for it has provided land to develop the infrastructure.
Set up in the year 2003, BGL first commenced CNG distribution operations on a small scale in 2005 from Vijayawada and later expanded the same to Hyderabad.
The regulator has to fix the tariff as the company had got permission for supply and distribution of CNG and piped gas for both the cities before the PNGRB was constituted. In the case of Kakinada, the company won the city gas distribution project, where the tariff was decided at the time of awarding it.
The company is receiving about 0.045 mmscmd of natural gas from Reliance Industries Limited (RIL), and this is mostly used for CNG requirements of road transport corporation buses and other private vehicles. It recently launched piped gas distribution on a pilot scale to a colony in Hyderabad.
The company estimates a potential demand for 1 mmscmd of natural gas to meet the CNG needs of vehicles and buses in Hyderabad apart from 0.125 mmscmd for domestic gas in the initial phase.
On the possibility of any sharp cut in the rates proposed by BGL, the official, who did not want to be named, said he did not expect such a thing as what they had asked for or currently were being charged was very reasonable compared with that of Indraprastha. The company had submitted its proposals to PNGRB almost one-and-a-half years ago followed by several rounds of negotiations with the regulator, according to the official.
BGL had drawn up the CNG and piped gas distribution network project at an estimated cost of Rs 4,000 crore covering Hyderabad, Vijayawada and Kakinada cities. Of this, close to 90 per cent of the investment is expected to be required for developing the network in the state capital. However, the financial closure for the project is still pending. In addition to the tariff order, the regulator also prescribes a 5-year time line to complete the entire project.
“We hope to conclude the financial closure in the next four months. Discussions with bankers are on,” said the official. Though there was a proposal to rope in private players into the project, a final decision had not been yet taken, sources said. The company is in the process of finalising the contracts for laying the gas distribution network in Hyderabad.
BGL was also planning to bid for city gas distribution projects for districts of Rangareddy, Medak, Khammam and Nalgonda. However, the regulator had cancelled the process ahead of its commencement as it wanted to take a re-look at the framework for awarding projects in the country.

GSPC Gas hikes CNG, PNG prices

There is no end to bad news for consumers. A day after milk prices went up by up to Rs2 a litre, the GSPC Gas on Tuesday announced a sharp hike of almost Rs5 per kg in CNG prices. This comes just ten days after Adani Gas too had hiked CNG prices.
Officials said that GSPC Gas revised CNG prices from the current Rs45.25 per kg to Rs50.20, i.e. by Rs4.95 per kg, an increase of almost 11%.
The GSPC subsidiary also hiked PNG prices for domestic consumers from Rs16.90 per standard cubic metre (scm) to Rs20.91 per scm. The prices are inclusive of all taxes and duties. The hike would come into effect from April 11.
Adani Gas had revised CNG prices from Rs45.50 per kg to Rs50.20 with effect from April 1, and it was just a matter of time before GSPC Gas too followed suit.
GSPC Gas cited its dependence entirely on imported gas in view of non-allocation of cheaper domestic gas by the Central government as the reason for the price hike. The company said that the situation had further compounded of late, due to increase in spot LNG prices in international markets and due to depreciation of the rupee vis-à-vis the US dollar.
"The hike was necessitated to cover the mounting losses," GSPC Gas said.
Following the revision, both Adani Gas and GSPC Gas now sell CNG at Rs50.20 per kg.However, GSPC Gas' domestic PNG is priced significantly lower than that of Adani Gas. Adani Gas sells domestic PNG at Rs24.50 per scm excluding of VAT, while GSPC Gas has revised PNG price to Rs20.91, which includes VAT and other levies.
Interestingly, Gujarat Gas Company, which operates city gas distribution network in south Gujarat, sells CNG at Rs44.95 per kg, and PNG at around Rs19 per scm.

5 reasons why IGL shares tanked 40%

Shares in gas utilities firm Indraprastha Gas (IGL) plunged 33.7% to end at Rs 229.80 on the Bombay Stock Exchange. In contrast, the Sensex gained 22 points to 17,244. IGL stocks closed off the day's low. In early trade, shares of the company had touched a low of Rs 170.

The sharp fall was over a government regulator's directive to cut gas tariffs retrospectively from April 2008. IGL has approached the Delhi High Court against the regulator’s order, the company confirmed.

"IGL has approached today Delhi high court, where we have challenged the constitutionality and legality of the powers of the PNGRB (Petroleum and Natural Gas Regulatory Board) to fix the tariff," Managing Director M Ravindran said.

Here are five reasons why the stock tanked.


1) Government regulator Petroleum and Natural Gas Regulatory Board has ordered Indraprastha Gas Ltd (IGL) to cut tariff by around 60%. The new tariff will be applicable on retrospective basis from April 2008. This is the first time the regulator has determined tariff for any City Gas Distribution player.

"It is not a retrospective order. This was on the cards from the beginning. The tariff determination for the network is the statutory responsibility of the regulator for which the regulator has notified the regulations in March 2008. So from that day, the tariff determination as provided in the regulation takes hold," L Mansingh, ex-chairman of PNGRB told NDTV Profit.

 2) Impact on financials: The total refund on account of the retrospective nature of the order could be Rs 900-1,200 crore, which is 20-25% of current market capitalization, Citigroup said. The potential downside is to the tune of 45-65% to earnings before interest, tax, depreciation and amortization. IGL will struggle to make even normative returns on the capital, Citi noted.

3) The regulator wants IGL to return the excess tariff charged till now. However, it has not yet provided a framework to return the excess tariff charged.
"This entire business of CNG and PNG is a retail business, which is a cash and carry business. There are no identifiable customers so retrospective refund is not possible. This the basis on which IGL has gone to High court," Ravindran said.



4) Tariff order also requires selling prices to be reduced immediately.

5) The selling price for gas includes cost of gas, network tariff, compression charge and marketing margin. The regulator has determined the 'network tariff' & 'compression charge.' For now, marketing margins remains a key variable for earnings as margins are not regulated currently. So, IGL has the option to increase marketing margins.

HSBC has downgraded the stock to ‘underweight’ and cut the target price to Rs 150 per share from Rs 366 per share. The company can make up for lower tariff by higher marketing margin, but it may be short-lived.

"Investors across the globe find it difficult to predict at what time government will come into the picture in state run companies...  How do you believe in India if they keep on doing such things from retrospective effect," Deven Choksey, MD, KR Choksey told NDTV Profit.

Other government firms that have significant stake in IGL also saw selling pressure. Oil marketing firm BPCL, which owns 22.5% stake in IGL, declined 2%. Another gas distributor GAIL India Limited that owns 22.5% stake in IGL ended 1.8% lower.

"Such a drastic reduction in tariffs for IGL, apart from raising concerns for the company, will also likely raise concerns for possible tariff cuts for networks where tariffs are not yet determined," Nomura said in a note to clients.

Pipeline firm Gujarat State Petronet and gas distribution firm Gujarat Gas Company may soon get tariff revision orders from the regulator, sources told NDTV Profit. Natural gas importer Petronet LNG may also come under the purview of the gas regulator.

The regulator will also decide on the marketing margin that can be charged by any gas marketing entity. Until now, the margins have been agreed on between the buyers and the sellers.

Sources said that the regulator has asked for data regarding marketing margins from all companies though it is yet to decide on a cap on marketing margins.

Odisha, GAIL to sign pact for Rs 5,000-cr pipeline soon

he joint venture (JV) agreement to be signed between the Odisha government and GAIL India Ltd for a Rs 5,000-crore natural gas pipeline is set to be finalized soon. The pipeline that will stretch from Surat (Gujarat) to Paradip will pass through two other non-major ports-Dhamara and Gopalpur and also some major towns like Angul and Sambalpur.
“We have sought the views of relevant departments and state agencies like Industrial Infrastructure Development Corporation of Orissa (Idco) and Industrial Promotion and Investment Corporation of Orissa Ltd (Ipicol) on the draft JV agreement submitted by GAIL. The state government has requested GAIL to make some changes in alignment to ensure that the pipeline passes through the KBK (Kalahandi, Bolangir and Koraput) region,” said an industry department source.
“GAIL has got the approval of gas regulator Petroleum & Natural Gas Regulatory Board (PGNRB) for the Surat-Paradip pipeline. GAIL was looking to have right of way for the pipeline but we have suggested it to acquire land for the purpose. The estimates for land acquisition are yet to be made,” the official added.
The Surat-Paradip pipeline will cover a distance of 400 km in Orissa. In addition to this pipeline, the 1,100-km Kakinada-Howrah pipeline which is under construction, is set to cover 434 km in the state.
GAIL has evinced interest in setting up city gas distribution (CGD) network in Odisha. Nine urban centres- Bhubaneswar, Khurda, Balasore, Kamakhyanagar, Rourkela, Anandpur, Jajpur, Bhadrak and Baripada have been identified for building CGD network in the state.
PNGRB which had earlier given a detailed presentation on potential for development of CGD infrastructure in Odisha had urged the state government to map geographical areas for developing such infrastructure. It had also called upon the state government to mandate use of compressed natural gas (CNG) in all commercial vehicles after setting up of CNG stations. Besides, the regulator had also asked the state government to waive sales tax on CNG.
The regulator expected the city gas distribution network to be a reality in the state by 2014. Meanwhile, GAIL is also interested to build an LNG (liquefied natural gas) terminal in the state at an investment of Rs 4,500 crore. The company had identified the ports of Paradip, Dhamara and Gopalpur as potential locations for establishment of the terminal. Indian Oil Corporation Ltd (IOCL) had recently inked a Memorandum of Understanding (MoU) with Dhamara Port Company Ltd (DPCL) for developing an LNG terminal inside the port area at a cost of Rs 10,000 crore. The terminal willhave a total capacity of 15 million tonnes per annum.

IGL gets Rs 1,000-cr hit from regulator

Gas board orders cuts in rates, charges for CNG & PNG to Delhi consumers; firm may challenge directive
The price of compressed natural gas (CNG) in the capital could come down by 20 per cent and of piped natural gas (PNG) by 10 per cent in the wake of an order on Monday by the Petroleum and Natural Gas Regulatory Board (PNGRB).
Indraprastha Gas Ltd (IGL), the monopoly supplier of both gases in the capital, may have to take a hit of around Rs 1,000 crore. The order has sharply reduced, with restrospective effect, network rates and compression charges. IGL, it is learnt, is looking to challenge it.
PNGRB has directed IGL to reduce prices for Delhi consumers with effect from on Monday after factoring in the reduction in both network rates (levied on CNG, PNG and industrial consumers) and the compression charges on CNG. It has also asked the company to make refunds since the 2008-09 financial year based on the changes, since that was the first financial year of operation for the company after the regulator came into being in October 2007.
An industry official said as the order directed IGL to refund the difference between the network rates and compression charges decided by the board and those levied by IGL from April 1, 2008, IGL will have to refund the amount. A company spokesperson did not comment. He said the order was being studied.
Rakesh Jain, associate director (energy) at Feedback Infra, said IGL would be negatively impacted. He did not quantify by how much.
Prior to the Board’s existence, both network rates and compression charges were decided by the company. PNGRB has now directed IGL to give a break-up of network rate, compression charge and ‘last-mile connectivity’, if any, in each bill.
IGL had proposed to the Board a network rate of Rs 104.05 per million British thermal units and compression charge of Rs 6.66 per kg of CNG. The Board approved Rs 38.58 and Rs 2.75, respectively, bringing these down by 63 per cent and 58.7 per cent. The network rate per kg is expected to be Rs 1.86 against the Rs 5.02 given by IGL, a difference of Rs 3.16. Another Rs 3.91 impact will come in reduction of compression charges. Together, this means a price reduction of Rs 7.07 per kg of CNG from the current Rs 35.45.
Similarly, in the case of PNG, the network rate according to the order is Rs 1.33 per standard cubic metre (SCM) against the Rs 3.59 from IGL. That’s a drop of Rs 2.26 per SCM from the current price of Rs 18.95.
Industry officials said IGL would challenge this order. “IGL made a profit of Rs 874 crore since the fiscal beginning April 2008. It is impossible for the company to refund an amount higher than this. More, the reduction that is being directed will make future business highly loss-making,” said one.

ONGC commits investment worth Rs 1,26,000 crore across India

Oil and Natural Gas Corporation (ONGC) will undertake big ticket exploration and production plans for which it has committed investment worth Rs 1,26,000 crore in its 12th Five-Year Plan for 2012-17. The company has decided to prepone some of its projects. The investment also includes Rs 26,000 crore in 11 clusters in the country.

ONGC chairman and managing director (CMD) Sudhir Vasudeva said on Friday that the company hopes to cross 30 million tonnes of oil production in 2013-14. "We account for 52 per cent of the country's gas production and by 2016-17, ONGC's production is expected to touch 100 million cubic metres per day," Vasudeva told mediapersons.

Vasudeva said the dispute in Sudan and Syira has caused shortage of about 0.8 million tonnes of crude oil and gas due to geo-political reasons. ONGC- Gujarat State Petroleum Corporation (GSPC) joint venture ONGC Petro Additions Limited's (OPAL) upcoming mega petrochemical project will witness yet another delay in commissioning. Vasudeva said the proposed project at Dahej will be commissioned in first quarter of 2014. Earlier, it was projected to be commissioned by end of 2013.

When asked about the recent Union budget's impact on ONGC, Vasudeva said the increase in cess and excise duty will increase tax liability of the company by Rs 5,000 crore. ONGC that is present in almost all the verticals of hydrocarbon is also aiming to enter into city gas distribution (CGD). It has joined hands with GSPC and BPCL to bid for 65 per cent stake of BG Group in Gujarat Gas Company Limited (GGCL).

"CGD is the only missing link in our value chain. But we want to enter in CGD business that suits our stature. And hence, bid for GGCL makes sense for direct entry instead of bidding for one or two cities," Vasudeva said.

India’s LNG imports will rise steeply

 

AK Balyan receiving a trophy and citation from Indian Minister of Petroleum and Natural Gas Jaipal Reddy. (Petronet)

India’s domestic gas demand is rising fast, even as local supply remains woefully insufficient to meet its requirements. Indian LNG imports are, therefore, expected to increase sharply over the next few years. Currently, India is the world’s eighth-largest importer of LNG, but it is likely jump into the top five in the near future.
One key player in bringing gas from overseas will be state-owned Petronet LNG, the country’s largest LNG importer. In New Delhi last month at the Asia Gas Partnership Summit, Petronet’s Managing Director and Chief Executive Officer AK Balyan spoke to Interfax about the prospects for India’s LNG market and how Petronet is positioned to benefit from growth in demand.
Interfax: How do you assess the business prospects of the company?
AK Balyan: India’s domestic gas output has not reached the levels expected. There has been a drastic fall in output from Reliance Industries’s KG-D6 fields, while explorer Oil and Natural Gas Corp. (ONGC) continues to rely on assets that are depleted and aging. Given such a scenario, the dependence on imported LNG is going to rise, especially for power, fertiliser firms, city gas distribution and industry, which is good news for our viability and revenues. Our estimate is that LNG will form nearly 40% of total gas supply in India in the next three years from the present 25%. This is a very steep increase that will benefit us.
Interfax: What are the overseas LNG supply options that Petronet is seeking?
AB: We receive 7.5 million tons per annum (mtpa) of LNG from Qatar’s Rasgas under a long-term deal at Dahej. We also have a contract to purchase 1.5 mtpa of LNG from Australia’s Gorgon project from 2014 that will be regasified at Kochi. Given the continuous rise in demand, we are negotiating a long-term contract with Qatar for an additional 2-3 mtpa. We are also in discussions with Russia’s Gazprom.
If the need arises we will be in a position to source gas from America, Angola, Mozambique and Russia. Over the longer term, we are also looking to pick equity stakes in upstream exploration assets in joint ventures in order to build a stronger gas resource base. We are studying projects in Russia and Africa with good prospects and value. We have bid for a minority stake in Russia’s Yamal LNG project, in partnership with Gail and ONGC.
Interfax: What are the infrastructure plans of Petronet LNG?
AB: We are looking to tap the expected rise in LNG imports and have put in place expansion plans. The 5 mpta Kochi terminal in Kerala will be operational by December this year while the capacity enhancement at the 10 mtpa Dahej terminal (in the western state Gujarat) to 15 mtpa will be implemented by 2014. We are also looking at the possibility of a third plant on the east coast to feed south India, which is industrialising at a rapid pace. We have sanctioned French consultant Tractebel to prepare the detailed feasibility report in Andhra Pradesh. We are conscious of competition from other players in the field (Reliance, Royal Dutch Shell, Reliance Power, Gail and Indian Oil Corp.) and are, accordingly, moving at a fast pace.
Interfax: Is there a risk of over-capacity?
AB: India’s LNG imports have nearly doubled over the past year. In another year or so they may cross 100 million cubic metres per day. Presently, India’s LNG import capacity is insufficient to meet the projected demand for gas. In my opinion, the capacity needs to rise by at least three or four times the present levels to about 45-50 mtpa in the near future. Right now the problem is of too little rather than too much. Given such a situation we are looking at a longer term plan to upgrade the Dahej terminal to 50 mtpa.
Interfax: Has government policy been conducive to gas imports?
AB: The government has been in sync with reality. This has been reflected in the annual budget that removed the 5% customs duty on LNG imports for power entities that are in dire need of the fuel. This will be counter-inflationary and will also boost demand for gas, which is a clean source of energy. The finance ministry has also made oil and gas/LNG storage facilities and gas pipelines sectors eligible for additional funding, which is a positive step. There are also efforts to negotiate cross-country gas pipeline projects to ease the situation.
Interfax: Do you think India is paying too high a price for LNG?
AB: The prevailing rate of $14-16 per million Btu (MMBtu) at India’s west coast is higher than normal. The rise happened following the Fukushima crisis and the tsunami in Japan. Given depressed demand in Europe and rising shale gas output in North America, I expect the price of LNG should stabilise in the range of $9-10/MMBtu as it was earlier. This is the price that reflects the prevailing market demand-supply conditions and is being quoted by India in international negotiations, including proposed pipeline projects.

Lack of skilled manpower hits LNG sector

India's liquefied natural gas sector is facing an acute shortage of trained manpower, even as the energy-starved country races to increase re-gasification capacity to meet surging domestic demand for the natural gas.
According to LNG project consultant Ethical Energy Petrochem Strategies, about 1,000 trained workers are required over the next couple of years for terminal and commercial operations against the current availability of about 500 workers. Close to 250 workers are needed to operate a 5-mmtpa LNG terminal.
"LNG is not an employee-intensive business. However, LNG projects require specific skill sets," said Ethical Energy CEO Dhiren Desai.
Finding experienced hands is proving to be a challenge for most operators as no domestic institute imparts training for LNG operations. This makes them dependent on petrochemical companies, refineries and fertiliser firms for their requirement of trained manpower.
Also, most workers need to be trained abroad, as LNG is relatively new in India. Most of the workforce for the commercial aspect of LNG operations is drawn from city gas distribution companies and power producers.
India, the eight-largest importer of LNG, consumes about 165 mmscmd of natural gas every year, of which about 50 mmscmd has to be imported. These imports are expected to double over the next two to three years as domestic production drops and demand from industry rises. LNG is needed for electricity generation, industries, fertiliser sector and city gas distribution companies.
At present, there are only two LNG terminals operational in the country-Petronet LNG's terminal at Dahej, Gujarat, and Shell's terminal at Hazira, also in Gujarat. Another half a dozen facilities are likely to be commissioned over the next two to five years.
While the LNG projects of IOC, Gujarat State Petroleum Corp (GSPC), SRM Exploration, and Hiranandani are at various stages of development, two terminals at Dabhol and Kochi are about to be commissioned.

'India to have natural gas pipeline grid of 30,000-km by 2017'

India will by 2017 have a natural gas pipeline grid of 30,000-km connecting consumption centres to source of fuel, Oil Minister S Jaipal Reddy [ Images ] said on Monday.

"We have a country wide network of 12,000 km of gas pipeline (and another) 12,000 km of pipelines are under construction," he said speaking at the 15th Foundation Day of Petronet LNG Ltd [ Get Quote ] in New Delhi [ Images ].

"With another 7,000 km of pipelines under bidding by the (oil regulator) Petroleum and Natural Gas Regulatory Board, we are looking at the emergence of a National Gas Grid of nearly 30,000 km in length by 2017, with a capacity of  875 million standard cubic meters per day (mmscmd), to take natural gas to different markets across the length and breadth of India [ Images ]," he said.

Currently, the gas pipelines have a capacity to transport 230 mmscmd of gas.

Stating that natural gas sector in India was on the verge of a takeoff, Reddy said natural gas is the fuel of choice since it is an efficient fuel for power generation, a cheaper feedstock for industries, a cleaner alternative fuel for vehicles and leads to an improvement in the quality of life.

Considering its versatility and a smaller carbon footprint, the government has launched a drive to popularise the use of natural gas in the country.

"Today, about 51 cities and towns are covered under the City Gas Distribution as a part of which piped natural gas for cooking and CNG for the transport sector are being supplied," he said, adding PNGRB has plans to roll out CGD networks in over 300 geographical areas in the country.

With domestic gas produced is limited, India's dependence on imported liquefied natural gas is projected to grow.

"To cater to the increase in imported LNG, we are in the process of increasing our current LNG handling capacity of 13.5 million tonnes per annum to more than three times by 2017," Reddy added.

To cater to the huge expansion in the gas market, India is also pursuing trans-national gas pipelines such as the 1800 km long Turkmenistan-Afghanistan-Pakistan-India Gas Pipeline.

"In spite of the security hazards and a high threat perception, we are pursuing this ambitious project.

"After more than 18 months of hard negotiations, the four participating countries are close to initialising the Gas Sale Purchase Agreement," he said without elaborating.

ONGC says no to Reliance Gas Transportation Infrastructure stake buy

Oil and Natural Gas Corp has declined to participate in the stake sale of the pipelines company owned by Mukesh Ambani and other promoters of Reliance Industries Ltd but other state firms such as Oil India and Gail India are evaluating the prospect.

The company, Reliance Gas Transportation Infrastructure (RGTIL), operates the $3.75-billion East-West pipeline that was built to deliver D6 gas to Karnataka, Maharashtra and Gujarat. It has appointed JPMorgan, Citigroup and SBI Caps as advisors for the stake sale, industry officials said.

"RGTIL's bankers had approached us recently to discuss the possibility of ONGC picking up an equity investment in RGTIL but we declined as we did not see any value in the proposition as pipelines is not our core business," a senior ONGC official told ET.

Gail, which is keen to develop a countrywide network of pipelines, has shown interest. "RGTIL has contacted us for an expression of interest in the ongoing stake sale of RGTIL and Gail has shown preliminary interest. We will be undertaking a techno-commercial due diligence where we will be taking a close look at all the issues affecting the company," a senior Gail official told ET.

While ONGC does not want to make an investment outside its core business of oil exploration and production, Oil India Ltd is looking for new growth strategies.

"RGTIL has contacted us and we are interested in the opportunity, it is too preliminary to talk numbers now but we are looking at diversification from our core business of exploration and production and thus are keen to explore both organic and inorganic opportunities. We will be soon be conducting a thorough due diligence," T K Ananth Kumar, Director, Finance, Oil India told ET.

Mukesh Ambani is reported to be seeking a valuation of up to Rs 10,000 crore for the company. According to industry experts, the key issue affecting the stake-sale would be the steep fall in gas production at KG-D6, which has now hit an all time low of 28.16 mmscmd, the lowest level since RIL began output from the KG-D6 block in April 2009.

Also, RIL the operator has told the petroleum ministry that any incremental production is only possible by 2016. "In the long term, this could make sense for Gail which is primarily a pipeline company and currently its HBJ pipeline runs from the west to north, so RGTIL'S east-west pipeline could help it to establish a nation-wide footprint.

Also Gail could be looking at protecting its turf given that GSPL has recently won a couple of new pipeline contracts," said an energy analyst from a prominent Mumbai-based brokerage house.

"This move could also be a part of the government's decision to establish a central gas grid," he added. "By exiting RGTIL, Mukesh Ambani is sending a clear signal about the potential of KG-D6 and the markets will definitely view this development in that light," he added.

There are other key issues flagged by industry experts. "The east-west pipeline was initially built for a capacity of 80-120 mmscmd and now it is not even transporting half of that volume, so its long-term hire charges and tariffs could be impacted negatively," said another oil and gas analyst.

"In the long-term, this acquisition could benefit Gail as Petronet's new 5 mtpa LNG terminal in Ganagavaram (situated close to Kakinada) could receive cargo by 2018 and by then even RIL could have resumed some production to at least 50 mmscmd," he added.

CNG gas prices to rise Rs 4.70 per kg from Sunday in Ahmedabad

Adani Gas Ltd on Saturday announced increasing the compressed natural gas(CNG) price by Rs4.70 per kg from Sunday, impacting the industry and households in Ahmedabad.
The hike by the city gas distribution company comes into effect from April 1 pushing the CNG price to Rs50.20 per kg against Rs45.50 per kg now.
Adani Gas will revise price of CNG to Rs50.20 per kg (inclusive of 14.42 per cent excise duty and 15 per cent VAT) with effect from April, 1, 2012, a company statement said.
Citing significant increase in international LNG prices, the company stated that revision in prices was necessary.The company has network of 50 CNG sations in Ahmedabad, and 7 refuelling stations in Vadodara. It supplies over 3.50 lakh kgs of CNG to over one lakh vehicles everyday.
The company also supplies natural gas to 1.50 lakh domestic consumers, 7,00 industrial houses and 1,100 commercial consumers in Ahmedabad.