It’s all about the gas

Natural gas been established as a cleaner fuel has the potential to meet most of the energy needs of a city or urban habitat. Also its wider application makes natural gas popular among various sectors like transport, power, fertilizer, household, steel, and so on. In this regard, City Gas Distribution (CGD) network facilitates the flow of natural gas to city for its application in transport sector as Compressed Natural Gas (CNG) and household, commercial and industrial sector as Piped Natural Gas (PNG). In transport sector, CNG by replacing petrol and diesel helps in reducing harmful vehicular emissions, caused largely from sulfur and benzene. CNG being safer and economical fuel also reduces the operational cost of vehicles which is generally 68 percent and 36 percent lower than petrol and diesel respectively. In household, commercial and industrial sectors PNG is quite competitive to fuels used in these sectors in terms of safe and continuous supply, convenient of use, economically viable, no wastage, minus storage requirement and lower maintenance cost. PNG in commercial and industrial sectors are used to run boilers, ovens, furnaces, thermifluid heaters, tumblers and hot water generators for power generations, besides other cooling applications.
CNG and PNG are distributed to end users through the CGD network, across geographical areas (GAs), as authorized by PNGRB. CNG stations are situated in major traffic locations of cities, while PNG is distributed through pipelines to end users (domestic, commercial and industrial). This network is designed to operate at a pressure which at present is not more than 19 kg/cm2 and the supply for a volume not exceeding 50,000 standard cubic metres per day (scmd) per consumer per annum. Natural gas beyond this volume can be sourced by the consumer through a main gas transmission pipeline.

Need for CGD in India
With its rapidly growing populations and burgeoning economy, India’s energy requirements have shown a rapid increase in the recent years. To meet its energy needs, valuable resources such as coal, oil, natural gas, hydropower, nuclear energy and renewable are being used.
Besides, energy needs are augmented via importing of crude oil, liquefied natural gas (LNG) and washed coal. Among various resources, dependence on coal and oil was higher during 2009, accounting for 52% and 30% share respectively. Because of substantial reserves, convenience of availability and low production costs, coal dominates India’s current fuel basket. In fact, more than half of the electricity produced in India comes from coal. Also due to its huge energy requirements in transport and industrial sectors, its dependency on imported crude is also increasing.
As a result intensive use of coal and oil has led to environmental degradation resulting from carbon dioxide (CO2) and other greenhouse gases, emitted in the atmosphere. Therefore, the immediate challenge faced by India with respect to the two conventional fuel are the pressure of reducing carbon intensity (the amount of carbon dioxide emitted for every unit of GDP) and to tackle the rising crude oil prices, which averaged $112.74 during fortnight June 01-15, 2011. 

State of Natural Gas in India
Luckily, India has got decent natural gas reserves which if utilized to its potentials can address some of its energy needs and many of its environmental woes. Fact is India’s natural gas reserves during 2010 stood at 1,437 billion cubic meters (bcm). There are 145 gas fields and 242 oil and gas fields situated in onshore (on land) and offshore (on the sea bed). Most of the natural gas is available in western offshore and onshore areas of Gujarat, Assam and Andhra Pradesh. Gas available in areas of Tamil Nadu, Rajasthan and Krishna Godavari offshore is relatively less. These fields which are operated by Oil and Natural Gas Corporation, Oil India Limited, Reliance Industries Limited (RIL) and other private joint venture operators accounted for 169.3 million metric standard cubic meters per day (mmscmd) of natural gas supplies during 2010-11, along with LNG imports. India’s natural gas production in 2010 was 50.9 bcm. This was an increase from 39.2 bcm in 2009, with 29.7% growth. India also observed phenomenal growth in natural gas consumption of 21.5% in 2010, recording 61.9 bcm, one of the highest among Asia Pacific nations in percentage terms. The shortage during that period was met by importing 12.15 bcm of LNG, of which 10.53 bcm was imported from Qatar.
 
Role of Natural Gas in CGD 
As said earlier, natural gas is a key to CGD network. Given its availability, cost affordability, user friendliness and potentials to reduce greenhouse emission, the Government of India has initiated National Action Plan on Climate Change (NAPCC), which aims at addressing the issues of climate change occurring due to global warming. Under NAPCC’s clean air initiative, steps are being taken to reduce pollution by promoting the use of natural gas in various cities through fuel switch over from petrol and diesel to CNG, coal to natural gas, etc, as an adaptation and mitigation strategy. To reiterate, natural gas is been a preferred fuel worldwide due to its benefits which is been accrued by various sectors.
In case of industrial sector its demand correlate with industrial output due for process heating purposes and useful for new industrial equipments. Also its end users get connected with supply through CGD networks in households, commercial and industrial units. Gas fired power generation plants are less emissions intensive and lower in capital cost.
In transport sector the payback period for purchasing a natural gas vehicle could become shorter, given the current trajectory of petroleum prices, besides less emission intensive. Most of the aforesaid applications of natural gas are facilitated through CGD. The competitiveness of natural gas with other fuels is the sole determinant of its use.
Current State of CGD in India
India’s CGD network is connected with the main transmission pipelines, covering 11,814 kilometers, laid by entities like Gas Authority of India Limited (GAIL), Reliance Gas Transportation Infrastructure Limited (RGTIL), Gujarat State Petronet Limited (GSPL) and Assam Gas Company Limited (AGCL). Government has planned to increase the network of gas pipelines to the extent of 15,000 kilometers by the end of 11th Five Year Plan. Such network is operative in cities like Delhi, Mumbai, Agartala, Surat, Ankleshwar, Bharuch, Ahmedabad, Agra, Vadodara, Noida, Kanpur, etc. Ministry of Petroleum and Natural Gas (MoPNG) has set a target of covering 200 cities with gas connections by 2015, different from PNGRB which has a target to cover 300 GAs, covering wider areas of sub-urban, villages and districts, in next five years. PNGRB has invited bids for authorization of CGD networks. So far, entities have submitted Expression of Interest for around 65 cities. Three rounds of bidding for CGD licenses have been launched, while GAs of fourth rounds has been announced. Till now 29, GAs has been covered in these four rounds.

The Challenges in CGD
As reflected from the above expansion plans, India still has a larger ground to cover as CGD business is in its infancy. Notwithstanding its huge potentials and merits, CGD business in its current form and shape, faces numerous challenges and barriers in entering the market. One of such problems faced by existing CGD players is the slow progress in penetrating the market despite having their presence for more than a decade. For e.g. Indraprastha Gas Limited (IGL) has managed to convert only 4.30 lakhs vehicles, out of 64.51 lakhs registered vehicles with only six per cent of penetration level, since last 12 years of its existence. Pakistan has the highest number of natural gas vehicles (NGVs) to the tune of 27.40 lakhs in the world fueled by 3,285 stations as compared to India’s 10.80 lakhs vehicles fueling 571 stations. India has to raise its number of refueling stations to serve it’s rapidly rising NGVs by developing its infrastructure further. The penetration level in PNG segments goes down further with only 2.50 lakhs domestic and 464 commercial connections.
The problems intensify where the expansion of such network is required in unplanned cities in India. Some other issues relates to availability of land for CNG stations, approvals from concerned authorities like municipal corporations, environmental clearing authorities, etc, facing the ire of common people, and so on. Problem in Tier I and Tier II cities for the existing CGD companies is the hefty price paid to local authorities for land acquired for CNG stations and laying downs of PNG pipelines. For example, recently IGL paid about Rs. 15,000 just for digging besides other cost for laying a PNG pipeline, which is three times more of what they are getting as security deposit from the customer, thereby loosing Rs. 10,000 per customer. The end result is the cost and time overrun, coupled with slow and low returns. Therefore, PNG business in smaller cities is now becoming unviable. Moreover, CGD business is also plagued with manpower shortage. Besides engineers, skilled labourers, plumbers and technicians are required.
Similarly, policies and regulations of PNGRB are sometimes not getting aligned with actual day to day business, thereby impacting various downstream projects. For example, there has been a supply concern in sectors like power, fertilizers, CGD, refineries and so on after a fall in production at KG-D6. RIL has been asked by the government to cut supplies of non-core sectors by restricting it to sectors like power, fertilizers, refineries and CGD. The directives of the government issued in April 2011, to allocate gas on a priority basis seems contradictory with Gas Sales and Purchase Agreement (GSPA), which talks of allocation on pro-rata basis. Such shortfall in allocation has started hitting hard the core sectors too starting from CGD. RIL has already decided to abstain itself for signing further GSPA as it did in case of Bawana power plant in Delhi.
Recently due to temporary fall in the natural gas production in KG-D6 basin, the supply has been curtailed to many sectors including CGD. Consequently, these sectors have started to rely on costlier LNG, which also is the main source of supply to CGD sector. This has resulted into the rise in their input cost, resulting in the rise in CNG prices, which have been raised thrice in a short span of three months. For example, the Indraprastha Gas Limited has raised the price of CNG in June 4, 2011, by 0.50 paisa per kg, to the tune of Rs.29.80 per kg. This not only gives the room to CNG companies to raise CNG prices by following global crude oil prices trends but also making it comparable with the existing petrol or diesel prices in terms of saving on operation cost in percentage terms, to justify such increase.

Conclusion
Despite India’s natural gas sector being evolving, its development in recent past has shown the signs of potential it has to fulfill its robust energy demand, by replacing the existing dirty fuels in various sectors. But it is only through sustainable development of entire natural gas value chain, can keep the hopes of a various sectors including CGD alive. Such sustainability can be brought through good governance and better policy implementation, adaptation of best international practices in terms of radical technologies, which not only takes care of the environment but also reduces energy intensity.
CGD can play a vital role in widespread use of natural gas among those sectors like transport, which are polluting environment the most through vehicular emissions, besides insulating a common man from rising petrol and diesel prices. CGD through PNG can remove the burden of subsidy on LPG cylinders, thereby targeting it to the poorer section of the society, helping them to switchover their fuel from biomass which they are currently using for cooking purpose. Government should also promote wider usage of natural gas appliances like geysers, air conditioners etc, so that people can expand the use of PNG in domestic, commercial and industrial units, making it viable to this segment too. Therefore all the policy directions of the government should focus to enhance the availability, supply and efficient use of natural gas to make CGD sector more vibrant.

Indraprastha gas keen to buy BG's Mahanagar Gas Ltd stake

BG Plc is keen to sell its 49.75% stake in Mumbai based gas retailer Mahanagar Gas Ltd (MGL), giving energy companies to expand their presence in the Indian gas market, where state-run Gail India, the Adani Group and the joint venture between Reliance Industries and global major BP are eyeing rapid growth.
Industry sources said Delhi based city-gas distributor Indraprastha Gas, which is jointly promoted by Gail and Bharat Petroleum Corporation, is keen to pick up BG's stake in MGL. Gail is also a contender for BG's 65% stake in Gujarat Gas Co Ltd, as reported by ET this month.
"We are very keen to acquire BG's stake in MGL. We have already discussed the matter in detail with Gail and communicated our intent," said a source close to IGL and having direct knowledge of the development. "I'm aware that BG executives have met senior members of the GAIL management recently to discuss the matter," he added. BG's spokesperson said: "We do not comment on market speculation."
Gail, MGL and IGL did not respond to ET's queries. MGL provides piped-natural gas to around five lakh domestic customers and 1,200 small commercial and industrial establishments in Mumbai and adjoining areas. It also supplies CNG to 2 lakh vehicles through 150 filling stations and 750 dispensing points across Mumbai, Thane, Mira-Bhayander and Navi Mumbai. Gail is the other key promoter of MGL, holding 49.75% stake.
BG had earlier planned to exit MGL in September 2007 and even appointed Kotak Securities to do the valuations. Reports suggest that back then it could have been valued at $525-$ 530 million. Now market sources say the company may be valued at $750- $780 million.
Sanjeev Prasad, executive director, Kotak Securities, said: "I am not aware of this development but like in the case of Gujarat Gas I think BG's main aim behind this exit is not to raise funds. It is more to do with the fact that MGL too has not been able to grow its operations beyond Maharasthra."
BG has been a key player in Gujarat, India's biggest gas market, but it decided to exit. Prasad said the decision to exit Gujarat Gas was probably triggered by the fact that it had not been able to grow beyond the small cities of Gujarat. Domestic gas supply has declined, forcing city gas distributors to import costly LNG and raise retail prices.
A market source who closely tracks the gas sector said: "Acquiring equity in MGL would make a lot of sense for GAIL especially if it is also able to pick up BG's stake in Gujarat Gas as then it would catapult GAIL straight to a leadership position in the Indian city-gas distribution sector." He also said, "Overall BG is reshuffling its global portfolio, it is shifting focus to Brazil and Australia where it has close to $40 billion exposure in the LNG business and exploration and production, so it obviously needs the cash."
"Another reason behind BG exit could be the declining production of gas at the Panna-Mukta-Tapti fields where it is the operator, and also there is no new source of natural gas that will begin production soon in BG's entire exploration portfolio in India," the source added. Industry watchers also say that BG has also taken cognizance of the formidable competition that RIL and BP's new gas venture poses, especially as it will also focus on global sourcing and marketing of gas.

Adani, GSPC may foil Gail's BG Group stake buy in GGCL

Gail India's aim to buy the BG Group's controlling stake in country's largest private sector city gas distribution firm, Gujarat Gas Company Limited (GGCL), will face a stiff challenge from the diversified Adani Group and archrival Gujarat State Petroleum Corp (GSPC), industry officials said.

Adani Group is believed to have appointed a Mumbai-based M&A advisory firm last week to pursue a deal with BG Group that wants to hive off its 65% interests in GGCL with market capitalisation of over 4,500 crore. Analysts said the race for BG's stake would help shareholders get a much better value for their investment. State firm GSPC is uncomfortable with possible expansion of its opponent Gail's presence in CGD in Gujarat. GSPC may enter into the fray through its subsidiary GSPC Gas or back Adani Group, which is partnering with the state venture for liquefied natural gas (LNG) terminal at Mundra on West Coast, industry sources said.

Gail has a presence in city gas distribution at Vadodara in partnership with the local civic body and it can emerge as largest CGD player in Gujarat that accounts for country's one-third natural gas consumption but it has a history of bitter rivalry with GSPC, which is controlled by the Gujarat government. Recently, Gail approached the Supreme Court challenging gas regulator's mandate to GSPC for laying 4,000 km long pipelines on three routes at an investment of 12,500 crore.

Both Adani Group and GSPC officials are keeping their cards close to their chests. The state's principal secretary for energy and petrochemicals DJ Pandian is also maintaining silence about government's position over BG Group's decision to hive off its interests from GGCL.

However, a top government of Gujarat bureaucrat stated that the government of Gujarat will offer support to GSPC if the deal with BG Group is viable. "The government of Gujarat is keen to retain control over GGCL's gas network," he said.

Sources close to Adani Group and GSPC believe that both are expected to benefit from gas supplies to GGCL from their proposed LNG terminal as domestic gas supplies to BG Group subsidiary is dwindling. GGCL has a network of 42 CNG stations in South Gujarat.

Bhagyanagar Gas begins piped supply in Hyderabad

Bhagyanagar Gas Ltd, a venture of HPCL and GAIL, today commissioned phase one of the city gas distribution network project in Greater Hyderabad by commissioning supplies in and around Shamirpet area in the city outskirts.

The project has been completed with an outlay of Rs. 250 crore and the entire city as per plan, which is allotted to the venture, is likely to be covered over the next 24 months, according to Mr A.R. Datla, Head, Marketing, Bhagyanagar Gas Ltd.

Mr Datla told Business Line that the gas is being tapped from the KG D6 Reliance Industries fields supplied and evacuated from the East-West pipeline that passes through the region. The mandate is to provide piped gas for the city areas spread over 1,818 sq km. “During phase one we have also set up gas storage and supply facilities at three Andhra Pradesh State Road Transport Corporation (APSRTC) depots,” he said.

“The entire project that seeks to cover whole of the city is expected to be completed over the next 24 months. But significantly, we will start supplies progressively in areas wherever the pipelines are ready for local supplies,” he said over phone.

Thus far, about five CNG terminals are operational in Hyderabad. From today four more stations have been readied. According to plans, it is proposed to have 50 stations by December 2012 and 22 stations for APSTRC.

1328 Lakh LPG and 15.88 Lakh PNG Consumers in the Country at Present: Reddy

The Minister of Petroleum & Natural Gas Shri S. Jaipal Reddy informed in the Lok Sabha in a written reply today that Piped Natural Gas (PNG) is currently being sold to households in Delhi at a rate of 22 per scm (upto consumption of 30 scm in two months) and at 34 per scm (beyond consumption of 30 scm in two months). He added that the price of domestic LPG (at Delhi) is 399 for a 14.2 kg cylinder. The corresponding energy equivalent price of PNG 391 (at 22/scm) and 605 (at 34/scm) as compared to 399 for a 14.2 kg LPG cylinder.

The Minister also informed the house that against a total of 1328 lakh LPG customers, there are only 15.88 lakh PNG customers in the country. Domestic LPG cylinders are being sold to the customers for several decades whereas development of City Gas Distribution (CGD) project is only starting, and depends, inter alia, upon pipeline connectivity, availability of gas and commercial viability of the project.

Shri Reddy further said that Government of India has enacted the “Petroleum and Natural Gas Regulatory Board (PNGRB) Act, 2006’’, wherein PNGRB is entrusted with the responsibility of, inter alia, authorization of entities to operate CGD networks. PNGRB has envisaged a rollout plan of CGD Network Development over the next five years in more than 300 Geographical Areas (GAs) in the country.

1.5 lakh households to be supplied PNG

Gas Authority of India Limited (GAIL) Gas has been authorised by the sector regulator, Petroleum and Natural Gas Regulatory Board (PNGRB), for connecting 1.5 lakh domestic households through piped natural gas (PNG) in the country over a period of five years. The investment needs were likely to be met by its parent organisation, Gail.

Gas Gas is a 100 per cent subsidiary of the state-owned Gail India. Gail Gas has been authorised by PNGRB for implementing specific city gas distribution (CGD) projects in Kota (Rajasthan), Sonepat (Haryana), Meerut (Uttar Pradesh), and Taj Trapezium Zone besides the gas distribution network for Agra, said Prabhat Singh, director, marketing, Gail and director-in-charge, Gail Gas, talking to ToI.

Dewas was the first to implement it on Monday. Out of the total 170 million cubic metre (MCM) of natural gas being provided by various natural gas production units in the country per day, Gail was responsible for 120 MCM while National Fertiliser Ltd (NFL) was utilising the fuel to run its plant. There were a good number of other fertiliser companies that were relying on GAIL to meet their fuel requirement, said Singh.

Based on the success of Indraprastha Gas in New Delhi and Mahanagar Gas in Mumbai, Gail has now set up six more joint ventures for CNG projects in various cities, so as to fuel commercial vehicles. They are Avantika Gas (Indore), Bhagya Nagar (Hyderabad), Central UP Gas (Kanpur and Bareily), Maharashtra Natural Gas (Pune), Tripura Natural Gas (Tripura) and Green Gas (Lucknow and Agra). In fact, it has induced other entities to come into CGD project at different places.

Gujarat State Petroleum Corporation (GSPC) and Reliance are some of those entities that have also made their foray into the project, taking a cue from the success of the same project being undertaken by Gail Gas. In fact, British Gas has tied up with Gail Gas to venture into the business, said Singh.

In its bid for diversification of business, Gail Gas was also looking for allied retail business at its refuelling stations. It means that the company will be providing space for retailers to open their stores at the refuelling stations so as to facilitate the Gail Gas' customers to do shopping, while their vehicles were getting fuel from the stations.

Adani Gas too increases CNG Price in Gujarat to Rs. 45.50

Diversified Adani Group's city gas distribution (CGD) arm Adani Gas that caters to CNG consumers in Ahmedabad and Vadodara announced price increase from Rs 40.50 per kg to Rs 45.50 with effect from November 16. Natural gas will be expensive for Adani Gas' consumers in industrial and commercial categories as well. It may be mentioned here that state owned GSPC Gas Company Limited also revised its CNG price with effect from Wednesday.
Incidentally, the oil marketing companies reduced petrol price by Rs 1.50-2 per litre with effect from Tuesday night. Gujarat that accounts for country's one third of natural gas consumption is witnessing frequent tariff hikes.

GSPC Gas that caters to the piped natural gas and compressed natural gas (CNG) users in parts of Gujarat will charge 22% more to the industrial customers 12% more to the CNG users. GSPC Gas increased gas prices for the commercial consumers also while there is no change in tariff for the domestic users. GSPC Gas will now charge Rs 26.70 per standard cubit meter (SCM) to the industrial customers, up from Rs 21.80.
With 15% VAT, industrial customers will have to shell out all time high Rs 30.70 per SCM. CNG consumers at GSPC Gas' 119 fuel stations will pay Rs 45.25 per kg, up from Rs 40.25.
Early this month, the government of Gujarat filed a reference before the Competition Commission of India ( CCI) against BG Group subsidiary Gujarat Gas Company Limited. However, GSPC Gas and other city gas distribution entities like Sabarmati Gas and Charotar Gas too are compelled to revise their gas tariff upward now.
The government of Gujarat is arguing that the primary source of gas for Gujarat Gas comes from the cheaper domestic resources and administered price mechanism. With increasing demands in its geographical areas, Gujarat Gas procures expensive imported LNG through the state venture and GSPC Gas promoter Gujarat State Petroleum Corporation (GSPC) as domestic gas supply is going down. All the CGD players in the state are dependent on expensive LNG now.
Both Adani Gas and GSPC Gas are attributing increase in imported LNG prices as reason behind the steep tariff hikes. "Increase in price of input gas from GSPC is mainly on account of the increase in LNG price due to prevailing high crude oil prices in the international markets and depreciation of Indian Rupee against Dollar," read a media statement by Adani Gas on Wednesday evening.
GSPC and other CGD players are seeking cheaper natural gas from the domestic resources like RIL's D6 in KG Basin to curb soaring prices.
Incidentally, the oil marketing companies reduced petrol price by Rs 1.50-2 per litre with effect from Tuesday night. Gujarat that accounts for country's one third of natural gas consumption is witnessing frequent tariff hikes.
GSPC Gas that caters to the piped natural gas and compressed natural gas (CNG) users in parts of Gujarat will charge 22% more to the industrial customers 12% more to the CNG users. GSPC Gas increased gas prices for the commercial consumers also while there is no change in tariff for the domestic users. GSPC Gas will now charge Rs 26.70 per standard cubit meter (SCM) to the industrial customers, up from Rs 21.80.
With 15% VAT, industrial customers will have to shell out all time high Rs 30.70 per SCM. CNG consumers at GSPC Gas' 119 fuel stations will pay Rs 45.25 per kg, up from Rs 40.25.

Stakeholders to Brainstorm over Post-Tsunami LNG Market Tomorrow

Tomorrow, the liquefied natural gas (LNG) suppliers, consumers, natural gas transporters, stakeholders in city gas distribution players business, regulators, upstream players and government agencies will come together, in Ahmedabad, to brainstorm over the market conditions after Tsunami hit Japan.
Since March 2011, LNG buyers have been compelled to change their strategies after the domino effect of Japan's earthquake sent shock waves worldwide. In India, leading suppliers and consumers are facing challenges in terms of rising spot LNG prices and reduced availability of long term LNG supply offers.
In India, largest LNG consumer Gujarat is facing challenges since Tsunami resulted in increasing Japan's gas appetite. Gujarat that accounts for one third of Indian gas demand is facing challenges amidst dwindling domestic gas production and rising LNG prices in the international market. The gas prices are all time high in the state and it is trying to find out long term solutions to support local industrial customers besides the city gas distribution companies.
On Thursday, RIM Intelligence Co, a Japan-based company providing research-based information to the stakeholders in oil & gas sector, will host 'LNG Conference 2011'. The one-day conference aims at providing a platform to India LNG industry stakeholders to consider various solutions to the existing challenges.
"LNG suppliers from all over the world devised new plans and pricing strategies to meet the extraordinary LNG demand from leading utility companies in post-earthquake and tsunami hit Japan. Considering the significance of the issues, to be discussed during the conference, a huge participation from the Indian LNG and natural gas industry is expected. The discussion during the first session of conference will revolve around the theme of 'Post Japan Earthquake Scenario and Emerging Dynamics in Global LNG Markets", read the media statement from the organisers. The day-long conference would attempt to address issues, concerning the stakeholders of LNG value chain.
Participants like BG India head of midstream business Subroto Chakraborty, Gujarat government's principal secretary - energy & petrochemicals DJ Pandian, Shell Hazira LNG's Surendra Pal, RIM Intelligence Co vice president NaruhitoYanagi, IFC International MD Nitin Zamre, Ethical Energy CEO Dhiren Desai, and Gujarat State Petroleum Corporation's Ravindra Agrawal will address the stakeholders.

Gail, HPCL ,Greater Calcutta Gas Supply Company signed MoU for joint venture

Gail, Hindustan Petroleum (HPCL) and Greater Calcutta Gas Supply Company today signed an MoU for a joint venture for city gas distribution, which is likely to require an investment of around Rs 2,000 crore.

GAIL and HPCL will hold 37 per cent stake each, while the rest will be owned the West Bengal government-controlled Greater Calcutta Gas Supply Company, official sources said.

The investment could be to the tune of Rs 2,000 crore for the project, GAIL Executive Director J Wasan said here.

The joint venture will look at various options of gas availability.

"We are looking at all options -- Jagdispur-Haldia pipeline, CBM from Ranigunj and Durgapur, and even importing gas by a floating terminal," Wasan said.

HPCL officials said it would take at least 2-3 years to execute the project.

GAIL plans Rs 3,000 cr floating LNG terminal in eastern coast

State-run Gail is contemplating a liquefied natural gas (LNG) floating storage and regasification unit (FSRU) in Eastern India which could entail an investment of about Rs 3,000 crore.

The company is also considering Dhamra in Orissa for the terminal and initial-level studies are on, a senior company official who did not want to be quoted said here today.

The terminal was initially planned in Haldia and Digha in West Bengal but they were delisted because of being low draft and cyclone prone area, the official said.

West Bengal, however, would get a fresh city gas distribution project for which GAIL will sign a joint venture agreement with Hindustan Petroleum and the Greater Calcutta Gas Supply Corporation on November 17.

Gail earlier had planned a Rs 7,600-crore pipeline from Jagdishpur to Haldia, but the project faced rough weather as a Reliance Industries promoted RGTIL was not able to set up the Kakinada-Haldia pipeline, on which the Jagdishpur-Haldia pipeline was dependent for KG-D6 gas.

In the proposed gas JV, GAIL and Hindustan Petroleum will hold 37 per cent stake each, while Greater Calcutta Gas will hold 26 per cent equity with veto power.

A FSRU is a floating storage and regasification facility, which receives LNG from offloading LNG carriers and the regasification system provides natural gas through pipeline to shore.

Gail may Pick Up BG’s 65% Stake in Gujarat Gas

Gail India is eyeing the controlling stake in British gas major BG’s subsidiary in Gujarat, the country’s biggest natural gas market, as the state-run company prepares to compete with oil major BP and Reliance in the gas marketing business.

BG, one of the first western companies to invest in India’s energy sector, is selling its 65% stake in Gujarat Gas Co (GGCL), the country’s largest private sector gas transmission and distribution firm. BG had acquired the stake for . 170 crore in 1997, while the current market value of the company is about . 5,000 crore.

“We are exploring the opportunity right now as it could be a good strategic fit,” a senior Gail India executive, who did not want to be identified, told ET. A company spokesman confirmed Gail’s interest in the BG’s stake but said it was premature to comment further. The two companies are already partners in Mahanagar Gas, which distributes gas in Mumbai.

Gail has been scouting for opportunities to expand its city gas distribution (CGD) business, which is very profitable as natural gas works out much cheaper than petrol and diesel.

For households, piped gas is competitively priced and saves consumers the trouble of booking and replacing LPG cylinders. Company officials and analysts said Gail was eyeing Gujarat Gas’ network of pipelines and customers. It distributes about 3.6 million metric standard cubic meters per day (mmscmd) of natural gas to nearly 3.30 lakh customers, including industrial, commercial and domestic, through a 3,200-km pipeline network.

It also supplies compressed natural gas to 1.61 lakh vehicles through 42 retail outlets. BG may have decided to exit because the business was not growing fast, analysts said. “I don’t think BG’s main aim behind this exit is to raise funds, it had more to do with the fact that it has not been able to grow its operations beyond the small cities of Gujarat in all these long years that its been in India. So, clearly the management has taken a call and said that it does not want to invest any more resources in an operation which is not scaling up as desired,” said Sanjeev Prasad, executive director at Kotak Securities.

But for Gail, the company remains attractive, analysts said. “The deal could fortify Gail against the competitive onslaught expected from RIL-BP’s city gas venture, especially as BG has a very large and loyal client list in Gujarat,” said Deepak Pareek, oil and gas analyst, Prabhudas Lilladher.

BP has bought 30% in Reliance’s 21 oil and gas blocks in a $7.2-billion deal, and the two companies are eyeing the gas market with a 50:50 joint venture. “The deal makes a lot of sense for Gail, especially as it will be taking over a large operation that will generate cash-flow from day one instead of starting from scratch, also sourcing gas should not be a problem for Gail as it is a stake-holder in Petronet LNG and Dabhol,” Pareek said. Courtesy

BG Group Looking to Divest Stake in Indian Unit Gujarat Gas

Gujarat Gas Co. said its majority stakeholder BG Group PLC is looking to divest its stake in the Indian city gas distribution company.
Gujarat Gas has been "informed by its majority stakeholder that it has started a process that may result in divesting its shareholding," it said in a filing with the Bombay Stock Exchange.
Gujarat Gas didn't specify whether BG is looking to divest a part of its stake or its full stake.
BG Group's Indian unit declined to comment.
London-listed explorer BG Group acquired a majority stake in Gujarat Gas in 1997, BG's website showed.
BG Group has a 65.12% stake in Gujarat Gas, which distributes gas to commercial, industrial and domestic consumers through 42 retail outlets in the western Indian state of Gujarat.