GAIL Gas, APGDC inks pact for gas supply network

A shareholders’ agreement for restructuring of Andhra Pradesh Gas Distribution Corporation Limited has been signed by Andhra Pradesh Gas Infrastructure Corporation Private Limited, Andhra Pradesh Gas Distribution Corporation Limited and GAIL Gas Limited to pave way for creation of gas supply network.

GAIL Gas Ltd has been taken in as equal partner in the APGDC. Initially, the Andhra Pradesh Gas Distribution Corporation Limited has been incorporated as a wholly-owned subsidiary of Andhra Pradesh Gas Infrastructure Corporation Private Limited for laying and maintaining natural gas pipeline infrastructure and city/district Gas Distribution Networks in Andhra Pradesh.

According to a statement, the State Government after careful study of the present day natural gas scenario and also to tap the potential of the natural gas and to accelerate the industrial growth in the State have given the nod for the equity participation by GAIL Gas Limited.

GAIL Gas Limited is the wholly-owned subsidiary of GAIL India Limited and focusing mainly on the city gas distribution networks. The agreement was signed in the presence of Mr. Sutirtha Bhattacharya, Principal Secretary to Government, Infrastructure & Investment Department, Mr.B. R. Meena, VC&MD, APIIC and MD, APGIC, Mr. Vijayanand, MD, AP Genco, Mr. Prabhat Singh, Director (Marketing) GAIL India Limited.

Piped gas to cost more by Rs 3-8

After Delhi, consumers of piped natural gas (PNG) in Gurgaon will now have to shell out extra bucks as the distribution company has revised its rates between Rs 3 to Rs 8.
A majority of consumers use PNG as it is economical as compared to the conventional liquefied petroleum gas (LPG) that comes in standalone cylinders and is cheaper by 30%.

The new rates came into force following revision of rates on September 1. Now, customers will have to pay Rs 400 for 20 kg PNG. sConsumers will have to pay R22 per standard cubic meter (SCM) consumption of gas for the first 30 SCM, beyond which, the price will be Rs 34 SCM.
The minimum slab has again been reduced from four months to two. "Still, it will be an economical option for residents. Even after the revision of rates, it will be 30% cheaper than liquefied petroleum gas cylinders," said Satish Chopra, managing director, Haryana City Gas Distribution Limited.
This is the second time that the rates have been revised since its inception in 2009.
Though the initial increase was marginal, this time, the hike is nearly 15% per SCM .
Sources said a liquefied petroleum gas cylinder weighing 16 kg costs Rs 400.

Piped gas is user-friendly, say residents

To own a liquefied petroleum gas (LPG) seems to be becoming a prized possession these days. Whether we term it economical or short supply of LPG, city residents surely find piped natural gas (PNG) more user-friendly.

Nearly 28 societies and 2,500 residents have already started using the same, putting a question mark on the existence of gas cylinders.

The PNG gas has received an encouraging response from the residents.

"A cylinder, which costs R400 now, lasts nearly a month. As I am using PNG gas pipeline, a two-month bill will cost me nearly R300. This is more economical and I can save 50% gas," said Shilpa Mehta, a resident of sector 56.

Khushboo Mahendroo, another resident of HEWO apartments, said, "We don't have a LPG gas connection. Whenever we bought a cylinder, the vendor used to charge extra money. The supply is short during winters and we have to struggle to get cylinder refills."

"Ever since the gas pipeline has been introduced, it is a boon for us. The moment you call your area supervisor, they are ready to help."

The gas pipeline project was initiated in Gurgaon in 2009.

At present, 28 societies in sector 56, Golf Course road and MG road have started using it.

The Haryana City Gas Distribution Limited (HCGDL) has covered most of the new city area.

Satish Chopra, managing director, Haryana City Gas Distribution Limited, said, "It does not require storage inside the house, hence its safe."

High level panel says no to pooling of natural gas price

Reversing its earlier stand, a high-level government committee said that domestic natural gas users cannot be asked to subsidise costlier imported LNG as pooling of natural gas prices was not feasible.
An inter-ministerial panel headed by Planning Commission Member Saumitra Chaudhuri in its draft report a few months back had suggested averaging out price of costlier imported LNG with cheaper domestic gas. The averaging out, called pooling of prices, would have resulted in users of cheaper domestic natural gas pay double the existing rates so that imported LNG could be sold at affordable rates.
But in its final report, which was prepared after extensive consultation with the industry, it said, "The Committee does not recommend pooling mechanism for natural gas at the overall level, nor does it recommend a price pooling on sectoral basis."
Instead, the committee in its August 25 report said preferential allotment of domestic gas to be done to priority sectors of fertiliser and power only and the rest of the consumers like steel plants should be allocated imported LNG.
Domestic gas is currently priced at USD 4.2 to USD 5.5 per million British thermal unit (mmBtu) while the fuel imported in ships in its liquid form (liquefied natural gas or LNG) is priced at USD 10 to 14 per mmBtu.
"These (non-priority) users operate in a market environment where their output prices are market driven with no regulatory burden and hence they should be able to pass on the higher costs of gas feedstock," the report said.
State gas utility GAIL India and Petronet LNG, which were part of the inter-ministerial committee, had been lobbying for pooling of gas prices as LNG currently being imported on a long-term contract from Qatar will cost upward of USD 12 per mmBtu from 2014 while new contract with Australia was priced
at USD 14.5 per mmBtu.
"The recommendation put forth here do not envisage any form of pooling at the all-India level cutting across industries," the report said.
"What it does is to preferentially allot available domestic natural gas to fertiliser and power sectors with a certain quantity reserved allotment for the city gas/CNG sector," it said.
The final report called for meeting incremental requirements of the two sectors and keeping usage of imported LNG in the priority sectors to not more than 25%.
Non-priority steel plants, oil refineries, petrochemical units presently consume about 18.4 million standard cubic meters per day out of the total domestic gas availability of 110.59 mmscmd. Fertiliser and power sector draw 88.37 mmscmd.
The Committee said the domestic gas producers should be given freedom to discover the price of the fuel. "The process should reflect opportunity costs, adequacy of incentives for exploration and production (E&P) and fairness of the consumer."
It also wanted import duty on LNG to be aligned with that of crude oil, on which the customs duty was brought down to zero from 5% in June this year. Also, the government should treat LNG/Natural Gas as a "declared good" so that they have a common concessional rate of VAT.
"The Department of Revenue (which was also part of the committee) is not agreed to the proposal for aligning import duty on LNG with that of crude. On the issue of declared good status in regard of VAT, the Department of Revenue did not wish to record a view," the report noted.
The Committee said it has opted for preferential allotment on a scheme of priority as a basis for allocating the scarce resources of domestically produced natural gas.
"Fertiliser and power sectors have been given first priority for domestic gas. But it is recognised that even they will have to consume some amount of LNG," it said.
For city gas distribution and CNG retailing to automobiles, the Committee recommended that a certain amount of domestic gas (6-7 mmscmd) be set aside for their usage.
Even for non-priority users, the panel said they should have "a choice of either sourcing their own supply of LNG or depending on their present suppliers to give them gas at blended domestic and LNG price."
"Large users may opt to choose to source their own LNG and this will help develop a competitive market for LNG," it said.
Projecting gas demand to rise to 199 mmscmd by 2016-17 from current 132.5 mmscmd, it said the fertiliser sector would need to source 22% of their requirement from LNG while the power sector will need to source 27% of their needs.
"All other users, including city gas/CNG and non-priority industries, would have to source the bulk of their requirement from LNG," the report said. "In 2011-12, about 73% of their total requirement would have to come from LNG and this proportion is likely to rise to little over 80% by
2016-17 depending on the growth of demand from the sectors."
Total LNG imports are likely to rise from about 46 mmscmd presently to about 103 mmscmd by 2016-17.

Interview: Mr. Arving Kumar Mittal, MD (MNGL)

MNGL is the today one of the main provider of Natural Gas to Maharashtra’s final consumers. You joined the company very recently: how was the state of the company when you arrived?

 I have taken leadership of MNGL in the month of April 2011. After I took over, the total sales – comprising of both Compressed Natural Gas (CNG) and Piped Natural Gas (PNG) – have been increased by about 35%, in this short span of four months.

 MNGL is currently operating 14 CNG stations in the Pune area, of which one is an online station. We have also started supplying PNG to some of the big townships, not connected to our main steel grid, through Decompression unit with stationary cascade storage facility. This facility is the first of its kind in India.

What are the new goals that you have set for the company?

 Today, MNGL’s total capital expenditure is around 100 crores. In addition, we are planning to invest 100 crores more this year and another 250 crores by end of 2014. This will bring MNGL’s total capex to around 450 crores in three years from now.

 We are planning to add 140 kilometers of steel pipeline and 400 kilometers of MDPE pipeline to our existing infrastructure. Also, by end of 2014, we would have set up 43 CNG stations spread across the city.

 Also, MNGL’s PNG domestic connections would increase to 72000 by 2014 from current figure of 3,000.

What is your assessment over MNGL’s capacity to raise funds and finance the company’s future development?

 MNGL has already tied up with Banks for financing its capital expansion for the next 5 years. Seeing our future prospects, we see no issue in raising the funds.

MNGL focuses on both PNG and CNG distribution: what are the areas of priority today?

 In the allocated Geographical Area of Pune, MNGL is developing fast in term of spreading its pipe line reach all around Pune city & adjoining areas to cater to PNG & CNG customers.

How difficult is it to change the mindset of local consumers to switch to natural gas and to what extent do you have to act as an educator?

 In today’s world, consumers are very much familiar with fuel. Globally, people are starting to be aware of the importance of having greener fuel and of having an environmentally responsible way of living.

 We are certainly going to contribute in reducing pollution in Pune.

 There is also a cost factor: CNG is much more economical than petrol or diesel. In addition to the Auto-rickshaws, four-wheelers are also going for a CNG kit, nowadays.

The CNG market is a supply driven market considering how high the demand is. To what extent do you plan ahead the necessary infrastructure to meet the demand?

 Looking at this cost advantage I mentioned, auto rickshaws are very much motivated to use natural gas. To cope with their requirements, we are going to add more stations in close proximity of the town centre, where high demand of CNG is being seen.

How challenging is it to conciliate your commitment to the country in providing safe and affordable gas accessible to all and being a market oriented player?

 Considering the price for CNG is market driven, we are not seeing any particular difficulty in our pricing strategy.

 Regarding PNG, we are also replacing liquid fuels by natural gas. In comparison to the liquid fuels, our approach to the market is different since we have been transparent with our customers. PNG is also more economical than liquid fuels, in addition to being more environmental friendly.

 We deliver PNG safely to customer’s premises and follow T4S regulation by PNGRB.

MNGL is planning to expand into two more geographical areas – Khopoli-Lonavala and Pen-Alibag. Where are we today in this process?

 We are going to bid for both Geographical Areas. In fact, 16th of September’11 would be last date of submission of bids. As we are fully equipped, and thanks to our geographical advantage, we are confident that we will be successful. The basic infrastructure work that we have set up in Pune will certainly facilitate implementation of infrastructure in these areas.

Competition could come also in Pune itself, as the exclusivity agreement awarded by the PNGRB to operate the network in Pune ends in 2014. To what extent are you anticipating this and preparing the company to react to the opening of the market?

 By 2014, I am confident that MNGL will be a fully established City Gas Distribution (CGD) company in India. Our vision is to place MNGL amongst the top five CGD companies in the country in five years from now.

 MNGL is already a competitive player. By expanding our network in Pune and surrounding areas, we will further increase our competitiveness and grow tremendously; the sky is the limit.

Only eight states have so far taken initiative for city gas distribution. The petroleum regulator (the PNGRB) has identified 200 cities in the first phase for supplying city gas and ultimately plans to pipe the whole country. This creates obviously great opportunities for city gas distributors such as MNGL. What are the implications of this plan for MNGL?

 We expect our turnover to grow exponentially in the next three years, which will allow us to run the business in a competitive market. We will get opportunity to expand beyond our existing GA with the expansion of CGD sector in the country.

India is the world’s fourth largest consumer of energy after the USA, Japan and China and this trend is not about to change given the country has one of the world fastest economies. Maharashtra, with Pune being seen as the ‘engineering valley of India’ especially has a strong economic development. How do you evaluate future outlooks and how would you define MNGL’s role within the region and the country to ensure energy security?

 India’s GDP is forecasted to grow by over 8% in the next few years. To sustain such growth, the country’s energy requirement is tremendous. The share of natural gas used in India on the energy scale is around 9%, as against world average of 24%. Therefore, use of natural gas is expected to grow in India at a faster rate than any other source of energy, if India has to achieve the projected GDP growth number.

 As you know MNGL is operating in Pune area, the second biggest city in Maharashtra, we obviously have an important role to play in the region’s economic development. We are determined to replace the conventional fuel, causing the most pollution, by natural gas for most of the customers in our Pune area.

Sonipat CGD Network Area

Kota CGD Network Area

GAIL Gas sets up joint venture in Kerala

GAIL Gas, a wholly owned subsidiary of GAIL (India), and Kerala State Industrial Development Corporation (KSIDC) have agreed to pursue city gas distribution opportunities in the State.

The two entities signed an agreement to set up joint venture Kerala GAIL Gas Ltd in the presence of the Chief Minister, Mr Oommen Chandy, and GAIL Chairman and Managing Director, Mr B.C. Tripathi, here on Friday.

PACT SIGNED

The agreement was signed by Mr M. Ravindran, Chief Executive Officer, GAIL Gas, and Mr Alkesh Kumar Sharma, Managing Director, KSIDC.

Kerala GAIL Gas will be incorporated soon and will have an initial authorised share capital of Rs 100 crore.

GAIL Gas Ltd will hold 26 per cent equity in the company and the KSIDC 24 per cent.

The balance 50 per cent equity has been kept for strategic partners, financial institutions (Indian or international) and non-Government companies.

Kerala GAIL Gas plans to take up city gas distribution activities throughout the State by participating in the bidding process of Petroleum and Natural Gas Regulatory Board.

BUSINESS PLANS

There are 14 Geographical Areas (GAs) in Kerala, each district being considered as one GA. The company intends to supply compressed natural gas to vehicles and piped natural gas to households, commercial establishments and industries.

Detailed feasibility report (DFR) and business plans for Ernakulum and Kozhikode have already been prepared to bid for these two geographical areas (GAs) for which bids are to be submitted shortly to PNGRB.

Subsequently, the company will prepare business plans for the balance 12 GAs.

Kerala GAIL Gas also plans to set up CNG stations at bus depots of Kerala State Road Transport Corporation and supply natural gas to power plants, cold storage units and wind power plants.

The company is likely to have a capex investment of Rs 250 crore by its fifth year and Rs 1,000 crore by the 25th year.

Oil India mulls diversification into city gas distribution business

State-run Navaratna oil explorer Oil India is chalking out an expansion and diversification strategy that could also include an entry into the city gas distribution space.
"We plan to pursue a cautious strategy for our exploration initiative. We are looking for sure-bets, because exploration is a risky activity. Even when it comes to domestic exploration, we intend to bid for the next Nelp auctions very selectively," Oil India Director for Exploration & Development Baikunta Nath Talukdar said here.
The company is considering entering the gas transportation market, since it already has expertise in laying pipelines and transporting gas through pipelines. "We would like to market our gas directly to consumers. We may tie-up with a gas marketing company for this," Talukdar said.
"City gas distribution and piped gas distribution are potential areas which we have been identified for diversification. That apart, we also intend to tap shale gas, since the price of natural gas is rising," Talukdar said.
With respect to overseas exploration ventures, the company plans to focus its efforts on fields that have already been discovered. Earlier, the company had set aside 40 per cent of its surplus funds for exploration initiatives. Now, that figure has risen to 52 per cent.
Oil India also intends to improve recovery from existing oilfields. It is already engaged in increasing the productivity of mature oilfields by inducting new technologies and company has begun horizontal drilling in some fields to enhance recovery.
Nevertheless, the diversification strategy will be conservative, with OIL sticking to areas in which it has some expertise, Talukdar said.

Markets continue in the green...

Energy stocks are trading in the green led by Reliance Industries Ltd and Essar Oil. As per a leading financial daily, state run energy firms - IOC (Indian Oil Corp), GAIL (Gas Authority of India Ltd) and Indraprastha Gas Ltd. have alleged that private companies in city gas distribution (CGD) space have suppressed input costs and have bid aggressively to get licences to supply natural gas. These licenses would allow the private companies to distribute gas to households and automobiles. The regulatory board wants to expand natural gas usage to 300 cities, out of which GAIL wants to set up networks in 200 cities. The above mentioned state run firms have enjoyed a monopolistic position in the CGD space till now. They are now facing tough competition from the domestic and foreign firms such as BG group and the Adani group. In order to stall the private companies' plans to enter CGD, the state run firms have approached the Petroleum and Natural Gas Regulatory Board (PNGRB) regarding the unfair bidding.

Reliance Gas' KG-D6 block output dips below 45 mmscmd/day

Natural gas production from Reliance Industries' eastern offshore KG-D6 block has dipped below 45 million standard cubic metres per day this month.

Reliance produced about 44.8 mmscmd of natural gas during the week ending August 14, according to the status report filed by the company with the oil ministry here.

The output comprised 37.7 mmscmd from Dhirubhai-1 and 3 gas fields and 7.1 mmscmd from MA oil field in the KG-DWN-98/3 or KG-D6 block.

As per the status report, out of the 22 wells to be drilled in the Phase-I of Dhirubhai-1 and 3 field development plan, 18 wells have been drilled and completed so far.

During August 8 to 14, 16 wells were put on production as two wells (B2 and B13) were kept closed due to high water cut.

MA oilfield produced an average of 13,688 barrels of crude oil per day besides the 7.1 mmscmd of associated gas.

Of the total 44.8 mmscmd, about 14.6 mmscmd of gas was sold to fertiliser plants and another 26.2 mmscmd to power plants. The remaining 4 mmscmd was consumed by other sectors like sponge iron plants, LPG, city gas distribution networks and petrochemical/refineries.

Minister of State for Petroleum and Natural Gas R P N Singh had earlier this month informed Parliament that output from KG-D6 was short of 70.39 mmscmd envisaged by now as per the field development plan approved in 2006.

"The contractor (Reliance) was advised by (oil regulator) DGH to expeditiously drill more development wells in D1 and D3 field as per FDP in order to enhance gas production in KG-DWN-98/3 block," he had stated.

Reliance has so far drilled only 20 out of the committed 22 wells on D1 and D3 as reservoir has not performed on expected lines.

Of the 20 wells drilled, only 18 wells are under production. Further in the FDP approved in 2006, Reliance had committed to drill 31 wells by end of current fiscal.

Reliance currently holds 90 per cent interest in KG-D6, while the rest is with Niko Resources of Canada. It is selling 30 per cent in the block and 22 others to UK's BP Plc for USD 7.2 billion.

Reliance started natural gas production from KG-D6 fields from April 1, 2009.

Its partner Niko had earlier this month stated that "declines (in production) are expected to continue until work-overs are completed and/or additional wells are tied-in".

The present output is less than about 60 mmscmd production in the same period a year-ago.

Oil India mulls diversification, city gas distribution

The state-run Navaratna oil explorer Oil India is chalking out an expansion and diversification strategy, and considering entering the city gas distribution space. "We plan to pursue a cautious strategy for our exploration initiative. We are looking for sure-bets, because exploration is a risky activity. Even when it comes to domestic exploration we intend to bid for the next Nelp auctions very selectively," Oil India Director for Exploration & Development Baikunta Nath Talukdar said here. The company is considering entering the gas transportation market, since it already has expertise in laying pipelines and transporting gas through pipelines. "We would like to market our gas directly to consumers. We may tie-up with a gas marketing company for this," Talukdar said. "City gas distribution and piped gas distribution are potential areas which we have identified for diversification.That apart, we also intend to tap shale gas, since natural gas price is rising," Talukdar said. Even in its overseas exploration ventures, the company plants to stick to fields that have already been discovered.Earlier, the company set aside 40 percent of surplus funds for exploration, now that figure has risen to 52 percent. Oil India also intends to improve recoveries from the existing oilfields. It is already engaged in increasing productivity of its mature oilfields by inducting new technologies. The company has begun horizontal drilling at its oilfields to enhance recoveries. The diversification will also follow a conservative strategy of sticking to those areas in which it has some expertise, Talukdar said. 

Petroleum and Natural Gas Regulatory Board seeks single window clearance for city gas distribution

AHMEDABAD: The Petroleum and Natural Gas Regulatory Board (PNGRB) has written the chief secretaries to smoothen the process for the city gas distribution (CGD) companies.

It wants the state machineries to give necessary clearances and the faciliatate implementation to ensure that CGD network operationalise within timeframe. It is also seeking single window mechanism by appointing a nodal officer at the state and district level.

The letter comes as the CGD companies represented to the board on challenges in implementing their projects, which is escalating their costs. Problems of CGD companies include higher right of use charges, pipeline laying not allowed during monsoon, non-availability of land for setting up CNG stations and lack of single window clearances.

"In some states, the ROU charges account for 30% of the total steel pipeline laying costs and as high as 70% of MDPE pipeline laying cost. In many states, this is much higher. There can be no argument that the civic authorities cannot be faulted for expecting the timely restoration of roads as per their specifications. However, this should not be seen as a means of revenue generation," read letter by PNGRB chairman L Mansingh.

PNGRB also urged for the cheif secretaries to to give top most priority for facilitating the setting up of CNG stations, which requires land. It argued that excessive spend on expanding CGD networks will burden the end user.

Gujarat Gas may find it tough to maintain its high margins

The June '11 quarter results of Gujarat Gas were surprisingly strong, as the company undertook price hikes in anticipation of an increase in LNG costs that didn't happen. Still the company is facing challenges on volume growth and is unlikely to sustain current high margins going ahead. However, the scrip doesn't appear to face any correction risks.
For a city gas distribution company, the 67% profit growth reported by Gujarat Gas for the June quarter exceeded expectations. The company posted a strong 41% revenue growth to Rs 576.6 crore and improved operating profit margin by 180 basis points to 23.9%. Most of the company's revenue growth came from higher prices. It implemented an across-the-board price hike in April '11, which took the average sales realisation 35.6% higher y-o-y to Rs 19.1 per standard cubic meter (scm). In comparison, the volume growth was a paltry 1.8% to 302 million cubic meters.

Adani to pick up 20% in Green Gas

Gujarat-based Adani Gas, an arm of Adani Enterprise, will pick up 20 per cent equity in Green Gas Limited, a joint venture between Gail and the Indian Oil Corporation (IOC).
Green Gas supplies city gas and compressed natural gas in Agra and Lucknow in Uttar Pradesh. Gailand IOC hold 22.5 per cent each in the company, while Uttar Pradesh State Industrial Development Corporation holds five per cent. Aditya Vikram Birla Group and financial institutions IDFC and UTI together hold 50 per cent stake in Green Gas.
“We have signed a memorandum of understanding with Green Gas to pick up 20 per cent equity in the company. We will merge our assets with Green Gas. Since both of us were in the same city, we decided to work together so that there is no hassle. Also, now, wherever we go we will go together,” said Rajeev Sharma, chief executive officer, Adani Gas.
SBI Capital Markets has been given the mandate to evaluate assets of Green Gas and Adani Gas. The company has begun work on drawing a financial model and a business plan for Green Gas. The board has also asked it to try and arrange private equity infusion upto a specified limit.
IOC and Gail decided that Adani Gas may be inducted as a strategic partner in Green Gas on account of their gas pipeline infrastructure in Lucknow. The combined infrastructure of both companies is expected to provide ready infrastructure to service most parts of the city.
“Adani Gas has infrastructure in Lucknow so we decided to utilise their network. If the business case of Adani Gas is found beneficial to the interest of Green Gas and its shareholders, Adani Gas could be offered up to 20 per cent equity in Green Gas,” said a Green Gas executive.
Adani had spent around Rs 65 crore to lay steel and plastic pipelines for around 60 kilometre in Lucknow. The company, however, had to suspend work midway as it failed to source gas and was subsequently forced to stop work after an intervention by the Petroleum and Natural Gas Regulatory Board in 2009.
Green Gas has syndicated a term loan of Rs 153.6 crore to finance the ongoing city gas distribution expansions and capital expenditures.

Reliance shuts oil production facilities in KG-D6

Reliance Industries (RIL) has
shutdown production facilities at an oil field in its
showpiece KG-D6 block off the Andhra coast for maintenance
without any impact on production till now.
RIL on July 31 took a shutdown to do maintenance work at
a compressor on the Floating Production Storage and Offloading
(FPSO) unit operating in the MA oilfield, sources said.
MA oilfield produces a little less than 15,000 barrels
per day of oil and about 7.6 million standard cubic meters per
day of natural gas from the five wells.
The wells have not been shutdown and they continue to
produce at almost normal rate, sources said.
KG-D6 block, which besides MA oilfield also includes the
gigantic Dhirubhai-1 and 3 (D1 and D3) gas fields, is
producing about 45.4 mmscmd of gas today as compared to over
46 mmscmd last week.
Sources said the maintenance work will last 12-14 days
and
gas production from MA field will be shut for only 36-48 hours
around this weekend.
Sources said wells in the MA field have not been shutdown
during the maintenance of FPSO which pumps out oil from the
field. The wells continue to produce oil and gas.
While gas production from MA oilfield has come down by
0.2-0.3 mmscmd, one out of the 16 production wells in the D1
and D3 has also been shutdown for maintenances, reducing
output by 0.4-0.5 mmscmd.
The Krishna Godavari basin Block KG-DWN-98/3 (D6) has 19
oil and gas finds. Of these, the largest, Dhirubhai-1 and 3
finds and an oil field, MA, have been put into production.
RIL plans to upgrade a gas compressor during the
shutdown. For two days, all gas will have to be flared and
there will be none available for sale, sources said.
The present output is just enough to meet the contracted
demand of core sectors -- 15.35 mmscmd of fertiliser units, 29
mmscmd of power plants, 0.65 mmscmd of city gas distribution
firms and 2.59 mmscmd to LPG plants.
Sources said in May, the oil ministry had directed that
production from KG-D6 will first go to meet the contracted
demand of core users. If any gas is left after that, it can go
to non-core sectors like petrochemicals, refineries and steel.
In event of output falling below what has been allocated
to core users, fuel will first be supplied to fertiliser
plants to their full requirement, then to LPG plants, power
and lastly to city gas users.
If this priority remains, then city gas companies like
Indraprastha Gas Ltd, which sell CNG to automobiles and piped
cooking gas to households in Delhi, will run dry for about two
weeks. Supplies to LPG plants of GAIL would also be impacted
unless the oil ministry says the cut in supplies would be
pro-rata.

IGL may extend supply to 500,000 users in five years

Indraprastha Gas Limited (IGL) has decided to meet additional natural gas demand from imported liquefied natural gas (LNG) because it does not expect any new allocation of domestic gas for the next three years. Rajesh Vedvyas, MD of IGL, talks about company's growth plans in an interview with Siddhartha P Saikia Excerpts:

Is your business affected by dip in the domestic gas output?

No, for our requirement of additional gas to meet incremental demand, we are dependent on LNG. Less supply from domestic field doesn't impact our business. We are not going to get any deemed domestic gas in next three years and, accordingly, planned our operations.

How much is your current demand and where are you sourcing it from?

Currently, our demand is 3.3 mmscmd. Out of this, 2.2 mmscmd is gas from administered price mechanism (APM); 0.15 mmscmd is from KG basin and rest is LNG.

How much do you see your demand growing in next three years? How big is your present customer base?

We see our gas demand going upto 4.5 mmsmcd in next three years. Out of this, 2.2 mmscmd would be APM gas, while rest would be LNG. For piped cooking gas, there are nearly 2,000,000 potential customers in Delhi. In the next five years, we could cover a total of 500,000 new customers. The CNG users are growing at the rate of 14-15 per cent year-on-year. Currently, we supply piped cooking gas to nearly 260,000 customers in Delhi, Noida, Greater Noida and Ghaziabad.

Which are the new cities where you have bid for third round of piped natural gas distribution? How much investment would it require?

We have submitted bids for Jalandhar and Ludhiana. The investment in Jalandhar would be nearly Rs 500 800 crore, while it would be close to Rs 1,000 crore for Ludhiana. We are of the view that cities that have more than 80 per cent of customers make good business sense.

Do you think bidding is the right way to expand city-gas distribution network?

The first round by PNGRB was successful. The Supreme Court quashed the second round. And we don't know when the results for the third round would be declared. We have apprised PNGRB that the bidding process has loopholes, which they must plug. Bidding is not the right way to go for expansion of city-gas distribution network. Rather, there should be few empanelled companies whom the regulator (PNGRB) should allow to lay pipelines through a selection process.

Where is the growth for IGL if you do not get the opportunity to lay network in new cities?

We have our hands full for next five years in the cities where we have our network. Even if no new cities were allotted, it would not impact our growth.

How do you plan to raise funds?

Last year, we raised Rs 350 crore with Axis Bank as the lead arranger of the loan. In the current financial year, we will raise around Rs 300 crore, where HDFC Bank is the lead arranger.

Do you plan to set up a LNG terminal?

IGL is fortunate in having strong promoters in Gail and BPCL and is quite comfortable about LNG sourcing. However, we do not rule out any direct term contracts with the shippers in future.

150 RTC CNG buses gather dust

HYDERABAD: While APSRTC continues to dream about procuring new fleet to net additional revenue, the 150 brand new buses which they have procured about four months ago are gathering dust at Musheerabad bus depot due to lack of CNG supply.
In February 2011, the state government has directed the APSRTC management to ensure that at least one-third of the 6,000 buses which the corporation intends to purchase in the next couple of years should run on CNG (compressed natural gas). According to sources, the corporation and the state government thought at that time that it would be an easy task as 230 CNG buses are already in operation in Vijayawada and a CNG mother station works at brisk pace in Shamirpet.
As per the plan, in the first phase, RTC quickly procured 40 CNG buses hoping that from March 15, Bhagyanagar Gas Limited (BGL), the nodal agency to supply natural gas to Hyderabad's city gas distribution project, will start providing CNG as it was agreed upon. However, things ran into a roadblock as the Reliance Gas Transportation Infrastructure Ltd (RGTIL) could not supply the fuel to BGL.

LNG firms may do well on high prices

The world finally seems to be entering the high LNG price regime as Japan is guzzling more gas to meet its power demand to offset the fall of output from its nuclear power plants damaged by a deadly earthquake in March.
While this is good news for LNG producers across the world, India is caught at the wrong time as a falling output from KG-D6 field is forcing the country to import more LNG at high spot prices.
LNG, or liquefied natural gas, is increasingly being used as a cheaper replacement of crude and other forms of energy such as coal.
“Japan’s nuclear power generating capacity has come down by 30% and due to the recent damages to nuclear plants, the Japanese are toying with the option of going for more LNG and coal-based power plants,” said Vandana Hari, Asia editorial director, Platts, a Singapore-based global information provider on energy and metals.
According to Platts Spot JKM Index, the Japanese LNG import price has risen by 55% since the March 11 earthquake.
Between March 2011 and July 2011, the price of spot LNG has risen from $9.5 per mmBtu to $15.8 per mmBtu, a rise of 66.32%, according to Platts data.
According to another data, the movement of shipment of all crude and LNG cargoes are concentrated towards the Southeast Asian economies.
The current ceiling price in India for domestic gas from the Panna-Mukta field is $5.73 per mmBtu, $5.57 per mmBtu for Tapti field and $4.2 per mmBtu for KG D6 as against the current international spot price of $16 per mmBtu, a difference of 180%.
Hari said the surging LNG prices are sure to impact India as while the gas demand has increased sharply, its domestic supply has not risen in tandem.
While high prices will hurt domestic power and fertiliser players, the biggest consumers of gas, the LNG firms such as Petronet LNG and Shell are set to benefit.
Also, city-gas distribution companies such as Gujarat Gas, Indraprastha Gas, the city-gas arm of Adani are likely to have a dream run in the next few years.
Companies such as Gujarat Gas, which sourced some of its requirement of natural gas from the Panna, Mukta and Tapti fields, had said in April it will be difficult to continue to sell cheaper gas as output is falling and the only option is imported LNG.
“India currently imports close to a million metric tonne of LNG every month and this is expected to go up as the outlook from KG D6 is not impressive,” Hari said.
Satish Mishra, a fertiliser and gas analyst from brokerage Pinc Research, said, “India’s current gas demand consumption stands at 170 million metric standard cubic metres per day (mmscmd) out of which Reliance is supplying close to 48 mmscmd, as against the projected 50-55 mmscmd earlier.’’
He said while Shell is still supplying 1.2-1.3 million tonne per annum (mtpa) of imported LNG to Indian customers, Petronet LNG, India’s biggest LNG player, is operating at full capacity of 10 mtpa, against an fiscal 2011 figure of 8 mtpa.
“Most of the companies had set up capacities expecting gas from Reliance, but with Reliance’s production falling they have to either shut operations or switch to spot LNG,” Mishra said,adding that the price of spot LNG is expected to hover at $12-$14 per mmBtu.
However, Hari from Platts said rise in shale gas exports from the US can ease the situation.
“But it would take time. For now, LNG is a seller’s market,” she said.

Lose LPG for PNG, say gas firms

Consumers in the twin cities may permanently lose their LPG cylinder connections even before piped gas becomes operational in the city.
Oil companies are keen to take away LPG connections within six months for those consumers who are connected to the Piped Natural Gas (PNG) network. The companies are backed by an order from the ministry of petroleum and natural gas that puts the responsibility of withdrawing the LPG connection of PNG consumers on the gas distribution companies, in this case, Bhagyanagar Gas Limited.
The Petroleum and Natural Gas Regulatory Board has taken serious note of the ministry’s directions. The Board chairman, Mr L. Mansingh, recently wrote a letter to the Union minister, Mr S. Jaipal Reddy, expressing concern that the threat of withdrawing LPG connections would seriously hamper the objective of encouraging PNG connections.
The regulator came out with an alternative proposal: keep the cylinder connection in suspended animation under ‘safe custody’. Should the piped gas fail, LPG will be supplied to the customers.
Another important factor is that a majority of customers will be tenants who would want to retain their LPG connections as they may not find PNG in new areas to which they may move.