CITY GAS DISTRIBUTION

INTRODUCTION

With the growing concern about environmental aspect GOI started CNG rollouts in cities
suffering from increasing pollution. The CNG demand got a boost with the Supreme Court
directive on pollution reduction in 12 major cities in India and hence provided a platform to a
highly ambitious sector of City Gas Distribution in cities like Delhi. Mumbai, Surat, Lucknow
etc. Various organizations like GAIL, IOCL, BPCL, GGCL entered into this sector by forming
JVs with other players and provided the sector the necessary thrust it deserve.

The CGD network caters to the supply of Piped Natural Gas (PNG) to domestic Households
(HH) & small commercial/industrial establishments & CNG to automobile sector. Considering
CGD as the last milestone of Indian gas chain lot of efforts has been done by various players and
GOI to ensure last mile connectivity of gas which has been substantial in the current decade.

Indian Gas Chain (Source: GGCL Investors Meet, Marchv27, 2008)

With the introduction of PSUs in all of the sectors of the Indian gas chain the gas chain has
become more structured and organized. Currently major oil PSUs like Indian Oil Corporation
Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd are providing substantial
support in all parts of the gas chain with the formation of JVS like Green Gas Ltd (GGL) in
Lucknow & Agra, Indraprastha Gas Ltd (IGL) in Delhi-NCR etc. With a vision to empower most
of the cities and the citizens by providing access to natural gas oil PSUs are coming up with
more plans on CGD network development.

The demand pattern (Gas) zeroed by the Ministry of Petroleum and Natural Gas (MoPNG) in its
Draft Paper on Utilization of Natural Gas-2007 for CGD network is as follows:

YEAR ESTIMATED DEMAND FOR NATURAL GAS (IN

MMSCMD)
2006-07 11.00
2007-08 12.08
2008-09 12.93
2009-10 13.83
2010-11 14.80
2011-12 15.83
Estimated Demand Pattern of NG in CGD Networks (Source: Draft paper on utilization of natural gas in India
 2007

The inference that can be drawn easily is that while the demand in power and fertilizer sectors
will grow sharply because of more and more requirements and introduction of CCGT (Combined
Cycle gas Turbine) plants in power sector the development work in establishing the CGD
networks will be done in a consistent and phased manner.

The consumers of NG via CGD network are classified into different categories based on their
capacity and end use. They are broadly classified as:

SERIAL NO. TYPE OF CONSUMER DESCRIPTION

1. Domestic Consumer Consumers demanding
Natural Gas for cooking as
well as for heating purposes
2. Commercial Consumer While hotels, restaurants,
sweet shops, hospitals, offices,
etc could primarily require gas
for cooking and hot water
requirements.

3. Industrial Consumer Industrial consumers are

classified into two primary
categories- The large scale and
medium scale & the small
scale industries.
4. Transport Sector Transport sector requires CNG
for transporting purposes and
catered through the
development of compressed
natural gas network.

All four types of consumers consume different amount of Natural gas in performing their
operations. They need NG via different channels and the form in which they receive CNG is also
different (like automobiles receive it in the form of CNG while domestic HH receives it in the
form of PNG) leading to a different prices for them and creates a different margin with each
MMSCMD of gas supplied to them. In a nutshell, the profitability reduces from commercial
consumer to bulk consumer. The picture shown below will establish the relation between some
major factors considered while developing CGD network in a city.
COMPRESSED NATURAL GAS (CNG)

Compressed Natural Gas, in short CNG is nothing but Natural gas compressed for the use of
transport sector. Due to its low density, it is compressed to a pressure of 200-250 kg/sq. cm to
enhance the vehicle on-board storage capacity. Principal constituents of NG are Methane and
Ethane, but most gases contain varying amounts of heavier hydrocarbons that are normally
removed by processing. After recovery of the heavier hydrocarbons, the remaining gas, known as
lean gas, is returned to the pipeline system. Natural gas is drawn from pipeline system for
compression and distribution as CNG. Predominantly Methane is available in the lean gas; hence
CNG contains mostly methane (normally not less than 85%).

CNG is one of the safest fuels as it has a high auto-ignition temperature of about 540 degree
centigrade and a very narrow range of flammability (i.e. 5% to 15%). In other words, if CNG
concentration in the air is less than 5% or above 15%, it will not burn. Further, it is lighter than
air and in case of any leakage, natural gas will go up in the air and chance of any ignition is
remote.

# Types of CNG stations

CNG stations are of four major types depending upon the structure and operations:
1 CNG Mother Stations: Mother Stations are connected to the pipeline and have high
compression capacity. These stations supply CNG to both vehicles and daughter stations through
mobile cascades. The Mother Station requires heavy investment towards compressor, dispensers,
cascades, pipelines etc.

2 CNG Online Station: CNG vehicle storage cylinders need to be fitted at a pressure of 200
bars. Online stations are equipped with a compressor of relatively small capacity, which
compresses low-pressure pipeline gas to the pressure of 250 bars for dispensing CNG to the
vehicle cylinder.
3 CNG Daughter Station: The Daughter Stations dispense CNG using mobile cascades. These
mobile cascades at daughter stations are replaced when pressure falls and pressure depleted
mobile cascade is refilled at Mother Station. The investment is least among all types of CNG
stations.

4 CNG Daughter-Booster Station: Installing a booster compressor can eliminate drawbacks of

daughter stations. The mobile cascade can be connected to the dispensing system through a
booster. Daughter booster is designed to take variable suction pressure and discharge at constant
pressure of 200 bars to the vehicle being filled with CNG.

The diagram shown below represents the actual flow of NG from trunk pipeline right up to the
end user:
As Natural Gas is cheaper in comparison to other fuels rise in volume growth of gas arising from the said
factors has enabled the GGCL,MGL & IGL to scale up operations and improve the profitability. Besides
scale-up of volumes, the financial performance of gas distributing companies was being benefited from
the allocation of Administered Pricing Mechanism (APM) gas, for their CGD operations. Because of the
sizeable price differential between the traditional fuels (MS, HSD, Auto LPG, domestic LPG, Bulk LPG,
and LSHS) and city gas, the MGL, GGCL &IGL have had the scope to price city gas at affordable levels
for various classes of consumers and yet maintain robust margins. Since 2006, APM gas allocation has
been restricted only for sales to the CNG and domestic PNG segments, with gas for PNG (industrial) and
PNG (commercial) attracting non-APM rates, which are almost double the APM rates. The APM gas
price revision and allocation of gas at non APM rates for industrial and commercial customers margins
for MGL and IGL have declined in the recent past, while still remaining robust in absolute terms. GGCL
on the contrary has traditionally been dependent mainly on non-APM gas, given its larger focus on
industrial and commercial customers. Thus, its operating margins have been lower than that of MGL and
IGL; however it remains the largest player in India in terms of the volume of gas distributed, given its
focus on high volume customers.

CGD network in India

Name of the
S.No. Area Covered Entity Authorized
CGD Network

Sonipat CGD
1 Sonipat Gail Gas Limited
Network

Meerut CGD
2 Meerut Gail Gas Limited
Network

Kakinada CGD Bhagyanagar Gas

3 Kakinada
Network Limited

Dewas CGD
4 Dewas Gail Gas Limited
Network

Kota CGD
5 Kota Gail Gas Limited
Network
 JV of M/s DSM
Mathura CGD Infratech Pvt. Ltd.
6 Mathura
Network & M/s Saumya
Mining Pvt. Ltd.

Agra CGD
7 Agra Green Gas Limited
Network

Hyderabad CGD Bhagyanagar Gas

8 Hyderabad
Network Limited

Indore CGD Aavantika Gas

9 Indore including Ujjain
Network Limited

Ghandhinagar
Mehsana Sabarmati Gas
10 Ghandhinagar Mehsana Sabarkantha
Sabarkantha Limited
CGD Network

Pune City
Pune City including Pimpri Chiechwad and along Maharashtra
including Pimpri
11 with adjoining contiguous areas of Hinjewadi, Natural Gas
Chichwad CGD
Chakan & Talegaon GA Limited
Network

Kanpur CGD Central U.P. Gas

12 Kanpur GA
Network Limited

Bareilly CGD Central U.P. Gas

13 Bareilly GA
Network Limited

Delhi CGD Indraprastha Gas

14 National Capital Territory of Delhi
Network Limited

Mumbai CGD Mahanagar Gas

15 Mumbai & Greater Mumbai
Network Limited

Vijaywada CGD Bhagyanagar Gas

16 Vijaywada GA
Network Limited
 Thane City & adjoining contiguous areas including
Mumbai CGD Mira Bhayender,Navi Mumbai,Thane Mahanagar Gas
17
Network(GA-2) City,Ambernath,Bhiwandi,Kalyan,Dombivily,Badl Limited
apur,Ulhasnagar,Panvel,Kharghar & Taloja.

Natural Gas usage- India Vs World

The importance of oil in India can be gauged from the fact that it accounts for 36 percent of the Primary
Energy Mix in India. Taken with Natural Gas, this percentage rises to 45 percent. However, the
proportion of Natural Gas is approximately one-third that of the world average, once again indicating the
potential for rapid growth. It may be noted in this context, that a heavy reliance on coal in India is not
optimal, given that coal is a far more polluting fossil fuel as compared to Natural Gas

India’s Primary Energy mix in 2009 World Primary Energy mix in 2009

Worldwide, the industrial and electric power sectors are the largest consumers of Natural Gas. Industrial
sector accounts for 44% and the electric power sector 31% of the world’s total Natural Gas consumption.
With the above comparison of energy mix it is imperative that the Natural Gas is the preferred fuel vis-à-
vis the fossil fuels.
 Natural Gas Reserves & Consumption across the Globe.

Natural Gas Reserves:

The world's largest proven gas reserves are located in Russia, with 4.757 × 1013 m³ (1.6 × 1015 cu ft).
Russia is also the world's largest Natural Gas producer, through the Gazprom company. Major proven
resources are in Russia, Iran, Qatar, Saudi Arabia and United Arab Emirates

As per the Fact-book of Central Intelligence Agency (CIA) of USA the proved reserves of the Natural
Gas has revealed an increasing trend with new discoveries happening. The total Natural Gas - proved
reserves estimated as on January 2008 was 175.4 trillion cu m

Year Natural Gas - proved reserves

2003 161,200,000,000,000

2004 161,200,000,000,000

2005 161,200,000,000,000

2006 174,600,000,000,000

2007 172,800,000,000,000

2008 175,400,000,000,000

The above table shows the stock of proved reserves of Natural Gas in cubic meters (cu m). Proved
reserves are those quantities of Natural Gas, which, by analysis of geological and engineering data, can be
estimated with a high degree of confidence to be commercially recoverable from a given date forward,
from known reservoirs and under current economic conditions. Almost three-quarters of the world’s
Natural Gas reserves are located in the Middle East and Eurasia, Russia, Iran, and Qatar together accounts
for about 57 percent of the world’s Natural Gas reserves as of January 1, 2009. In terms of reserves India
is at 24th position.

Rank Country Natural Gas – Reserves (cubic meters)

1 Russia 47,570,000,000,000

2 Iran 26,370,000,000,000

3 Qatar 25,790,000,000,000
 4 Saudi Arabia 6,568,000,000,000

United Arab
5 Emirates 5,823,000,000,000

6 United States 5,551,000,000,000

7 Nigeria 5,015,000,000,000

8 Algeria 4,359,000,000,000

9 Venezuela 4,112,000,000,000

10 Iraq 3,170,000,000,000

11 Turkmenistan 2,860,000,000,000

12 Indonesia 2,630,000,000,000

13 China 2,450,000,000,000

14 Norway 2,288,000,000,000

15 Malaysia 2,037,000,000,000

16 Uzbekistan 1,798,000,000,000

17 Kazakhstan 1,765,000,000,000

18 Netherlands 1,684,000,000,000

19 Egypt 1,589,000,000,000

20 Canada 1,537,000,000,000

21 Kuwait 1,521,000,000,000

22 Libya 1,430,000,000,000

23 Ukraine 1,075,000,000,000

24 India 1,056,000,000,000

Inspite, of having good reserves compared to other countries in the world the network of Piped Natural
Gas Distribution to domestic sector is lagging, as per reports Pakistan and Bangladesh are way ahead in
comparison to India in PNG Network to Domestic segment.

Consumption of Natural Gas

The following table shows the worlds Natural Gas Consumption, which has increased form 2.555 trillion
cum in 2004 to 3.198 trillion cum in 2008. The increase in consumption of natural gas is expected to grow
further with increasing production of Natural Gas.

Natural Gas - consumption

Year
(cubic meters)
2004 2,555,000,000,000
2005 2,599,000,000,000
2006 2,675,000,000,000
2007 2,819,000,000,000
2008 3,198,000,000,000
2009 3,476,000,000,000
2010 3,628,000,000,000

Today India ranks at 20th position in the world in terms of Natural Gas consumption
The Petroleum and Natural Gas Regulatory Board (PNGRB) is aiming to cover as many as about 230
towns and cities in the near future of city gas distribution.

The commercial success of the CGD project in India has drawn M/s. APNRL into the said business.

STRUCTURE OF CGD NETWORK

Setting up of a CGD network is a big task in itself in terms of management of public private
interest. It is not only a matter of distribution and marketing of the product it is also about
creating a feeling of security in the mind of prospective customers. PNGRB board has provided
the guidelines in the form of its “Draft Paper on Access Codes” which has clearly mentioned the
responsibilities associated with the transporter and shipper making things more clear to both
parties. The essential elements of a CGD network are:
1. Steel grid pipeline
2. City Gate Station (CGS)
3. District Regulating Station (DRS)
4. CNG stations
5. Service Regulator (SR)

All of the above mentioned facilities are directly related to each other and thus have a deep
impact on the functioning of the whole CGD network. As far as the cost is concerned the
establishment of these fundamental facilities bring major cash outflow to the distribution
company. The networking is defined as:

The above figure shows constituents of an effective CGD network where each unit perform its job to

ensure the proper working of the system. A brief description of some of the units mentioned above is

given below:

1. City Gate Station: The point where custody transfer of NG from high / medium pressure transmission

pipeline to the CGD network takes place.

2. Distribution Pressure Regulating Station/ District Regulating Station: “Distribution Pressure

Regulating Station or District Regulating Station (DPRS)” means a station located within authorized area
for CGD network having isolation, metering, pressure regulating and overpressure protection devices.
3. Service Regulator: It reduces the gas pressure from 4 BAR to 100 mBAR and ensures the flow of gas
at constant pressure at all time.

4. Meter Regulator: Installed before the meter, the meter regulator reduces the gas pressure from 100
mBAR to 21 mBAR

SWOT
SWOT analysis of the OMC in context of the City Gas Distribution is discussed in the following
table:

Strengths
• Presence in most of the states.
• Prior experience as a partner in GGL.
• Stake in Dahej‐PLL and existing exploration blocks in India and overseas.
Opportunities
• Increasing demand for NG in Indian cities.
Weaknesses
• Scarcity of experienced individuals in CGD.
• Currently no other gas source except Dahej‐PLL is available.

Threats
• Increasing competition in CGD business.
• Increasing NG prices.

DEMAND ANALYSIS OF PANIPAT AS A GEOGRAPHICAL AREA FOR

CGD IMPLEMENTATION IN HARYANA

INTRODUCTION
To feed the increasing demand of Natural Gas, Dadri-Panipat RLNG pipeline marketing and
laying rights were awarded to IOCL. The pipeline will be of 132 km length and will provide an
economic means of feeding NG to the captive power plant at Panipat refinery. The major
purpose behind the laying process of Dadri-Panipat spurline is to replace Naphtha with NG.The
RLNG pipeline will receive NG through HVJ pipeline at Dadri and will cater the needsof about 7
districts falling in the vicinity of the proposed pipeline. Major districts which will fall in the
vicinity of the proposed pipeline are:
• Panipat (HR)

• Sonipat (HR)

• Baghpat (UP)

• Meerut (UP)

• Ghaziabad (UP)

• Gautam Budh Nagar (UP)

• Bulandshahr (UP)

The proposed pipeline route (as decided by the organization) originates from GAIL's Dadri terminal and

traverse towards north, crosses NH 24 near village Masuri, Hapur-bypass-road (NH 58), River Hindon,

River Yamunna, NH-1 and enters the ROW of MJPL at MJPLChainage 87.70 km ex-Bijwasan and

continues up to MJPL Chainage 106.00 km ex-Bijwasan and thereafter in common ROW of MDAJ hook-

up line for approx. 5.5 km. A branch pipeline to NFL will take off at Village Diwana near Panipat from

the Dadri-Panipat R-LNG pipeline. The pipeline route has been finalized so as to avoid human habitation,

factories etc. as far as possible.

The proposed pipeline work is under progress and the plans for setting up robust CGD network in some

of the cities close to the proposed pipeline are under consideration. Currently, IOC is considering overall

demand of NG in the above mentioned districts and has plans to set up CGD network starting from the

selected cities in a phased manner. The cities of the district that would be selected for the development of

CGD network would be covered in a multi phased format and will be supplied NG as per the requirement

of the city itself. On some technical and commercial grounds 7 it has been calculated that the area within

25 km range (on each side) of pipeline would be best for the initial phase of the CGD network setup
process and thus facilitate further establishment of the CGD network in whole district. On the similar

grounds industrial customers with demand of more than 3000 SCMD were zeroed to find out the potential

of NG demand in respective districts. Major cities complying with the norms and regulations of PNGRB

and satisfying the minimum Return on Investment (RoI) requirement will be considered as the first

preference. The study is aimed to investigate the profitable and compatible aspects of cities and districts

and thus provide the reasons and rationale for selection of the best possible choice.

There are several reasons associated to the development of CGD network in the above mentioned

districts. The reasons range from the micro and macro economic impact to the brand positioning

and stretching of IOC product line. The selection of districts/cities would be done on the basis of

total NG demand assessment including Industrial, Domestic and Automobile sector demand in

the form of NG, PNG and CNG respectively and some other factors. The overall NG demand

potential for the above mentioned districts for particular cities is calculated through the analysis

of data available to the organization. While districts are undertaken in an order to ascertain the

total maximum potential for NG market, cities are being focused after due considerations to the

phased improvements to the CGD network process itself.

METHODOLOGY FOR CALCULATION OF POTENTIAL NG DEMAND

The potential industrial NG demand for year 2012-13 is taken from the report submitted to IOCL
by MDRA group out of which three scenarios were drawn having a switching over pattern of 45-
59%, 60-74% and 75-89% for pessimistic, realistic and optimistic scenarios respectively.
The PNG demand is calculated from the Indane LPG sales in the respective towns and cities
which were extrapolated to the total sales in that city/town by the market share of Indane LPG in
respective town/city. The result thus procured is converted into the total LPG demand after
considering the fact that domestic LPG accounts for 96% of the total LPG consumption.
The figures thus obtained are converted into NG equivalent using conversion factors and total
PNG demand is calculated.
CNG demand in the city/town is calculated from the vehicular population profile of the city and
some statistics related to it (mileage, avg. daily distance travelled). The total CNG demand is
thus converted to NG to calculate the potential NG demand.
While determining the PNG and CNG demand the switching over pattern is taken constant (at
10% upto year 2012-13) to create parity amongst all the cities/towns considered in the study.

CRITERIA FOR CITY SELECTION

While total expected demand of NG can be one of the major benchmark for the selection of
town/city for CGD network establishment some other factors like current status in terms of EOIs
and State Govt. policies and moves can also play major role in making decision. On the basis of
the experiences of IGL and MGL a checklist is prepared covering most important aspects of city
town selection in addition to the expected NG demand.

Selection Criteria
1. Closeness to the proposed RLNG pipeline
2. Administrative action by the state to promote NG in the city/town
3. Total population of the city/town
4. Status of the city/town in terms of EOI to the PNGRB Board
5. Existing LPG and CNG demand
6. Infrastructure of the city/town
7. Level of urbanization in the city/town
HARYANA
Introduction
Located in northern part of India, Haryana emerged as a separate state in the federal galaxy of
the Indian Republic after being carved out of the state of Punjab on November 1,1966. With just
1.37% of the total geographical area and less than 2% of India’s population, Haryana has carved
a place of distinction for itself during the past three decades. Today Haryana is among the most
prosperous states in India, having per-capita income of Rs 49038 at current prices (Source:
Economic Survey of Haryana, 2007-08) in the country. It is a leading manufacturing hub as it is
also home to Maruti Suzuki India Limited, India's largest automobile manufacturer, and Hero
Honda Limited, the world's largest manufacturer of two-wheelers. Panipat, Panchkula and
Faridabad are also industrial hubs, with the Panipat Refinery being
the second largest refinery in South Asia. There is also an established steel and textile industry in
the state of Haryana.
When it comes to financial health Haryana one among the three best performing states in the
country. Haryana had the minimum fiscal deficit of 0.6 per cent in financial year 2006-07.
Haryana tops the list in terms of per capita investment in the fiscal year 2007 with an investment
of Rs 1,86,045 crore. Ninety-three of top Fortune 100 companies already have their corporate
offices and production bases in Haryana. In 2006-07 Haryana received foreign direct investment
projects of over Rs 11,000 crore in the state and corporate sector.
Recently, Haryana has come up with New Industrial Policy (NIP) which is formulated for
generation of rapid industrialization and jobs to the people of Haryana. As per the data available
Haryana is equipped with 682 new industrial units with an investment of 230 crore. Famous for
its industries and its cultural values, Haryana is one of the most prolific and growing states of
India. The fact file of Haryana and its growth statistics corroborates the claims ade by the
Haryana Govt. Development of Industrial estates like Precision Tools Complex at Rohtak,
Footwear Park at Bahadurgarh and Aparel Park at Barhi (Sonipat) are some of the recent works
that account for the increased industrial growth of the state.
The principal cities of Haryana Include names of Faridabad, Panipat, Rohtak, Hisar, Sonipat,
Karnal Yamunanagar, Gurgaon, Bhiwani and Sirsa out of which Faridabad claims of the most
populated city and Panipat and Sonipat stands at third and fifth positions respectively.
Considering the economic and population status of Panipat and Sonipat and the distance between
the spurline and cities they have been selected for the demand estimation of NG in them.