Gujarat is the most developed gas market in the country. The state is one of the largest producers and consumers of natural gas. Greater government focus along with presence of robust infrastructure including extensive pipeline network and liquefied natural gas (LNG) terminals has enabled the state in creating a conducive ecosystem for a gas-based economy.
The Gujarat State Petroleum Corporation (GSPC), an undertaking of the Gujarat government, has played a key role in developing the state’s gas-driven economy. The group has a presence across all segments of the gas value chain. Its city gas distribution (CGD) companies – Gujarat Gas Limited (GGL) and Sabarmati Gas Limited (SGL) – operate the largest CGD network in the country. In an interview with CGDIndia, A. Ramana Kumar, Managing Director, SGL, spoke about the recent initiatives undertaken for the creation of a gas-based economy in Gujarat, current status of CGD networks operated by GSPC Group companies, future expansion plans, key challenges facing the CGD sector and its future outlook…
Q1. How has Gujarat been able to create a gas-based economy?
Gujarat has been a pioneer in creating a gas-based economy. Natural gas forms 25 per cent of the state’s energy basket, much higher than the national average of merely 6 per cent. The state’s natural gas consumption has witnessed a huge increase in the past two decades, and, at present accounts for 32 per cent of the total gas consumption in the country. Further, Gujarat has become the first state with 100 per cent coverage of CGD development authorization. All 33 districts of the states have been authorised by the Petroleum and Natural Gas Regulatory Board for expansion of CGD network under the ninth and tenth bidding rounds. Currently, around 605 compressed natural gas (CNG) stations are operating in Gujarat and over 2.2 million piped natural gas (PNG) connections have been provided. Apart from GGL and SGL, there are several other CGD companies in the state including Vadodara Gas Limited, Adani Gas Limited, Torrent Gas and IRM Energy.
Several factors such as availability of gas, favourable policies and presence of robust pipeline infrastructure and liquefied natural gas (LNG) terminals have been instrumental in the successful penetration of natural gas in Gujarat. The state government has followed the philosophy of creating the demand rather than following it. Besides, the active participation of state entities has also helped in developing the gas market in Gujarat.
Recently, schemes such as the CNG Sahbhagi Yojana and the PNG Sahay Yojana have been launched to further drive gas consumption in the state. While the CNG Sahbhagi Yojana aims to add around 450 CNG stations in the next couple of years, the PNG Sahay Yojana will provide cleaner cooking fuel to poor households. The state government has also encouraged manufacturing units to use natural gas and the fuel is being supplied to several industries including steel, fertilisers, etc.
Further, Gujarat’s gas transmission infrastructure is the most extensive in the country and has played a crucial role in increasing the share of gas in the state. The pipeline network has increased almost sevenfold since the early 2000s. Moreover, the state is also home to three operational LNG terminals – Dahej, Hazira and Mundra– with a total capacity of 27.5 million tonnes per annum.
Q2. What is the current status of the CGD networks operated by GSPC Group companies with respect to CNG stations, PNG consumers, etc.?
The GSPC Group companies are present across the entire energy value chain from exploration and production to gas transmission, regasification terminals and gas marketing and distribution. GSPC’s subsidiary, Gujarat State Petronet Limited (GSPL) is the second largest gas transmission company after GAIL (India) Limited and operates a gas grid of 2,692 km.
Further, after setting up a huge pipeline network in the state, GSPL-led consortiums are also developing three cross-country natural gas pipelines. While GSPL India Gasnet Limited is developing the 1,670 km Mehsana-Bhatinda and 740 km Bathinda-Jammu-Srinagar pipelines, GSPL India Transco Limited is undertaking the 1,881 km Mallavaram-Bhilwara pipeline project. Moreover, GSPC also owns a stake in the recently commissioned Mundra LNG terminal.
The group, through its companies GGL and SGL, has the largest CGD network in the country with a market share of 34 per cent and sales volume of 10.5 million standard cubic meters per day. The two companies have the authorisation to supply natural gas in 29 geographical areas (GAs) covering 48 cities and one union territory. GGL and SGL have together set up over 435 CNG stations in Gujarat accounting for almost 24 per cent of the total CNG stations in the country. Further, they have provided PNG connections to more than 1.56 million households in the state. They have also connected over 3900 industrial and 13,000 commercial consumers.
GGL and SGL account for 88 per cent of the CGD sales in Gujarat, with entities such as Adani Gas, Vadodara Gas and IRM Energy making up the rest. The two GSPC group companies are unique CGD entities with 74 per cent of sales being made to the industrial segment, 19 per cent to the CNG segment, 6 per cent to domestic households and the balance to commercial consumers. In the past couple of years though, the CNG segment has also witnessed high-paced growth with an increase in the number of CNG stations being set up.
Q3. What are the company’s future network expansion plans?
In the ninth and tenth rounds of bidding, GSPC has received authorisation to supply natural gas in 18 districts spread across seven GAs. All the new GAs have been bagged by GGL and are located in Haryana, Rajasthan, Punjab, Madhya Pradesh and Gujarat. The company plans to lay 1,100 km of pipelines in the next three years. Further, in areas that lack pipeline connectivity, the LNG and liquefied CNG routes will be leveraged.
Under the CNG Sahbhagi Yojana, GGL and SGL are expected to add 450 new stations in the coming three years. For the first phase, letters of intent for 215 stations have already been issued. The state government also plans to add a fleet of 1,000 CNG buses in first phase. This is further expected to drive CNG volumes in the state. Moreover, there are plans to connect 450,000 households with PNG connections in the next few years.
Q4. What are some of the key issues and challenges faced by the CGD sector?
A key issue faced by the CGD companies is the low availability of vendors for procuring critical equipment. There are currently very few skilled vendors in the market who are not able to service the growth anticipated in the CGD segment. The issue calls for a long-term solution if projects need to be executed on time. Besides, high right of use charges in certain states have also hampered the progress of CGD projects.
Q5. What is the future outlook for the CGD sector?
In the last two decades, development of CGD networks had been limited to the states of Gujarat, Delhi and Maharashtra. However, in the past couple of years, with the launch of ninth and tenth bidding rounds, remarkable efforts have been made by the government to expand the CGD network in the country. The two CGD rounds aggressively cover most of the districts in the country and substantial amount of investments are expected to be made towards the creation of infrastructure. Besides, the Ministry of Petroleum and Natural Gas is also playing a very active role and is helping the CGD companies in resolving the issues faced by them. Going forward, the state governments can play a critical role in faster development of the CGD infrastructure. With creation of robust infrastructure and launch of favourable policies, Gujarat can serve as a role model to other states for creation of a gas-based economy.