The city gas distribution (CGD) sector has been severely impacted during to the outbreak of Covid-19 pandemic due to halt in construction activities as well as the decline in sales volume. Consequently, the pandemic has dampened the sector outlook in the short run. However, there is still optimism amongst the CGD entities for the medium and long outlook as the sector is quickly adopting to the changing business environment towards automation and greater deployment of digital solutions. Additionally, the Petroleum and Natural Gas Regulatory Board is also planning to soon launch the 11th bidding round to give out licences to help extend the coverage of natural gas to about 500 districts.
In an interview with CGDIndia, Ravi Agarwal, Executive Director, GAIL (India) Limited discussed about the current status of network development in geographical areas (GAs) authorised to its joint ventures (JVs), impact of Covid-19, upcoming investments and future outlook of the CGD sector…
Q1. What is the current status of network development in the GAs that have been authorised to the JVs owned by GAIL (India) Limited?
After the ninth and tenth rounds of CGD bidding, around 402 districts have been covered for pipeline infrastructure development, covering about 70 per cent of the population. Currently, around 17,000 km of pipeline network is operational and around 16,000 km of pipeline is under execution, with pan-India pipeline network coverage set to be achieved in the next 2-3 years. As far as authorised JVs are concerned, there is cost economics involved for every player in the CGD industry. Due to the outbreak of the Covid-19 pandemic, the consumer sentiments have been adversely affected. Hence, the infrastructure development in the CGD industry may not be the most accurate parameter of measuring its performance and other measures might provide a better reflection of the industry’s performance. One such aspect can be the positive growth in demand for regasified liquefied natural gas (RLNG) and imported natural gas which is not linked to the infrastructure development.
Q2. How was the performance of various JVs of GAIL impacted during the pandemic in terms of revenue generation, commissioning of compressed natural gas (CNG) stations and provision of domestic, industrial and commercial connections?
As far as the performance of JVs of GAIL are concerned, the performance during the first two quarters was affected. However, a spurt in demand was witnessed in the third quarter and the performance during November 2020 has been almost at par with November last year. Revenue generation through new consumers was impacted due to which the focus has shifted towards improving facilities for existing customers. For this, various measures are being taken such as digitisation of various processes. Smart metering is being introduced at a large scale and the existing infrastructure is being upgraded to connect more customers. Hence, the Covid-19 pandemic has forced the industry to place more emphasis on optimisation of existing infrastructure.
Q3. How has the pandemic impacted the minimum work program targets set for the upcoming GAs and CGD networks?
Due to the Covid-19 induced lockdown, work was halted for 3-4 months and construction activities on the retail infrastructure to provide last mile connectivity were impacted during this time. However, the effect of these months is not expected to hamper the achievement of overall targets by the end of the current financial year as activities are now being executed in synchronisation with last mile connectivity, supply chain system and consumer demand. The work on CNG stations and CGD retail network is expected to be completed in another 3-4 months’ time period as the critical material is already available at the sites. Hence, most of the work targets are expected to be achieved by March 2021.
Q6. What are the plans with respect to using small scale liquefied natural gas (SSLNG) for CNG and piped natural gas (PNG) supply?
In areas wherein, the development of pipeline infrastructure may take time or is not viable from technical and commercial perspective, setting up of small scale Liquefied Natural Gas (SSLNG) station to cater the PNG and CNG demand has turned out to be a boon for the CGD entities. Also, SSLNG will help the CGD entities to achieve the D-PNG and CNG MWP targets set by PNGRB. Further, SSLNG has the advantage of catering to all CGD consumer segments like households, vehicles, industries and commercial establishments.
Once pipeline connectivity is established, SSLNG station can be moved to another location where it may be required.
Q7. What are the upcoming projects and investments in the industry?
It is expected that the ninth and tenth round of CGD bidding will bring about an investment of 1,20,000 crore. Recently, PNGRB has published the proposed list for 11th round of CGD bidding. Subsequent to the conclusion of tenth round of bidding, it was witnessed that the private sector’s participation in the tenth round had decreased as compared to the ninth round. The reason for lack of interest from the private sector can be attributed to the fact that plans being prepared in the bid documents are not consistent with the actual contracts being awarded. Hence, the implementation of plans is not in synchronisation with the targets. Therefore, before moving on to the eleventh CGD bidding round, there is a need to address the issues of the two preceding rounds that will enable the entities to effectively implement their plans. This would pave a way for the entities to undertake their works, and attract aggressive bidding in the subsequent rounds.
Q8. What are the future technologies that GAIL will be considering for deployment in the post-Covid world for automating CGD business?
- Majority of the geographical areas authorized by Petroleum & Natural Gas Regulatory Board (PNGRB) for CGD network development are cities. It is observed that getting land to set up CNG stations is a major hurdle being faced by the CGD entities.
Mobile Refuelling Units (MRUs) to dispense CNG is an evolving area which has been proven in many countries. MRUs are mobile CNG dispensing units which can be placed at points with periodic high CNG demand. Expansion of CNG stations through MRUs will act as a boon for the CGD entities as this will address the major issue of land requirement to set up CNG stations in cities. A trial operation of the MRU was approved by PESO under the guidance of MoPNG during the Natural Gas – Emerging opportunities in India Conclave held on 23rd January 2020 in Delhi. Subsequently, many entities have issued Expression of Interest (EOI) for setting up of MRUs recently.
- LNG is the cleanest fossil fuel and is widely used globally in the Transport Sector. Use of LNG as a transport fuel for long haul transportation has been well established globally especially in China. Under project “Blue Sky”, China has promoted LNG fueled vehicles with initial fiscal and regulatory incentives and now operates around 6 Lakhs LNG heavy duty vehicles. This has yielded visible benefits in cleaning the air in Chinese cities. Europe and USA are also promoting LNG fueled Vehicles for environmental and cost benefits.
India has many cities out of the globally top 15 polluted cities. To improve the air quality, MoP&NG has been driving the initiative of setting up of 110 LNG stations in phase I across the Golden Quadrilateral (GQ) National Highways, East-West Highway, North-South Highway and in major Mining clusters in the country. This initiative would help in establishment of LNG as a Transport fuel for increasing the share of Natural gas in the total energy basket of the country besides providing environmental benefits to the society.
- Several reforms are taking place in the CGD industry such as widespread introduction of smart meters and increasing the geographical reach by tapping customers residing in areas without proximity to the pipeline network through remote systems. Renewed focus has also been placed on the optimisation of existing CNG and LNG systems. From the perspective of policies, there is a need to bring reforms to regularise imports of equipment to reduce delivery time. In order to ensure efficient use of this equipment, all players of the industry must come under a single umbrella authority that could facilitate sharing of technology across entities. At the ministry level, reforms in the licensing system are being brought forward to ease restrictions on development of CNG stations.
Q9. What is the short-term and medium-term outlook for the CGD sector?
The short-term outlook is not very positive but the medium-term outlook does restore optimism as a huge market still remains untapped. The CGD sector is also expected to act a catalyst to the growth of other small- and large-scale industries and facilitate urbanisation in several regions. In the next 5-6 years, the CGD sector will cater to around 70-80 per cent of the population and is expected to be in a highly productive phase.