The share of natural gas in the energy mix peaked in 2010-11 to about 9.4 per cent with the commencement of gas production from the KG-D6 basin. At present, it fluctuates between 6 per cent and 6.7 per cent. In the coming years, domestic gas production in India is expected to ramp up. The total natural gas consumption during 2021-22 stood at approximately 168 million metric standard cubic metres per day (mmscmd) with the fertiliser, city gas distribution (CGD) and power sectors being the key consumers. The share of CGD in the overall gas consumption has increased from 23.5 mmscmd (16 per cent) during 2017-18 to 33.35 mmscmd (20 per cent) during 2021-22, registering a compound annual growth rate of nearly 11 per cent.
CGD development in India
The development of CGD infrastructure in India gathered pace with the launch of the ninth CGD bidding round. The 11th bidding round will cover nearly 98 per cent of the population and 88 per cent of the total geographical area of the country under the CGD network. A total of 295 geographical areas (GAs) have been authorised by the Petroleum and Natural Gas Regulatory Board. As of January 2023, over 5,100 compressed natural gas (CNG) stations were operational in India. Meanwhile, over 10.5 million domestic piped natural gas (PNG) connections have been provided.
There has been an evident push from the government for the development of CGD infrastructure in the country. To this end, various initiatives have been undertaken including allocation of domestic gas to the CGD sector under the no- cut category and granting “public utility status” to the CGD network by the Ministry of Labour and Employment. Further, the Ministry of Defence has issued guidelines for the use of PNG in its residential areas. Further, Ministry of Housing and Urban Affairs has issued an advisory for modification in building regulations to incorporate PNG as utility at the design stage, earmarking land plots for CNG stations at the town planning stage in the existing and proposed master plans of the city, etc. The government is also looking at means to rationalise gas prices.
IOCL’s CGD business
Indian Oil Corporation Limited (IOCL) has 49 GAs in its CGD portfolio covering 112 districts. Of these, 23 are through joint ventures (JVs) while 26 are on a standalone basis. IOCL entered the CGD business in 2005 through the JV route and was awarded the Lucknow and Agra GAs. In 2008, Indian Oil-Adani Gas Private Limited (IOAGPL) was formed. Till 2018, the GAs awarded to IOAGPL included Allahabad, Chandigarh, Panipat, Daman, Ernakulam, Udham Singh Nagar, Dharwad, South Goa and Bulandshahr. In 2018, under the ninth CGD bidding round, IOCL entered the CGD business as a standalone organisation and secured eight GAs. It was also awarded 11 GAs through JVs. In the 10th CGD bidding round, nine GAs were awarded to IOCL and one to IOAGPL. Further, in 2022, IOCL secured nine high potential GAs thereby establishing itself as a dominant player in the CGD market.
The company has established a network of over 1,200 km of steel pipeline and more than 3,000 km of medium density polyethylene pipeline. It has also commissioned over 125 CNG stations, 45,000 PNG connections, nine city gate stations and 20 district regulating stations. Capital investment of more than Rs 22 billion has already been incurred on the CGD business.
The digital technologies implemented by IOCL include a PNG customer portal and mobile app, systems, applications and products in data processing industrial solutions, geographic information systems, centralised customer care, central supervisory control and data acquisition and vehicle tracking systems (VTS). Going forward, IOCL plans to deploy other technologies in its systems. It is planning to optimise light commercial vehicle movement through digitalised end-to-end trip management along with integration with VTS. Apart from this, queue management for CNG stations, data analytics for sales forecasting and trend analysis, smart metering and digital construction management have been planned.
What lies ahead
By 2027, PNG connections in the country are expected to reach more than 50 million. Further, over 10,000 CNG stations will be developed. Apart from this, natural gas consumption in the CGD sector will increase by over three times to reach 100-125 mmscmd by 2030 from the current 33 mmscmd. Investments to the tune of Rs 4.5 trillion are expected. Despite facing challenges such as lack of skilled manpower, delays in obtaining permissions, fluctuating gas prices and lack of vendor development, the CGD sector is expected to grow in the coming years backed by government support.
Based on a presentation by R.K. Zutshi, Chief General Manager (CGD), IOCL, at a recent Indian Infrastructure conference