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Govt identifies 44 new areas for city gas distribution auctions

FE Bureau
·2-min read
city gas distribution auctions, PNGRB, CGD network, CNG stations, MoPNG, PNG connections, GAIL Gas
city gas distribution auctions, PNGRB, CGD network, CNG stations, MoPNG, PNG connections, GAIL Gas

The Petroleum and Natural Gas Regulatory Board (PNGRB) has proposed 44 new geographical areas for the upcoming 11th round of bidding for city gas distribution (CGD). According to the new tentative list, the highest number of CGD areas will fall in Tamil Nadu (eight), to be followed by Maharashtra (seven) and Madhya Pradesh (six). At present, the CGD network covers 232 geographical areas spread over 407 districts in 27 states.

Under the ninth and 10th rounds of bidding for CGD networks, the numbers of CNG stations and domestic piped natural gas (PNG) connections are expected to increase by 8,181 and 4.2 crore, respectively, in the next 8-10 years. The present share of gas in the energy basket of the country is 6.2%, and the target is to take it to 15% by 2030.

As of September 2019, there were 1,815 CNG stations and 54.2 lakh domestic connections across the country. Currently, about 76% of the compressed natural gas (CNG) stations and 80-90% of the PNG connections are concentrated in Delhi, Gujarat and Maharashtra.

The Ministry of Petroleum and Natural Gas (MoPNG) has prepared a draft policy for CGD, which, the government expects, will become a template for every state to come up with their own CGD policies. CGD network operators are seen to benefit from a sustained weakness in global spot LNG prices and an expected decline in domestic gas prices.

Kotak Institutional Equities expects domestic gas prices to decline by around $1/mbtu in the upcoming revision for the first half of FY21. Apart from state-run GAIL Gas, Gujarat Gas, Indraprastha Gas, Mahanagar Gas, Indian Oil, Hindustan Petroleum and private entities such as Adani Gas and Torrent Gas have significant presence in the sector.

According to Kotak, CGD companies source around 15% of their domestic gas requirement from the Panna-Mukta-Tapti fields and after the expiry of production sharing contract from this field in December 2019, the fuel extracted from this field is seen to fall to $3.6 per million British thermal units (mbtu), against its earlier contracted price of $5.7/mbtu.