SUMMER TRAINING REPORT ON

Gas Monetization Strategies: A Critical Analysis

Undertaken at

“OIL AND NATURAL GAS CORPORATION”

Submitted in partial fulfillment of the requirements for

the award of the degree of

BACHELOR OF BUSINESS
ADMINISTRATION
By

OM WADHWA
09017701717

Vivekananda School of Business Studies

Vivekananda Institute of Professional Studies
Guru Gobind Singh Indraprastha University, Delhi
 Student Declaration

I hereby declare that this submission is my own work and that, to the best of my
knowledge and belief, it contains no material previously published or written by
another person nor material which has been accepted for the award of any other
degree or diploma of the university or other institute of higher learning, except
where due acknowledgment has been made in the text.

Date:
Signature of the student:

Name of the student: Om Wadhwa

University Enrollment Number: 09017701717

BBA
2017-2020
Vivekananda Institute of Professional Studies
(Guru Gobind Singh Indraprastha University)

Page 2 of 56
 Certificate of Completion

OM WADHWA student of Vivekananda Institute of Professional Studies

(Enrollment No.-09017701717) has submitted a Summer Training Report titled
Gas Monetization Strategies: A Critical Analysis conducted at ONGC, New
Delhi for partial fulfillment of Bachelor of Business Administration (BBA) to be
awarded by G.G.S.I.P. University, Delhi. I certify that this report has been
completed under my guidance and is satisfactory.

Date:
Signature of the Guide:

Name of the Guide: Mr. Ashish Pathak

Designation: Sr. Corporate Marketing Officer

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 Table of Content

❖ Executive summary ……………………………………………………………..………………..05

❖ Introduction of ONGC…..….………………………………..…………………...................06
➢ ONGC - Down the Memory Lane……………………………………………….….06
CH-1 Introduction

➢ Genesis of ONGC…………………………………………………………………………..06
➢ Industrial Policy Resolution, 1956………………………………….……….…….07
➢ Early Days…………………………………………………………………………….………07
➢ Phenomenal Growth (1961 – 1990)………………………………………………07
➢ After 1990…………………………………………………………………………………...08
➢ ONGC Product’s……………………………………………………………………………12
❖ Need for Direct Marketing of gas by ONGC………………..……………………………13
CH-2 Review of Literature

❖ Natural Gas …………………………………………………………………………………………….15

➢ Introduction………………………………………………………………...................15
➢ Natural Gas Processing…………………………………………………………………15
➢ Use Of Natural Gas………………………………………………………..……………..18
➢ Benefits of Natural Gas………………………………………………………………...20
➢ Comparison of Natural Gas with other Fuels………………………………..21
➢ Natural Gas Pricing In India…………………………………………………………..22
➢ Gas Pricing Revision……………………………………………………………………..23
❖ Gas Monetization Strategies…………………………………………….......................24
➢ Natural Gas Production & Utilization …………………………………………..24
Ch-3 Research

➢ Associated and Non Associated Gas …………………………………………….24

Methodology

➢ Oil & Gas Production Indian Scenario…………………………………………..26

➢ Demand Supply Gap…………………………………………………………………….28
➢ Bringing Gas To Market………………………………………………………………..30
➢ Alternate & Upcoming Technologies………………………………………….…44
➢ Evaluation of gas monetization options……………………………………….46
❖ Case study on utilization of gas available in Johrat sector …………………….…48
➢ Case introduction………………………………………………………………………..48
CH-4 Case Study
CH-5 Findings

➢ Case background………………………………………………………………………….48
➢ Gas flaring………………………………………………………………………………….…48
➢ Gas sales E-tender………………………………………………………………………..49
➢ Gas Evacuation options under study…………………………………………….49
➢ Identifying the best option available…………………………………………….52
➢ Case summary……………………………………………………………………………..53
❖ Conclusion………………………………………………………………………………................54
CH-6
Conclusion ❖ Nomenclature………………………………………………………………………………………….55
❖ References ………………………………………………………………………………………………56

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 ❖ Executive summary

This report brings out a brief introduction about India’s biggest company in upstream market of
oil and gas which is ONGC. The report also brings out the importance of natural gas as the
fastest growing energy source, not only in India but also all over the world. Gas reserves and
supply & demand scenario in world and especially in India is discussed to bring out the
importance of this valuable energy resource. The report focuses mainly on analysis of gas
monetization strategies so that underutilized resources, viz. gas, can utilize effectively and
efficiently.
This report also brings out a detailed case study for monetization of natural gas in
small/isolated field in remote part of north east India covering the evaluation of various options
and methodology used for arriving at the most cost effective option in view of the various
technical, socio-political and regulatory condition.

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❖ Ch-1 INTRODUCTION TO ONGC

➢ ONGC - Down the Memory Lane

After independence, the Indian Government realized the importance of oil and gas for rapid
industrial development and its strategic role in defense. Consequently, while framing the
Industrial Policy Statement of 1948, the development of petroleum industry in the country was
considered to be of utmost necessity.

Until 1955, private oil companies mainly carried out exploration of hydrocarbon resources of
India. In Assam, the Assam Oil Company was producing oil at Digboi (discovered in 1889) and
the Oil India Ltd. (a 50% joint venture between Government of India and Burmah Oil Company)
was engaged in developing the two newly discovered large fields of Naharkatiya and Moran in
Assam. In West Bengal, the Indo-Stanvac Petroleum project (a joint venture between
Government of India and Standard Vacuum Oil Company of USA) was engaged in exploration
work. The vast sedimentary tract in other parts of India and adjoining offshore remained largely
unexplored.

➢ Genesis of ONGC
In 1955, Government of India decided to develop the oil and natural gas resources in the
various regions of the country as part of public sector development. With this objective, an Oil
and Natural Gas Directorate was set up towards the end of 1955 as a subordinate office under
the then Ministry of Natural Resources and Scientific Research. The department was
constituted with a nucleus of geoscientists from the Geological Survey of India.

A delegation under the leadership of Mr. K D Malviya, the then Minister of Natural Resources,
and considered to be the Father of Indian Petroleum Industry, visited several European
Countries to study the status of oil industry in those countries and facilitate the training of
Indian professionals for exploring potential oil and gas reserves. Foreign experts from U.S.S.R
visited India and helped the government with their expertise. Finally, the visiting Soviet experts
drew up a detailed plan for geological and geophysical surveys and drilling operations to be
carried out in the 2nd five year plan (1956-’57 to 1960-’61).

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 ➢ Industrial Policy Resolution, 1956
In April 1956, the Government of India adopted the Industrial Policy Resolution, which placed
Mineral Oil industry among the Schedule ‘A’ industries, the future development of which was to
be the sole and exclusive responsibility of the state.

➢ Early Days
Soon after the formation of the Oil and Natural Gas Directorate, it become apparent that it
would not be possible for the Directorate, with its limited financial and administrative powers
as subordinate office of the Government, to function efficiently. So, on 14 th August, 1956, the
Directorate was raised to the status of a Commission with enhanced powers, although it
continued to be under the government.

In October 1959, the Commission was converted into a statutory body by an Act of the Indian
Parliament, which enhanced the powers of the Commission further. The main functions of the
Oil and Natural Gas Commission, subject to the provision of the Act, were “to plan, promote,
organize and implement programs for development of Petroleum Resources and the
production and sale of petroleum and petroleum products produced by it, and to perform such
other functions as the Central Government may, from time to time, assign to it.” The Act
further outlined the activities and steps to be taken by ONGC in fulfilling its mandate.

➢ Phenomenal Growth (1961 – 1990)

Since its inception, ONGC has been instrumental in transforming the country’s limited upstream
sector into a large viable playing field with its activities spread throughout India and
significantly in overseas territories. In the inland areas, ONGC not only found new resources in
Assam but also established new oil province in Cambay basin (Gujarat), while adding new
petroliferous areas in Assam-Arakan Fold Belt and East coast basins (both inland and offshore).

ONGC went offshore in early 70’s and discovered a giant oil field in the form of Bombay High,
now known as Mumbai High. This discovery, along with subsequent discoveries of huge oil and
gas fields in Western offshore, changed the oil scenario of the country. Subsequently, over 5
billion tone’s of hydrocarbons, which were present in the country, were discovered. The most
important contribution of ONGC, however, is its self-reliance and development of core
competence in E&P activities at a globally competitive level.

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 ➢ After 1990
The liberalized economic policy, adopted by the Government of India in July 1991, sought to
deregulate and de-license the core sectors (including petroleum sector) with partial
disinvestments of government equity in Public Sector Undertakings and other measures. As a
consequence thereof, ONGC was re-organized as a limited Company under the Company's Act,
1956 in February 1994.

After the conversion of business of the erstwhile Oil & Natural Gas Commission to that of Oil &
Natural Gas Corporation Limited in 1993, the Government disinvested 2 per cent of its shares
through competitive bidding. Subsequently, ONGC expanded its equity by another 2 per cent by
offering shares to its employees.

During March 1999, ONGC, Indian Oil Corporation (IOC) - a downstream giant and Gas Authority
of India Limited (GAIL) - the only gas marketing company, agreed to have cross holding in each
other's stock. This paved the way for long-term strategic alliances both for the domestic and
overseas business opportunities in the energy value chain, amongst themselves. Consequent to
this the Government sold off 10 per cent of its shareholding in ONGC to IOC and 2.40 percent to
GAIL. With this, the Government holding in ONGC came down to 74.14 percent.

ONGC has earned its first hydrocarbon overseas revenue from its investment in Vietnam.

Today, Oil and Natural Gas Corporation Ltd. (ONGC) is, the leader in Exploration & Production
(E&P) activities in India contributing 72% to India’s total production of crude oil and 48 per cent
of natural gas.

ONGC’s quest for energy goes deeper than setting new benchmarks in deep-water drilling in
the Krishna Godavari Basin or finding new frontiers of energy. Global decline in crude prices
notwithstanding, we have taken significant investment decisions diligently and aggressively,
reversing the production trend in offshore. And now we are venturing into deeper offshore
plays in our quest for energy security. It is this journey that has placed us among Fortune
“World’s Most Admired Companies” and ranked us 5thin the E&P industry globally on the Platt’s
Top 250 Rankings 2016.

Currently, seven out of 26 sedimentary basins are under production. These include Assam-
Arakan, Assam Shelf, Mumbai Offshore, Cambay, Krishna Godavari, Rajasthan and Cauvery.
There are estimated 10 billion tones of oil and oil equivalent reserves in these seven
sedimentary basins. Of this, about four billion tones of oil and oil equivalent are recoverable
reserves. Cauvery basin was the last that came on stream in 1985.

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ONGC Group of Companies

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➢ Major Assets/Basins of ONGC
• ASSETS/PLANTS:
o Mumbai High Asset, Mumbai
o Neelam&Heera Asset, Mumbai
o Bassein & Satellite Asset, Mumbai
o Ahmedabad Asset, Ahmedabad
o Ankleshwar Asset, Mehsana
o Mehsana Asset, Mehsana
o Rajahmundry Asset, Rajahmundry
o Karaikal Asset, Karaikal
o Assam Asset, Nazira
o Tripura Asset, Agartala
o CBM Asset, Bokaro
o AAFB Exploratory Asset, Silchar
o Jorhat Asset, Jorhat
o RKOE Asset, Jodhpur
o Urban Plant, Uran
o Hazira Plant,Hazira

• BASINS:
o Western Offshore Basin, Mumbai
o Western Onshore Basin Vadodara
o KG Basin, Rajamundry
o Cauvery Basin , Chennai
o MBA Basin, Kolkata
o A&AA, Basin, Assam
o Frontier Basin , Dehradun

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Page 11 of 56
➢ ONGC deals in the following :
• Crude Oil
ONGC is the largest crude oil producing company in India, 69% of the crude oil has
produced by ONGC. ONGC has discovered 6 out of 7producing Indian basins in the
last 50 years and has a formidable presence all over the country.
• Natural Gas
ONGC is the largest producer in India for Natural Gas. ONGC’s natural gas
production including its share of gas from joint venture was 25.811 BCM.
• Value Added Products :
o LPG
o C2-C3
o Low Sulphur Heavy Stock
o SKO
o Naptha
o HSD
o ATF

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❖ Ch-2 Review of Literature
Need for Direct Marketing of Gas by ONGC

➢ ONGC pioneered gas marketing in the country in early 60s and through its efforts
created a market for gas by directly dealing with customers. However, in 1992 (as per
the direction of GOI) gas marketing was transferred by ONGC to GAIL. After withdrawal
of gas allocation & marketing functions from ONGC, ONGC faced the problem of gas
flaring from small, isolated and marginal fields due to delay in gas allocation which was
leading to non-tapping of such precious and scarce clean fuel as GAIL did not find it
commercially viable.

➢ Based on various representations made by ONGC, GOI in 1997 permitted ONGC to

directly market gas up to 0.1 MMSCMD from isolated fields with an objective of early
utilization of gas getting flared from such fields/locations.

➢ However, MoP&NG in 2001 reviewed marketing of natural gas produced from isolated
and marginal fields of ONGC and directed that ONGC shall not advertise for any gas
under direct marketing scheme before offering the same to GAIL in first place. GAIL was
required to confirm within four months whether they would take the gas or not. In case
GAIL’s denial for marketing of such gas, in such cases ONGC could advertise the same

➢ Accordingly, thereafter ONGC started indicating gas availability from isolated and
marginal fields to GAIL. However, delay by GAIL in tie-up of consumers use to take place
leading to flaring of gas or non-utilization of such indicated gas. Accordingly, revised
guidelines were issued by MoP&NG in 2003. As per these guidelines, GAIL would tie-up
such gas within six months’ time, failing which GAIL should either pay MGO or return
the gas to ONGC for marketing.

➢ Finally, Govt. of India issued order dated 20.6.2005 on ‘Allocation and pricing of natural
gas’. The order stipulates that ‘any additional gas as well as future production of gas
from new fields to be developed in future by ONGC/OIL would be sold at market-related
price in the context of NELP provisions’. The NELP provisions provides for discovery of
price at arm’s length.

➢ Based on MoP&NG Gas Pricing Order dated 31.05.10, non-APM gas was redefined to
exclude gas from existing field and vide order dated 28.06.10 “Guidelines for pricing and
commercial utilization of non-APM gas produced by NOCs from their nominated blocks”.

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 The Guidelines envisaged allocation of gas up to 3 MMSCMD by MoP&NG based on non-
APM price of dominant gas in that supply zone. Beyond 3 MMSCMD gas, the Guideline
envisages discovery of gas price and NOCs to approach prospective customers in order
of priority and submit the proposal to MoP&NG for allocation.

➢ However, as above pricing order was not addressing the issue of allocation from
small/isolated fields, ONGC requested MoP&NG for allocation rights from small/isolated
fields based on transparent e-tender process based on price.

➢ After protracted follow up by ONGC with MoP&NG for early allocation of available gas
from large number of small isolated fields, large proportion of which is associated and
getting flared for want of marketing tie-up, MoP&NG vide order dated 16.1.2012 came
out with “Guidelines For Selection Of Customers For Domestic Gas Available From
Small/ Isolated Fields” having potential of less than 0.1 MMSCMD so that customers can
be directly selected by NOCs for allocation. As per these guidelines, such selection of
customers shall be through e-tender and allocation would be based on the principle of
‘Sectoral priority’ and earliest utilization date. The price of such gas as well as sectoral
priority would be on similar lines as per the guidelines on ‘Pricing and commercial
utilization of non-APM gas from nominated blocks dated 28.06.2010’.

➢ However, ONGC was of the opinion that tender should be price based and accordingly
MoP&NG was requested to introduce tendering concept based on price irrespective of
sectoral priority. MoP&NG on 08.07.2013 introduced the revised Guidelines for
Selection of Customers for Domestic Gas Available From Small/ Isolated Fields which
superseded the Guidelines dated 16.01.2012. These Guidelines did away the selection of
consumers based on priority sector and introduced the concept of price tender
irrespective of any sectoral priority.

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❖ NATURAL GAS

➢ Introduction
Natural gas is a gaseous fossil fuel consisting primarily of methane but including significant
quantity of ethane, propane, butane, pentane, and higher hydrocarbons (removed later on
as condensate) as well as carbon dioxide, nitrogen and hydrogen sulphide. It is found in oil
fields in either dissolved or isolated conditions (as associated gas), in gas fields (as free or
non-associated gas), in coal beds (as coal bed methane) and in water (as gas hydrates). Also
Shale gas is natural gas produced from shale. Because shale has matrix permeability too
low to allow gas to flow in economical quantities, shale gas wells depend on fractures to
allow the gas to flow.
Natural gas is mainly used as fuel for generating electricity and heat. Natural gas in
compressed form is used as fuel for vehicles which is known as CNG. It is used as fuel for
boilers and air conditioners worldwide. This is used for making fertilizers also, mainly
ammonia. For transporting, two variants are used - LNG for cross countries exchange and
CNG for domestic purpose.
Natural gas prices are affected mainly through the US demand and it's seasonal in nature
wherein in winters its prices fluctuate heavily. Also they have direct correlation with crude
oil prices. It is measured in million British thermal units (mmBTUs), but in some countries it
is traded in Gigajoule also. The world's most liquid derivative contracts for natural gas are
traded on NYMEX, while in India it is traded on MCX.

➢ Natural Gas Processing

Natural gas processing consists of separating all of the various hydrocarbons and fluids
from the pure natural gas, to produce what is known as ‘pipeline quality’ dry natural gas.
Major transportation pipelines usually impose restrictions on the make-up of the natural
gas that is allowed into the pipeline. That means that before the natural gas can be
transported it must be purified. While the ethane, propane, butane, and pentanes must be
removed from natural gas, this does not mean that they are all ‘waste products’.

In fact, associated hydrocarbons, known as ‘natural gas liquids’ (NGLs) can be very valuable
by-products of natural gas processing. NGLs include ethane, propane, butane, iso-butane,
and natural gasoline. These NGLs are marketed separately and have variety of different
uses; including enhancing oil recovery in oil wells, providing raw materials for oil refineries
or petrochemical plants, and as sources of energy

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 While some of the needed processing is
accomplished at or near the wellhead (field
processing), the complete processing of natural
gas takes place at a processing plant, usually
located in a natural gas producing region. The
extracted natural gas is transported to these
processing plants through a network of
gathering pipelines, which are small-diameter,
low pressure pipes. A complex gathering system
can consist of thousands of miles of pipes,
A Natural Gas Processing Plant interconnecting the processing plant to upwards
of 100 wells in the area.

In addition to processing done at the wellhead and at centralized processing plants, some final
processing is also sometimes accomplished at ‘straddle extraction plants’. These plants are
located on major pipeline systems. Although the natural gas that arrives at these straddle
extraction plants is already of pipeline quality, in certain instances there still exist small
quantities of NGLs, which are extracted at the straddle plants.

The actual practice of processing natural gas to pipeline dry gas quality levels can be quite
complex, but usually involves four main processes to remove the various impurities:

1. Oil and Condensate Removal

2. Water Removal
3. Separation of Natural Gas Liquids
4. Sulfur and Carbon Dioxide Removal

In addition to the four processes above, heaters and scrubbers are installed, usually at or near
the wellhead. The scrubbers serve primarily to remove sand and other large-particle impurities.
The heaters ensure that the temperature of the gas does not drop too low. With natural gas
that contains even low quantities of water, natural gas hydrates have a tendency to form when
temperatures drop. These hydrates are solid or semi-solid compounds, resembling ice like
crystals. Should these hydrates accumulate, they can impede the passage of natural gas
through valves and gathering systems. To reduce the occurrence of hydrates, small natural gas-
fired heating units are typically installed along the gathering pipe wherever it is likely that
hydrates may form.

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Page 17 of 56
➢ Uses of Natural Gas
• Power Generation
Natural gas is a noteworthy wellspring of power era using cogeneration, gas turbines
and steam turbines. Flammable gas is likewise appropriate for a joined use in
relationship with sustainable power sources, for example, wind or solar and for
alimenting crest stack control stations working couple with hydroelectric plants. Most
network topping force plants and some off-framework motor generators utilize
petroleum gas. Especially high efficiencies can be accomplished through joining gas
turbines with a steam turbine in consolidated cycle mode. Petroleum gas consumes
more neatly than other hydrocarbon energizes, for example, oil and coal, and creates
less carbon dioxide per unit of vitality discharged.

Coal-let go electric power era discharges around 2,000 pounds of carbon dioxide for each
megawatt hour produced, which is twofold the carbon dioxide discharged by a petroleum
gas let go electric plant per megawatt hour generated. Because of this higher carbon
proficiency of flammable gas era, as the fuel blend in the United States has changed to
diminish coal and increment gaseous petrol era, carbon dioxide emanations have
surprisingly fallen. Those deliberate in the main quarter of 2016 were the most minimal of
any recorded for the primary quarter of any year since 1992.

Combined cycle control era utilizing natural gas is right now the cleanest accessible
wellspring of energy utilizing hydrocarbon energizes, and this innovation is generally and
progressively utilized as natural gas can be acquired at progressively reasonable costs.
Power module innovation may in the long run give cleaner choices to changing over
petroleum gas into power, however so far it is not cost focused. Privately delivered power
and warmth utilizing natural gas controlled Combined Heat and Power plant (CHP or
Cogeneration plant) is considered vitality proficient and a quick approach to cut carbon
emissions.

• Domestic use
Natural gas dispensed in a residential setting can generate temperatures in excess of
1100 °C (2000 °F) making it a powerful domestic cooking and heating fuel. In much of
the developed world it is supplied through pipes to homes, where it is used for many
purposes including ranges and ovens, gas-heated clothes dryers, heating/cooling,
and central heating.

Heaters in homes and other buildings may include boilers, furnaces, and water heaters.
Both North America and Europe are major consumers of natural gas.

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 Boilers use low pressure, usually 6 to 7 inches of water (6" to 7" WC), which is about
0.25 psig. The pressures in the supply lines under the streets vary, either utilization
pressure (UP, the aforementioned 6" to 7" WC) or elevated pressure (EP), which may be
anywhere from 1 psig to 120 psig. Systems using EP have a regulator at the service
entrance to step down the pressure to UP.

In the US Compressed natural gas (CNG) is used in rural homes without connections
to piped-in public utility services, or with portable grills. Natural gas is also supplied by
independent natural gas suppliers through Natural Gas Choice programs throughout the
United States. However, as CNG costs more than LPG, LPG (propane) is the dominant
source of rural gas.

A Washington, D.C. Metrobus, which runs on natural gas.

• Transportation
CNG is a cleaner and also cheaper alternative to other automobile fuels such
as gasoline (petrol) and diesel. By the end of 2012 there were 17.25 million natural gas
vehicles worldwide, led by Iran (3.3 million), Pakistan (3.1 million), Argentina (2.18
million), Brazil (1.73 million), India (1.5 million), and China (1.5 million). The energy
efficiency is generally equal to that of gasoline engines, but lower compared with
modern diesel engines. Gasoline/petrol vehicles converted to run on natural gas suffer
because of the low compression ratio of their engines, resulting in a cropping of
delivered power while running on natural gas (10%–15%). CNG-specific engines,
however, use a higher compression ratio due to this fuel's higher octane number of
120–130.

Besides use in road vehicles, CNG can also be used in aircraft. Compressed natural gas
has been used in some aircraft like the Aviat Aircraft Husky 200 CNG and the Chromarat
VX-1 KittyHawt

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 LNG is also being used in aircraft. Russian aircraft manufacturer Tupolev for instance is
running a development program to produce LNG- and hydrogen-powered aircraft.

• Fertilizer
Natural gas is a major feedstock for the production of ammonia, via the Haber process,
for use in fertilizer production.

• Hydrogen
Natural gas can be used to produce hydrogen, with one common method being
the hydrogen reformer. Hydrogen has many applications: it is a primary feedstock for
the chemical industry, a hydrogenating agent, an important commodity for oil refineries,
and the fuel source in hydrogen vehicles.

• Other
Natural gas is also used in the manufacture of fabrics, glass, steel, plastics, paint, and
other products.

➢ Benefits of Natural Gas

Natural gas, the cleanest fossil fuel, is a highly efficient form of energy. It is composed
chiefly of methane; the simple chemical composition of natural gas is a molecule of one
carbon atom and four hydrogen atoms (CH4). When methane is burned completely, the
principal products of combustion are carbon dioxide and water vapor.
Natural gas has several advantages over other fuels including: it has fewer impurities, it is
less chemically complex, and its combustion generally results in less pollution.
• Natural Gas is a clean fuel
In most applications, using natural gas produces less of the following substances than oil
or coal: carbon dioxide (CO2), which is the primary greenhouse gas; sulfur dioxide, which
is the primary precursor of acid rain; nitrogen oxides, which is the primary precursor of
smog; and particulate matter, which can affect health and visibility; than oil or coal.
Technological progress allows cleaner energy production than ever for all fuels,
although the inherent cleanliness of gas means that environmental controls on gas
equipment, if required, tend to be far less expensive than those for other fuels.

• Cost Effective
Most natural gas appliances cost less money to operate than electric appliances.

• Reliable
Most natural gas appliances work even when the electricity is out. Since the natural gas
system is underground, outages are rare.

• Efficient

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 Natural gas appliances are faster and use less energy than electric appliances. Natural
gas dryers use less energy and can dry clothes faster than electric dryers.

Natural gas hot water heaters heat water twice as fast as electric water heaters. Natural
gas furnaces can last longer than electric heat pumps and deliver heat up to 25° F
warmer.

➢ Comparison of Natural Gas with other Fuels

In terms of emissions from power plant sources, natural gas is the cleanest fossil fuel.
Using data collected from the Energy Information Administration (EIA) division of the
Department of Energy (DOE), the emissions of several stack gasses are compared for
natural gas, oil, and coal. In addition to the reduction in CO2 emissions, natural gas does
not have significant emissions of nitrogen oxides and sulfur dioxide.
However, leaks of methane (CH4) from natural gas pipelines may amount to a significant
additional source of greenhouse gas emissions. Methane contributes more to climate
change than CO2 on a per pound basis, so even small leaks of methane may make
natural gas contribute more to climate change than coal. A study in 1997 by the EPA and
GRI estimated that the decreased CO2 emissions from natural gas outweigh any
greenhouse gas emissions from methane leaks. It is unclear if these estimates still hold
for current gas production, but in 1997 it was estimated that natural gas leaks account
for 19-21% of the U.S. anthropocentric methane emissions. More conclusive studies are
necessary before making clear comparisons between the climate change effects of
natural gas and other fossil fuels.

➢ Natural Gas Pricing in India

Natural gas pricing in India has gone through various phases from controlled to market-
determined and back to regulated prices. This chapter is devoted to providing readers
with a historical perspective on natural gas pricing in India.
• Gas Pricing Fundamentals
There are three basic pricing mechanisms for natural gas prevails in the world. They are:
• Cost plus pricing:
This method uses direct costs, indirect costs, and fixed costs related to the production
and sale of natural gas. These costs are converted to per unit costs and then a
predetermined percentage of these costs are added to provided a proft margin. Cost
plus pricing often fails to attract investment as the returns are fixed.
• Prices based on alternative fuels:
In this pricing mechanism gas is priced to compete with alternative fuels in the market.
The Gas prices are pegged to the alternate fuels based on energy equivalence &

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 efficiencies of use. Gas competes with Naphtha, Gasoline, Diesel, Coal, LPG, Fuel oil and
Electricity.
• Pricing based on gas to gas competition:
Gas competes with gas when the numbers of suppliers in the market is large and price is
market determined based on the demand and supply of gas.
• APM Gas Pricing
Pricing in the natural gas sector is currently based on the gas pooling concept, with the
government deciding the pool price. The price that a consumer pays includes a royalty
of 10%, transmission cost and state sales tax (it ranges between 4% and 20%). For the
north-eastern region, the gas prices are comparatively lower than other parts of country
to meet the political and social development of the region.
At present ONGC and OIL are getting producer price of Rs 3200 per MSCM ($ 2.01 per
MMBtu) and Rs 1920 per MSCM ($ 1.21 per MMBtu) in the north-eastern region. The
government plans to increase the producer price for ONGC and OIL by 16% and index it
to inflation as well.
According to the pricing model of APM gas, the total amount that a consumer pays has
four elements to it:
- The consumer price (landfall price) set by the government
- Transmission charges (payable to GAIL)
- The royalty of 10% (which is passed on to the government)
- Sales tax or other applicable taxes or duties.

• Non APM Gas Pricing

For mutually contracted gas, various commercial terms of contracts and market forces
determine the price of gas. These includes gas volumes, delivery commitments, upside
available, duration, linkage to benchmark, crude oil price, fixed or variable prices,
evacuation capabilities, creditworthiness of the customer, demand-supply balance etc.
Both the buyer and the seller take a view on each of these and assign a weightage to
arrive at their respective acceptable prices.
The prices are governed by the production sharing contract (PSC) for gas under NELP.
The government is required to approve the price prior to the sale of natural gas to the
consumers. It also has to ensure that gas has been valued on the basis of competitive
arm’s length sales in the region for similar sales under similar conditions.

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➢ Gas Pricing Revision
• After promising a price premium for gas produced from discoveries in high pressure-
high temperature, deepwater and ultra deepwater areas in October 2014, the Indian
Government outlined how such a pricing mechanism will be structured.
• On March 10, 2016, the GOI approved - proposal to grant certain marketing freedoms,
including pricing freedom for gas produced from high pressure-high temperature,
deepwater and ultra deepwater areas. This pricing freedom would be capped by a
ceiling price, calculated (in US$/mmBtu) as the lowest of:
- Fuel oil landed import price;
- Weighted average landed import price of alternative fuels (0.3 x price of coal + 0.4 x
price of fuel oil + 0.3 x price of naphtha); and
-LNG landed import price.
• In NELP PSCs & production from nominative blocks, the gas prices are computed and
notified by PPAC based on a hub based formula approved by the CCEA in Oct 2014,
which links gas price to the hub gas prices of USA, UK, Canada and Russian domestic gas
price.

Period Applicable Domestic Equivalent Domestic %age change

Gas Price(GCV Basis) Gas price(NCV Basis)
01.11.14 to 31.03.15 5.05 5.61
01.04.15 to 30.09.15 4.66 5.18 -7.66%
01.10.15 to 31.03.16 3.82 4.24 -18.15%
01.04.16 to 30.09.16 3.06 3.40 -19.81%
01.07.16 to 31.03.17 2.50 2.75 -20.00%
01.04.17 to 30.09.17 2.48 2.72 -1.09%
01.10.17 to 31.03.18 2.89 3.17 +16.54%
01.04.18 to 30.09.18 3.06 3.36 +5.99%
01.10.18 to 31.03.19 3.36 3.69 +9.82%
01.04.19 to 30.09.19 3.69 4.05 +9.75%

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❖ Ch-3 Research Methodology
Gas Monetization strategies
➢ Natural Gas Production and Utilization
Today fastest growing primary energy source is natural gas. Large amount of natural gas
reserves, technological advancements in exploration and production including deep-sea and
the desire for low-carbon fuels and cleaner air worldwide, has led to increase demand for
natural gas. We can simply look at the timeline for availability of fossil fuel in Table 1.

Oil Natural Gas Coal

Reserves 240700 million 167940 million 1139331 million
ton ton ton
Production 4382.4 million ton 3212.9 million ton 3656.4 million ton
Consumption 4418.2 million ton 3204.1 million ton 3732 million ton
R/P Ratio (yrs) 54.9 52.2 311.5
Table-1 : World-wide Fossil fuel reserves (BP Statistical Review)

➢ Associated and Non-associated Gas

We have mainly two major sources of gas: associated gas and non-associated gas reserves.
A Different gas utilization route will be led by different economic drivers for monetizing gas.

As a by-product of production of crude oil associated gas is produced. The associated gas
reserves are mainly developed for the production of the crude oil from which field
development cost is being paid. Associated gas is basically a undesirable product in the
production process which is basically re-injected, flared or vented.

Worldwide 141 Billion Cubic Meters (BCM) was flared in 2017 according to world’s bank
data for 2017 which shows need to produce oil and dispose of natural gas in the case of
associated gas it requires a totally incomparable approaches in field-development plans
where sustainable development would also have increasing focus and flaring may bring to
an end as an option which would have helped in controlling the waste of valuable resource
and also the environment will be saved from negative impacts . Currently projects like Obite
Gas plant , Chevron Texaco, Escravos GTL project are some of the key gas utilization projects
that are either have been recently completed or are at situation of about to be completed.

• Stranded Gas
We do have natural gas reserves being left unused because they are very small to be used
or very remote to be economically developed from sizeable population center. Stranded gas
is basically the gas that is wasted or unused due to local gas markets are very small where
the demand for that particular gas is very less or they don’t have the resources to full fill the
need of the customers effectively because to full fill the demands we also need to have

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proper infrastructure and that becomes few of the reasons for that particular gas to be
stranded. There are approximately 1,200 those type of fields with various sizes in the
different parts of the world.

• Associated Gas Reserves

Associated gas accounts for approximately 25% of the worldwide proven reserves of natural
gas. This is down from approximately 35% in the 1970s, mainly because of the stabilization
of the level of oil reserves in Middle Eastern countries and exploration in zones
more favorable to non-associated gas. The proportion of associated gas flared has been
reduced significantly during the last twenty years. This trend has been achieved through the
efforts of countries in recovering incremental quantities of associated gas.

• Deep Offshore Gas Reserves

Offshore Gas Reserves in the Arctic regions and Siberia also having a share of gas reserves
which makes very difficult to get the access of the gas, currently there are so many new
projects are under the process of completion where with the help of new technology it
becomes possible for us to use that gas which is available in these types of regions.

• Marginal Gas Fields

These are basically small pockets of hydrocarbons where we cannot use these fields for a
longer time period because of very small sizes of reserves because they have plateau
for few years and 15% of the total gas reserves has been covered by these types of fields
and out of that 20% of those fields are considered as stranded .

• Remote Gas Reserves

These are the reserves which are very far out of the reach of consuming areas. Fields like
Africa, South America, Northern Siberia are some of the examples of these types of filed,
there are also some fields like this are available in Middle Eastern areas which are
considered to be very far to be used economically in the present situation. After taking an
rough estimation we get that 15% to 20% consists of remote gas reserves out of total
stranded gas reserves.

Table-2 Stranded Gas Potential

Source 1012 m3
Associated Gas 12
Deep Offshore 8
Marginal fields 5
Remote gas fields 24-50
Total 49-65

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 ➢ Oil & Gas Production : Indian Scenario
India has positioned as one of the major developing economies in the world. According to
the current scenario India needs uninterrupted, economically viable & clean fuel supplies.
Over the next few years sectors like power, fertilizers and industrial sectors will increase the
demand of natural gas. LNG is bound to play a important role to ensure energy efficiency in
the country. Currently India is 4th largest importer of LNG by importing 22.5 billion cubic
meters. India needs to have a urgent development of infrastructure for LNG regasification
terminals and natural gas pipeline for building more strength to LNG market in India.

Currently India has 4 operational facilities for LNG imports:

Table-3 operational facilities for LNG imports in India

LNG Terminal Capacity

Dhabol LNG Terminal 5 million ton
Kochi LNG Terminal 5 million ton
HaziraLNG Terminal 3.6 million ton
Dahej LNG Terminal 10 million ton

India is having regasification capacity of 92 million standard cubic meters per day of gas
(mmscmd ) and it is expected to increase 52% by 2025. Price acceptability of LNG by various
sectors can be a major challenge in structuring and tying up LNG &India is also likely to be 3 rd
largest importer of LNG by 2020.

Table-4 Energy Consumption Sources In India.

Source 2005 2010 2025

Coal 51% 53% 50%
Oil 33% 30% 25%
Gas 9% 11% 20%
Hydro 6% 5% 2%
Nuclear 1% 1% 3%

The growth rate of Natural gas consumption as well as primary energy gas consumption in
India is higher compared to the World, Asia Pacific averages, consistent with the energy
needs of growing economy by looking at the growth rate of the World natural gas
consumption of last decade was over 2.76% while in the Asia Pacific region it was 6.92% and
for India 9%. If we talk about the market in India which is having highest consumption is
northern market due to the better pipeline connectivity. In the given table we can look at
the pipeline structure of India which will help us get clear picture.

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Figure-1 Pipeline Structure Of India For Natural Gas

Page 27 of 56
 ➢ The demand-supply gap
In recent years demand for natural gas has been increased due to –

- Its higher availability

- Development of transmission and distribution infrastructure
- Savings of cost from the usage of natural gas in place of alternate fuels
- Characteristics of natural gas which is environment friendly
India can be divided into six major regional natural gas markets –

- Northern Market
- Western Market
- Southern Market Northeastern Market
Out of these Northern Market and Western Market currently have highest consumption
due to better pipeline connectivity as seen in the above [Link] India some of the major
sectors to demand for the natural gas are –

- Power
- Fertilizers
- City Gas
- Industrial
- Petrochem/Refineries/Industrial Cons.
- Sponge Iron/Steel
Table-5 Natural Gas Demand Projections

SECTOR 2021- 2026- 2029-

22 27 30
Power 232.26 307.26 352.26
Fertilizer 107.85 110.05 110.05
City Gas 46.25 67.96 85.61
Industrial 37.00 52.06 63.91
Petrochem/Refineries/Industrial 59.52 75.96 87.94
Cons.
Sponge Iron/Steel 10.00 12.19 13.73
Total 492.88 625.49 713.49

Table-6 Natural Gas supply projections

Source 2021- 2026- 2029-

22 27 30
Domestic Sources 181.6 210.6 230.1
LNG Imports 175.2 188.0 188.0

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Gas Imports(Cross border 30.0 30.0 30.0
pipelines)
Total 386.8 428.6 448.2

After analyzing the data of the above Table-5 and Table-6 we got to know about the
demand and supply gap which had been projected, Therefore it is really become important
for the country to develop its infrastructure for natural gas supply in order to fulfill the
demand and supply gap with the help of the available options for the natural gas like LNG.

We can also look at the current situations of the demand and supply of the natural gas in
India.

Table-7 Scenario of Natural gas in India at the end of 2018

Production 27.5 billion cubic metres

Imports 30.6 billion cubic metres
Consumption 58.1 billion cubic metres

After looking at the current scenario of Natural Gas in the country, we are looking at the
imports of natural gas in the form of LNG from the other countries to full fill the needs of
the consumer of the country but at the same time we have also discussed about the
stranded gas which makes this situation more complex where resources of the country is
being underutilized and due to that we need to do more and more imports to fulfill the
domestic demand. This shows the need and urgency of the monetization of gas so that we
can do the proper utilization of the resources.

Figure-2 Natural Gas Demand And Supply Gap

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➢ Bringing Gas to Market
Figure-3 key components of bringing gas to market

In the above figure key components shows the flow of how gas enters into market which
starts from gas being found from gas fields and then it is sent to gas production facility after
that for the process of the conversion it is being sent to conversion facility and then it is
sent to the consumers facility so that can be further distributed to the consumers in a
particular area.

As discussed above about the key components of the bringing stranded gas to market now
the discussion will be centered around the monetization of gas.

• Technology options for gas monetization

Natural gas cannot be completely utilized and become stranded gas because of the cost
factor, when it comes to value of natural gas it becomes very less when it is there in the
field but in order to utilize that gas we need to make it available for the consumer and it
becomes very uneconomical as gas needs to be transported to thousands of kilometers
away and that is why gas remain stranded, so in order to cross this hurdle we can have the
potential way to deliver the gas to market in more economical way.

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 Figure-3 Gas to market option

• Gas to Gas
In order to make the gas transportation more economical we need to find out the way in
which we can convert the gas in to that form in which the volume can be reduced so that it
can take the least amount of space while transportation. So if we talk about the gas to gas
option we need to understand that we do have three options available where we can
transport the gas from Pipelines after giving it treatment so that it becomes compatible to
be transported through pipelines, other way is compress natural gas (CNG) where it will be
compressed in such a manner so that it can be easily transported to the consumers, last
way of gas to gas is to convert gas into liquefied natural gas (LNG) where gas is treated to
convert it into liquid form so that it can be stored as a liquid content then transported to
the consumer.

Figure-4 Volume reduction comparison under various options

In the above figure we can look at the volume being reduced by the various options of
conversion of gas into other types of gaseous forms where we can see that LNG has been
proved as most efficient way where in pipeline is the least efficient way comparative to
others.

As we have already discussed about LNG that it is one of the way which is helping our
country to meet its domestic demand of natural gas by importing LNG from the other

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 countries and we have also seen the efficiency of the LNG that how it reduce volume of the
gas which is making economically best way in gas to gas option.

• Liquefied Natural Gas –

When natural gas is treated at temperature of -265oF (-160oC) then its volume reduced by a
factor approximately 600 and we get the gas natural gas converted into Liquefied Natural
Gas (LNG) which makes it very easier to transport from one place to another economically
over long distances.

As the demand for the natural gas is also growing at a good speed which is making a big gap
between the demand-supply gap as seen in the figure-2 and we have also seen in Table-7,
role LNG is playing in order to make the demand-supply gap for natural gas shorter.

o Value Chain-
Following points will be showing value chain process/activity for LNG-

1. Liquefaction – Converting natural gas from gaseous state into liquid state at -265oF (-160oC).
2. Shipping – Gas will be transported from one place to another for the consumers into liquid
form.
3. Receiving – Gas will be received at a point from where it will be sent for the regasification
process.
4. Regasification Terminal – Here gas will be converted from liquid state to gaseous state so
that it can be used by the consumers.
o Screening Criteria-
LNG has been proven very efficient in terms of economical transportation for natural gas if
we compare to any other ways like pipeline because pipeline is the expensive way of
transportation when it comes to more than 2500km of distance and that is the reason
among all the comparisons that took place so far results have published that LNG is
competitive with pipelines.

o Key Considerations-
In order to evaluate options for transportation of gas as LNG there are few of the
considerations that might help-

1. Long Term Contracts- In today’s market scenario situation is where LNG has not become a
medium of exchange for gas because we are not looking forward to get the long term
contracts but at the same time we are looking at medium term contracts and short term
contracts due to that the confidence of the investors is not boosting up. So in order to see
more and more growth of the LNG industry we need to have long term contracts which will

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 not only boost up the confidence of the investors but also boost up the LNG industry as
investors will be willing to investing more and more.

2. Short term/spot purchase – In today’s market, supply is passing over the demand and
market is shifting from long term to short term contracts due to price flexibility for natural
gas which has weaken investors’ confidence that is where spot purchase/ short term
contracts are playing their role which is helping out the gas market.

3. Economics of the LNG chain- In order to understand the concept of calculating cost for LNG
production we need to go through following categories-
- Gas Production Facilities- According to the calculation’s done by various bodies of
natural gas it has been gas production cost varies from U.S. $0.25/million Btu to
more than U.S. $1.0/million Btu, which means that production cost of less than U.S.
$1.0/million Btu is desirable to make the LNG option economically viable. So in order
to attain this target of cost productions needs to be done in such a manner so that
the main aim of LNG which is to make it more and more economical can be
achieved.
- Base load liquefaction plant with storage and export facilities- So when we talk
about the LNG one of the main factor to determine the cost is liquefaction process
cost where natural gas will be converted from gaseous state to liquid state. Capital
cost of the liquefaction facility is based on few of the factors like the location of the
plant, size of the plant, site condition, and quality of feed gas.
Figure-5 Typical capital cost break down of an LNG liquefaction facility

- LNG tanker ships (Transportation)- Transportation has always been an important

factor when we talk about how economical LNG will be, so as we know after
liquefaction process once natural gas is LNG now it’s time to ship it out and that is
basically being done with tanker ships and cost of this process will always be
depending upon the distance needs to be covered from liquefaction facility to

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 market. A typical contribution of shipping cost to cost of delivered LNG is
approximately U.S. $0.5 to $1.2/million Btu.
- Import terminal with storage and regasification facilities- These facilities are going to
cost on the basis of the design factor of these facilities especially the design of the
storage tanks and also specific site conditions. These facilities typically contribute in
the cost of the delivered LNG approximately U.S. $0.3 to $0.4/million Btu.

• LNG – An option in Indian Context-

LNG imports started in 2004 in Dahej and Hazira because our domestic supplies for natural
gas were growing at a very slow speed and being fourth fastest growing economy in the
world with 7.2% projected growth demand for the natural gas had been increasing rapidly
and due to these circumstances growth in demand of LNG is substituting other liquid fuels
mainly in the industrial, commercial and residential sectors and domestic demand is being
fulfilled by 41.77% of LNG imports in overall supply.

o Price of LNG and competition from alternate fuels and sector level price
challenges-
Competition from coal is one of the major challenge because coal is meeting more than 50%
of the energy demand in India. With average power prices of around USD 0.70/Kwh, power
produced from LNG is likely to be around 1.50 to 2 times of that produced from coal both
domestic and imported. Govt. is also giving focus on reducing emissions and use clean form
of energy high production price and low sales price because government is also thinking
about the consumer satisfaction level. In the Fertilizer sector, while most of the gas used is
supplied through domestic sources, a key challenge lies in importing incremental required
through imports or producing them indigenously using LNG.

As it had been seen from various studies so far done to understand the pricing issue for LNG
for the country like India which is one of the biggest importer for LNG, beyond a delivered
price of USD 14/ MMBtu, it is economical to import fertilizers rather than producing
domestically. Other industries like city gas, refineries had been facing competition with
alternate fuels oil, naphtha and diesel. Naphtha had already been replaced with natural gas
in majority of sectors and diesel which is capped fuel oil has been having major pricing
challenge for substitution with LNG in these sectors.

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 o LNG degasification and Gas transportation infrastructure
To bridge the growing gas demand supply gap, robust development of degasification
terminal and gas pipeline network connecting various parts of India is required to be
developed at very fast pace. Currently with degasification capacity of 13.60 MMTPA
(excluding 5 MMTPA each in Dabhol and Kochi, which are currently not running/capacity
not utilized) and gas pipeline network of around 13000 KM, approximate 41.7% of total
natural gas is being supplied by RLNG.

o Competition from Far East and China

India would also need to take strategic decisions like upstream participation in integrated
liquefaction projects, tax efficient structures, and a consumer friendly regulatory
environment to make this dream a reality. Far East Countries such as Japan, South Korea,
Taiwan, are the major and traditional LNG importing countries which import around 50% of
total LNG traded in the world. India and China are relatively new entrants in comparison to
these established players and have to travel a long way to meet their energy requirements
through this route. Although, China, has been very aggressive in securing LNG, India faces
stiff competition from these markets. India is emerging as major LNG market of future with
all round development in LNG terminals (many upcoming along with expected investment in
many FSRU’s), gas pipelines to attain desired sustainable growth.

o Future Trends
For LNG to become the energy source of choice, the cost of the LNG chain has to be
competitive with alternative fuel sources. The trend is toward large liquefaction-train sizes
and fit-for purpose plants to reduce the capital cost of the liquefaction facilities. On the
terminal side, there is a high level of interest in moving facilities offshore because of
environmental and permitting issues. Several companies have proposed concepts for
offshore storage and regasification terminals (FSRU).

• Pipelines –
A vast fraction of the world's gas is brought to the market through pipelines. When
considering the pipeline option, factors such as distance, throughput capacity, compressor-
station requirements, pipeline size, water depth, and topographical profiles have to
be considered in the economic analysis.

o Key Considerations-
Aside from economics, pipeline transit fees and political risk are key issues that should be
considered when evaluating this option for monetizing gas. Additionally, pipeline routes are
fixed and are exposed to acts of terrorism, high transit tariffs, or the potential for gas flow
being shut off during a dispute involving one of the transit countries. Pipeline maintenance
is another area that requires attention. Pipeline sections, which are essentially out of sight,

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represent a risk over the long life of the gas project. The primary concern is corrosion;
however, mechanical damage also can be an issue. Newer pipeline technology and growing
energy consumption of nearby markets are the key drivers for transporting gas through
pipeline. The development of high-pressure pipelines has brought down costs by the more
efficient use of steel pipe. Alternative new metallurgy, possibly including the use of
composites, is expected to make pipelines a more competitive option by not only lowering
the cost of the pipe itself, but also by resulting in lower logistics and installation costs, which
are significant in difficult and inaccessible areas. Recent developments regarding deep
water pipelines are expected to open up new marine pipeline competition for LNG. Modern
materials can face the new challenges of the deep water pipelines crossing harsh
environments.

o Gas Pipelines: Indian Scene- India, currently, has a network of more than 13,000 km
of natural gas transmission pipelines with a design capacity of around 330
MMSCMD. This pipeline network is expected to expand to around 28,000 Kms with a
total design capacity of around 731 MMSCMD in next 5-6 years, putting in place
most of the National Gas Grid that would connect all major demands and supply
centers in India. The design capacity of pipeline network in India is expected to
reach 763 MMSCMD in 2029-30. However, considering the addition of capacity
directly linked to the existing/planned sources of natural gas in the country, the gas
grid capacity in India (pipeline emanating from source) is expected to reach 533
MMSCMD in 2029-30. In addition to the trunk lines regional gas pipelines, similar
to the intra-state network of Gujarat, are recommended for highly
industrialized states.

• Compressed Natural Gas-

Compressed natural gas (CNG) transportation is used in very small systems in
environmentally sensitive areas. Trucks, ships, or barges transport the gas from a remote
well to a pipeline or from a pipeline to a customer location. Sometimes the gas is
transported to remote filling stations for CNG-fueled vehicles.

• History
In the 1960s, Columbia Natural Gas of Ohio tested a CNG carrier. The ship was to carry
compressed natural gas in vertical pressure bottles; however, this design failed because of
the high cost of the pressure vessels. Since then, there have been several attempts at
developing a commercially viable CNG carrier. In the past five years, several competing CNG
ocean transport designs have evolved. Each design proposes a unique approach to optimize

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gas transport while using as much off-the-shelf technology as possible to keep costs
competitive.

• Production
The production facility for CNG is simpler than other remote gas utilization options such as
LNG, GTL, ammonia, or methanol. It typically consists of compression, cooling, dehydration,
and possibly LPG separation. The extent of compression and cooling is different for the
various CNG processes. The scope of the production facility depends on the quality of the
gas and reservoir pressure, but is a small fraction of that of a comparably sized LNG or GTL
facility.

• Transportation
A large portion of the CNG carrier's capital cost is the gas containment system and
associated safety and gas control systems. The means for transporting CNG differentiates
the various CNG processes that have emerged over the last few years. These processes
include Coselle CNG carrier, volume optimized transport and storage (VOTRANS), coiled-
pipeline (CPL) carrier, gas transport modules, and the pressurized natural gas concept.

The central idea behind the Coselle CNG carrier, patented by Cran and Stenning Technology
Inc., is to create a large but compact CNG storage with a pipe. A Coselle consists of several
miles of small-diameter pipe coiled into a carousel, hence the name Coselle. Enersea
Transport LLC is commercializing the VOTRANS technology. VOTRANS consists of long,
large-diameter pipes encased in an insulated shell. The technology is different from other
CNG concepts in terms of the lower compression requirements because of lower pressure
and temperature of storage. C-Natural Gas's CPL carrier uses a coiled-pipeline configuration,
which is easily adaptable to existing maritime shipping with nominal modifications to the
off- the-shelf ship design. The pressure and temperature at which CNG is stored vary
depending on the CNG process. A typical range of storage pressures is 140 to 200 bar.

• Receiving
The CNG ship unloads gas into a pipeline at the receiving station. The CNG receiving
terminal is relatively simple and includes a dock with high-pressure pipeline
connections and possibly an expander to allow energy to be recovered from the
high- pressure gas. A scavenging compressor may be needed to empty the ships
below the pressure of the pipeline. This will make it possible to transport larger quantities
of gas, which will reduce the number of ships required to transport a given quantity of gas.

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 • Storage
Storage at the production and receiving terminal is required to maintain continuous
operation. Assuming that the time between shipments is not great, a practical approach
may be to have extra ships and keep them in the port for storage purposes.

• Screening Criteria
The volume reduction for CNG depends on the conditions at which the compressed gas is
stored but is typically in the range of 250 to 300, compared with gas at atmospheric
conditions. CNG is considered a viable transportation option for markets that are 1000 km
or less from the source of the gas. As the distance from the market increases, LNG or GTL
becomes more favorable assuming sufficient volume of gas is available. CNG can handle gas
volumes ranging from less than 100 MMscf/D to more than 1 Bscf/D. The CNG process is
energy efficient with energy consumption approximately half of that of an LNG project and
significantly lower compared with syngas- based generation routes. The fuel required for
the compression of the gas at the production facility ranges from approximately 0.5 to 1.0%
of the feed gas depending on the feed-gas pressure. Additional fuel consumption during
transportation is a function of the distance of the market from the source. The cost of
transportation is dependent on specific-project conditions, shipping distance, and
number of ships. A Coselle study indicates that the cost of transporting 300 MMscf/D
over a distance of 1,100 miles is U.S. $1.4/million Btu excluding the cost of gas at the
wellhead. Cost of these projects should be verified on a project-specific basis.

• Key Consideration
The key issue with CNG as a gas monetization option has been the ability to obtain financial
backing for a real project. As with all new technologies that are not commercialized,
CNG faces the first-adopter syndrome. It has been difficult to put a project together that is
financially attractive and at the same time not too large to be considered too risky to be the
"first mover." One of the key variables that affects the cost of the CNG option is the cost of
ships. The ship cost is a function of the amount of steel, which in turn depends on the safety
factor used for the design of the containment system. Currently, there are no specific codes
that govern CNG carriers. The regulations that determine the safety factor used to design
the containment system could have an impact on the economics of CNG projects. Other
issues with the CNG option include evaluation of controlled loading, unloading and
emergency depressurising to confirm the use of carbon steel as the material of
construction, and safety-related concerns.

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 • Gas to Solids
In the gas-to-solids (GTS) option, the gas is transformed into a solid form called natural gas
hydrates (NGH) and transported to the market as a solid or slurry. Regasification of the
hydrate is required at the receiving end.

• Natural Gas Hydrates (NGH)-

Crystallized natural gas, if economically developed on a large scale, would be much more
cost effective to transport than liquefied or compressed gas. Japan’s Mitsui and Mitsubishi,
the BG Group, and Marathon Oil, among others, have been developing gas-to-solids
technology for both the production and shipping of natural gas hydrates. NGHs are
chemically stable at about -20 degrees Celsius compared with -162 degrees Celsius for
LNG, reducing the costs of transportation and storage. One cubic meter of NGH contains
approximately 160 cubic meters of natural gas, while one cubic meter of LNG contains 600
cubic meters of natural gas, thus limiting the quantity of gas that can be transported
with the NGH technology. Gas-to-solids plants, however, are relatively cheaper to build
than an LNG liquefaction facility.

A feasibility study by Mitsui Engineering and Shipping, comparing an NGH production,

shipping and regasification chain with an identical capacity LNG chain (one million tons per
annum) found the costs of the NGH chain to be about $4.7/MMbtu versus $5.5/MMbtu for
the LNG chain.

• Gas to Liquids
In contrast to the GTG and GTS gas monetization options, which are based on a physical
conversion process, gas to liquids (GTL) is a chemical conversion route involving
rearrangement of molecules. GTL processes are classified into direct and indirect processes.

• Direct GTL Processes – In this process gas is converted into liquid form by treating
gas directly with chemical process and as methane has CH4 which has very low
chemical reactivity which makes this process very difficult and that is a reason
which makes this process not a commonly used in the conversion case of gas to
liquid .
• Indirect GTL Process – It involves the process of conversion of natural gas into liquid
in little long process compare to above as in direct process there is problem being
found due to less chemical reactivity of methane so in indirect process it involves the
conversion of natural gas into synthesis gas (syngas), synthesis gas is mixture of
carbon monoxide and hydrogen. Syngas in converted into liquid products such as:
Methanol, Dimethyl ether(DME), Fischer-Torpsch (FT) liquids.

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Syngas can also be converted into: Oxygenate route, FT based route and these can be
further converted into: Methanol, Dimethyl by oxygenate route and FT based can obtain
products like: Diesel, Naphtha, Kerosene, Lubes.

Syngas can also be converted into chemicals like ammonia and their various derivatives.

Due to above attainable items from indirect process of GTL this process is most commonly
used.

• Gas to Liquids-Fischer-Tropsch Route–

The FT GTL process produces petroleum products such as naphtha, kerosene, and diesel.
Lubricants, solvents, waxes, and other specialty products also can be produced, if required
andGTL through the FT route to monetize stranded gas has received increasing attention
over the past few years. In general, GTL through the FT route refers to technology for
the conversion of natural gas to liquid; however, GTL is a generic term applicable to any
hydrocarbon feedstock.

o Screening Criteria-
The size of GTL plants can vary from small (5 to 15,000 B/D) to large (> 50,000 B/D). GTL
plants produce petroleum products, which are sold in a commodity market. The size of the
market is large, on the order of 1,240 million tonnes per annum. A world-scale GTL plant
with a capacity of approximately 50,000 B/D (1.95 million tonnes per annum) contributes a
very small fraction of the total market. GTL technologies available from different licensors
differ in process configuration, thermal efficiencies, and capital cost; hence, the amount of
gas required to produce a specific amount of liquid varies. The gas consumption for a GTL
plant ranges from 8,500 to 12,000 scf/bbl.

o Key Considerations-
Economics- The key parameters that determine the economic viability of a GTL plant are gas
price, capital cost, and operating cost. Other parameters that play a key role in the
economics of a GTL plant are product premiums, tax incentives, shipping cost, crude
prices, and environmental aspects.

• Gas Price- With only two commercial GTL plants built in the past 10 years, there is
little information available on the capital cost of these facilities. However, it is widely
believed that technology developments have resulted in significant reduction in
capital costs of GTL plants in recent years.
• Capital Costs-Capital costs are also dependent on factors such as location of the
plant, infrastructure requirements, plant capacity, technology selected, quality
of gas, and site development. GTL plants benefit significantly from economies of

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 scale, which is driving most technology suppliers toward building larger plants.
All major technology suppliers have announced GTL plants in the capacity range
from 50,000 to 100,000 B/D. The capital cost of the GTL plants quoted by various
technology suppliers for a fuels-based plant range from U.S. $20,000 to $35,000 per
bbl per stream day (U.S. Gulf Coast location), depending on the plant capacity and
technology. The production of specialty products in a GTL plant, while
improving revenue, will increase the capital cost of the plant.
• Operating Costs: Operating costs vary depending on several factors such as
location, technology (catalyst), and product slate. Typically, the operating cost of a
GTL plant ranges from U.S. $3 to $5/bbl excluding the cost of feed gas.
Commercialization of Gas-to-Liquid Technology- Although the FT process was developed in
the 1920s, the commercialization of this technology is still evolving, with only three
companies currently operating commercial plants. There is currently a great deal of interest
in GTL, and a number of companies believe that this is a technology whose time has come.

• Proprietary Nature of Technology and Licensing-

Technology providers consider GTL technology highly proprietary. There are significant
barriers to new entrants developing GTL processes because of the high cost of technology
development and the extensive patent protection of existing processes. Currently, the
technology for GTL is not widely licensed. Most technology suppliers leverage their
technology to gain access to gas assets.

• Crude-Oil Pricing-
The products from a GTL facility are in direct competition with products produced by crude-
oil refining; therefore, the growth of GTL is dependent on the price of crude oil. One way to
review GTL products is to compare the cost of producing these GTL products with the cost
of products from a crude-oil refinery. Hence, a minimum crude-oil price level will be
required to support future GTL projects. GTL technology providers claim that a crude-oil
price of U.S. $15 to $20/bbl results in a profitable GTL project. The impact of crude-oil price
on GTL product prices is one of the major obstacles to widespread commercialization
of GTL. GTL is an emerging technology. Although there are few plants in construction phase,
there is considerable activity around the world by major oil companies. Reduction in capital
costs and reasonable projections of the crude-oil price will be instrumental in the success of
GTL as a gas monetization option.

• Gas to Methanol-
Methanol is a primary liquid petrochemical made from renewable and non-renewable fossil
fuels containing carbon and hydrogen. It is commonly known as "wood alcohol." Natural gas
is the feedstock used in most of the world's production of methanol. Methanol is a

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chemical building block used to produce formaldehyde, acetic acid, and a variety of other
chemical intermediates. A significant amount of methanol is used to make methyl tertiary
butyl ether, an additive used in cleaner-burning gasoline. Methanol is one of a number of
fuels that could substitute for gasoline or diesel fuel in passenger cars light trucks, and
heavy-duty trucks and buses. Methanol is also widely considered a leading candidate as the
fuel of choice for vehicular fuel-cell applications.

Stranded gas can be monetized by producing chemical (or fuel grade) methanol and
transporting it to the market. Since the 1980s, there has been a significant change in the
way the methanol market has worked. Remote producers of methanol have begun to gain
market share over long-established production sites close to the customers. Gas economics
has been the driving force behind these changes. As gas demand has risen, the methanol
producers in North America and Europe have been squeezed out. Because methanol can be
transported easily, methanol production has moved to remote locations where gas is
cheaper.

• Screening Criteria- Until a few years ago, the size of a large-scale single-train
methanol plant was considered to be 2000 to 2500 metric tons per day. However,
economies of scale and market conditions are driving the trend toward building
larger-sized plants with capacities in excess of 3,000 thousand tons per day. Two
plants with capacities of 5000 metric tons per day are currently under construction,
and several large methanol plants are under discussion. The typical gas consumption
for a world-scale methanol plant ranges from 28 to 31 million Btu per metric ton of
product based on lowering heat value(LHV) of the feed; therefore, a 5000 metric
tons per day methanol plant will use approximately 157 MMscf/D of gas. For a
project lifetime of 20 years, a gas- field size of at least 1.15 Tcf is required to support
a plant of this size.
The economics of methanol are very much dependent on the cost of production and the
selling price of methanol. The market for methanol is volatile and competitive with large
swings in the price. The main components of the production cost of methanol are gas price
and the investment cost of the plant. A producer in a remote location must also
consider shipping costs for transporting the methanol product to the market.

• Market Demand- The methanol market is saturated; however, it is expected that

new plants will be built. In the future, new low-cost production will displace
existing high-cost producers unless new applications for methanol are established.
Besides the traditional markets, methanol has the potential to be used in a
variety of applications: power generation by fuel cells, as a transportation fuel
directly or by fuel cells, and as a feedstock for the production of olefins. These new

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 applications, if established, could lead to a surge in demand for methanol plants.
According to the recently published TechSci Research Report “India Methanol
Market Study 2011 – 2025”, the methanol market in India is projected to grow at
a CAGR of over 7% during forecast period.

• Gas to Power –
One of the options for gas monetization is GTP, sometimes called gas to wire (GTW).
Electric power can be an intermediate product, such as in the case of mineral refining in
which electricity is used to refine bauxite into aluminium; or it can be an end
product that is distributed into a large utility power grid. This discussion focuses on
electricity as the end product. The primary issues related to GTP are the relative
positions of the resource and the end market and transmission methods.

Screening Criteria- The amount of power available from a fixed quantity of feed gas
depends on several factors including the type of turbine, mode of operation, and
transmission system. With regard to long- distance power transmission, there are general
rules in relation to the "break-even" distance at which the DC alternative has an
advantage over the AC alternative. For power transmission by subsea cable, either
shore-to-shore or shore-to-platform, DC transmission is typically favoured at distances
longer than approximately 50 km (30 miles). For onshore transmission of large
quantities of power, DC systems are typically favoured at distances longer than 600 to
800 km (300 to 500 miles), depending on system capacity. These are general rules of
thumb, and each specific application should be evaluated for its particular
characteristics.

Key Considerations- With regard to the economic merits of AC vs. DC transmission

systems, initial-cost and operating-cost factors should be evaluated. The transmission
lines for DC are less costly than AC; however, there are the added costs for the AC/DC
conversion systems. Although there are some losses in the conversion of AC to DC and
vice versa, the conductor losses for DC are lower. Therefore, the overall system losses for
DC can be less than those of AC systems, particularly for long-distance transmission.
The various factors have to be weighed to determine the best solution for any given
application.

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 ➢ Alternate and upcoming technologies –
A number of alternative technologies exist that have the potential to make the
development of small fields - of under-five (5) tcf in size - economically viable. None of
these however, has yet been developed and proven on a commercial scale, though
they have each proven themselves viable on technical parameters. The most
advanced among these alternative technologies include i) floating LNG, ii) GTL floating
production storage and offloading (GTL- FPSO), iii) natural gas hydrates, (NGH) and
iv) compressed natural gas (CNG). These technologies have been developed to a point
where commercial scale deployment is not too far away, in the case of GTL and NGH, and
demonstration plants have been in operation for several years. What remains to be
seen is whether these technologies can run on a commercial scale and still be
economically viable.

• Floating LNG (FLNG) –

This concept combines LNG processing and storage technologies with deep water offshore
production experience. FLNG technology makes the production, liquefaction and storage of natural
gas possible at sea. LNG is transferred directly from the floating facility to specific carriers, for
convenient shipping to countries around in the world.

FLNG vessels are conceptually attractive because of the potential they provide to develop
small and remote natural gas fields. Ships with liquefaction facilities onboard can be
deployed over several fields in sequence as each field is depleted, eliminating the need
to build new facilities. These vessels will work in association with relatively small and
isolated installations. Few people would be affected in the event of an accident,
enhancing safety and security by virtue of their remoteness. This factor is of particular
importance in today’s security-conscious world. Several companies, most notably Royal
Dutch Shell, have been actively promoting this concept.

• GTL FPSO-
This technology combines the infrastructure of an FPSO vessel with proven GTL technologies,
and is broadly similar in concept to a floating LNG vessel. Syntroleum Corp., a developer

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of GTL technology, together with Bluewater Energy Services BV, recently finished the
feasibility study of the world’s first FPSO with GTL capabilities. The vessel will have daily
production capacity of 17,000 barrels of FT products, 40,000 barrels of oil, and 10,000
barrels of distillates, and will have a storage capacity of 2.3 million barrels. Initial estimates
place the capital expenditures for a vessel with these characteristics at $1.3 billion.
Syntroleum estimates that it would take about five years to build the first ship.

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➢ Evaluation of Gas Monetisation options

• Evaluation of the Asset (Reserves)-

The starting point for any gas monetization study is the evaluation of the gas
field to ascertain the quantity and quality of gas. The cost of gas production should be
estimated at this stage. In addition to the technical evaluation, a study of the
geopolitical situation and business issues is also essential.

• Data Gathering for Screening Purposes- If the evaluation in the first step is positive,
the next step is to gather adequate information for the screening of the various gas
monetization alternatives. An economic model, which could be refined later during
the final selection stages, should be developed to evaluate the options. The data
gathering during this stage of the evaluation process is fairly extensive, even though
the quality of information may be preliminary in nature. The depth and breadth of
knowledge that is required may not be available within most companies. The need
for assistance from outside consultants and contractors should be evaluated.

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 Consideration of issues related to risk and market analysis should be initiated at this
stage of the evaluation process.

• Short Listing of Options- A short list of the alternatives is essential to minimize the
amount of resources required for more-detailed analysis of the options. The short
list should be limited to two or three options.

• Data Validation and Collection- Once the short list is complete, a more-detailed
evaluation of the alternatives is necessary to select the optimum route to monetize
gas. Some of the gas monetization options, such as LNG, ammonia, methanol, and
GTL, are unique businesses in themselves and could potentially pose challenges
to companies that do not operate in that business segment. Hence, a clear set
of evaluation criteria should be defined. This is essential to ensure a good fit with
corporate strategies and objectives. The data collected during the screening stage
should be verified, and additional data should be collected to support a more-
detailed evaluation of the options. External consultants may be required to support
the financial, marketing, and business management aspects of the gas monetization
options.

• Optimization Model- The data collected in the previous step form the basis for
performing a detailed economic analysis of the options. Risk and market analyses
are done in parallel. Risk analysis includes technical, political, market, and financial
risk.

• Selection of Option- The results of the economic analysis, risk review, and market
considerations form the basis for the selection of the final gas monetization option.

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❖ Ch-4 Case Study- Utilization of gas available in Jorhat Sector of ONGC in NE India
➢ Case Introduction- Oil and gas production in Assam Asset of ONGC is mainly from two
distinct sectors namely, Nazira and Jorhat. Production from Nazira sector of Assam
Asset is mainly from 4 (four) distinct fields. Production from Jorhat sector of Assam
Asset is mainly from K1*, N*, B*, K2* fields. Nazira sector of Assam Asset is well
connected in terms of infrastructure availability for oil and gas transportation to
various customers present in the region. Jorhat Sector lacks basic infrastructure in
place (being a newer discovered sector, dispersed fields, poor grid connectivity, etc.).
This has led to poor E&P development activities in the region and also loss of valuable
resource (gas) over the past decade (high amount of gas flaring due to gas being
associated in nature and lack of grid).

➢ Case Background- Jorhat sector of Assam asset is presently producing oil and around
150000 SCMD of natural gas. The Crude oil is transferred from B GGS to Jorhat CTF
through pipeline. A crude-oil pipeline between N-K1 to B is in final stage of completion
which will bring produced-liquid from N & K1 to B1. Installations in K1, B and K2 are
planned for revamp under various standalone projects.

➢ Gas flaring- Majority of the gas produced in the sector is flared (~45%). This high
amount of flaring in Jorhat Sector is due to fields being isolated and scattered across a
very large geographical area and difficult terrain. These fields are not connected to the
gas-network and there are no consumers for this gas which is produced at different
scattered installations. Since, the gas produced is associated gas in nature and due to
absence of grid all the gas is getting flared. AGCL (A Govt. of Assam enterprise) is the
only consumer of gas from Jorhat Sector of ONGC with drawing gas to the tune of
45000-46000 SCMD from K1 GGS1. AGCL is unable to take more gas due to capacity
limitations of its compression and pipeline network.

Presently, following quantities of gas is being flared from various installations of JORHAT sector:

SN FIELD / INSTALLATION QTY (SCMD)

1 K1 GGS1 30000
2 N GGS1 20000
3 K2 GGS 10000
60000

➢ Gas Sales e-tender– The MoPNG guidelines for selection of customers for gas sales from
small/isolated fields (introduced in Jan’12) opened up opportunities for gas

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 utilization/sales which was earlier being flared. The guidelines allowed producers to
allocate gas directly to customers based on a defined sectoral priority list as
provided by MoPNG. Assam Asset undertook first round of e-tendering (sn 1-3) and
from K9 N2 blocks (which was to come online in 2 years’ time if gas gets allocated) for
gas-sales as per MoPNG guidelines but none could fructify due to conditional bids put in
by the bidders and other reasons. In absence of any gas-evacuation mechanism from
the area, some of the wells were capped affecting the full scale development and
associated activities of fields in this area. As per available data, as of now, around 15000
SCMD gas can be produced from H#1 and around 15000 SCMD gas can be produced
from B for a period of 5 years (which was taken up for e-tender under revised MoPNG
guidelines for gas sales to consumers from small/isolated fields, but had to be closed as
no bid was received from any bidder)
Therefore, as of now, around 150000 SCMD gas having revenue potential of around Rs.
60 Crore per annum (at FY 18-19 gas price level) is presently locked up on account of
effective gas-evacuation mechanism for this area.

➢ Gas Evacuation Options under study – MoPNG revised the guidelines for gas sales to
customers from small/isolated fields in July’13. In order to ensure early monetization of
the gas MoPNG reduced the gas allocation period from 365 days to 90 days. The
ministry also abolished any sectoral priority for gas allocation and introduced the clause
that gas allocation would be purely in terms of price and gas would be allocated to
bidder quoting the highest price over and above the reserve price set for the region.

Looking at the external environment in North East region and realizing the fact that
scattered nature of the fields in the region would make gas allocation/utilization
difficult within 90 days, the Asset started studying various options for efficient and
quick monetization of gas being flared in the region.

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 ➢ A diagrammatic representation of the options under review is presented below.

The options under study are –

• Agglomerate gas from small and marginal fields in Jorhat sector at some central/
suitable location (B GGS) and transport the same to Nazira- Asset is reviewing to
agglomerate gas volumes from different installations in Jorhat Sector and transfer the
same to B GGS1 and further transfer it to Nazira sector for sale as consumers are readily
available in Nazira sector.

The capital cost of the project (as calculated) would be in the range of round Rs 250 crores. The
payback period would remain in the range of ~ 4.5 years (@$4/MMBTU). The above option
would not only help in associating the two unconnected sectors but would also help in meeting
the long term demand coming up in the region from customers like ASEB, BCPL, etc. The above
option would help in meeting long term gas demand in the region (both external and internal).

Some of the other benefits of the project would be:

- Providing required fillip for E&P activities in the region.

- Reopening of closed wells.
- Opening of gas-evacuation route for the entire region.

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- Monetization of present and future gas from the entire area.
- Reduction in flaring in the region which is continuing since last many years for lack of
facilities and consumers. (As the scheme is related with mitigation of green-house
gas (GHG), possibility of registering the above scheme as CDM project is also being
checked)
- -Flexibility of gas supply in Nazira sector by making around 160000 SCMD presently
identified and more gas in future available for utilization.

• Agglomerating and selling gas available in Jorhat Sector from B GGS-1-

The Asset is also reviewing the viability of gas agglomeration in Jorhat Sector of ONGC at B
GGS-1 and further gas sale ex-B GGS. This would a CapEx ~150Crore, and payback period of
3 yr (@$4/MMBTU). The option is though convenient in terms of lower lead time in gas
agglomeration in the region and also gas sales from the same region itself. But as the gas
would be sold on ex-fence basis it may not be a viable alternative as it may be hard to find
gas customers in the region investing in the development of pipeline infrastructure from
ONGC’s fence to its own point of consumption (due to external environment, gas available
of fall back basis – which may make long term project unviable, lower gas volumes).

• Generate power from the gas-

The Asset is also studying the viability of Conversion of gas to power for sale / wheeling
against ONGC power purchase from ASEB (Assam State Electricity Board) etc.
Conversion of gas to power would not only help in reducing the power tariffs paid (the
power transmitted/supplied to ASEB may be adjusted against the power charges
payable on annual basis) but would also ensure quick monetization of flared gas. In this
regard the Asset is considering the option of putting up portable GEG’s (either own
GEG’s or through third party contract) at different locations. It is envisaged that the
power so produced would be wheeled or ONGC would get in a PPA with state
electricity board for selling power produced from the gas.
The option seems favorable as according to recent newspaper reports, the power tariff
are expected to be hiked by more than 50%. Therefore, producing power from
gas will help in terms of saving cost incurred on high priced power.

• Nominating the entire gas present in the region to Assam Gas Company Limited –
AGCL is the only well connected player of natural gas distribution in the upper Assam
region. Being a Govt. of Assam undertaking company, it got a first mover advantage in
spreading the gas distribution network in the upper Assam region. Its vast gas network
covers almost all the major areas in the upper Assam region. The gas network of AGCL
present in the upper Assam region is presented below.

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In 2018, around 40000 – 50000 SCMD gas is being supplied by ONGC-K-GGS1 (as per contract
with AGCL) to this network. Other inlet point for this network is from OIL (Oil India
Limited) in upper Assam.

In 2018, around 150000 SCMD is available for sale at least for a period of 5 years from various
small & isolated fields in Jorhat district.

Presence of a gas-evacuation route for Jorhat gas will provide fillip to E&P developmental
activities in the sector leading to availability of more gas-for-sale in near future.

➢ Identifying the best option available-

• Since ONGC is not a direct marketer/transporter of gas to the customers GAIL/AGCL
may explore the option of augmenting the necessary gas infrastructure in order to
ensure efficient/timely use of gas available in the region. As it has seen clearly
from the above points that gas to the tune of 150000 SCMD is available for say
minimum period of 5 years ex-ONGC fence. Since GAIL does not have infrastructure in
upper Assam region then it will not be an option for GAIL to lay grid for gas evacuation
purpose in the region but AGCL has grid connectivity in this region which would help
in integration of the entire gas available in the region. This would not only increase the
gas available for sales in the region but would also ensure utilization of the presently
unexploited national resource. Also GAIL and AGCL may also enter into gas swap
arrangements (between Nazira and Jorhat sectors) once the integration is done by
AGCL.
• It is needless to say that external environment/conditions prevalent in the north
east have kept investors wary for their investment in the region. Also MoP&NG’s
stringent conditions of gas monetization under the small/isolated field guidelines
has further created a chance of gas remaining unutilized/unexploited. Thus, if AGCL is

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 nominated all the gas present in the region on nomination basis, gas would be
monetized most efficiently and quickly.
• The option of integrating Jorhat and Nazira sector by laying gas pipeline from Jorhat to
Nazira would serve as a long term option of sufficing energy needs in the region. After
the start-up of BCPL plant gas would not be sufficient to meet the present level of
demand of ASEB, etc. Also, since many installations of ONGC are being run by the
power produced by ASEB, any reduction in gas supply to ASEB would create a
cascading effect on the overall performance of the Asset. Also, after the completion of
standalone renewal projects, gas internal utilization is bound to increase in Nazira
Sector. Therefore, seeing the constancy in gas production from Nazira Sector of ONGC
in future, it would be a wise decision to integrate the two sectors. This would not only
open E&P avenues in the region, but would also ensure increased and
uninterrupted supply of gas in the region which is sufficient to meet the long
term demand of the region.
• The option of generating power from gas and its utilization thereof has its pros and
cons. On one hand it holds an opportunity for ONGC to utilize the resource at the
earliest but it also holds an uncertainty with regards to the contractual arrangement of
power sale/wheeling with the state’s power distribution company and the off-
take thereof. As such the terms and conditions of the PPA are not very
conducive to the producer and it is not advisable for ONGC to get into such
an arrangement till suitable policy changes are incorporated by the state.

➢ Case Summary-
Therefore, it might be concluded that the only option of quickly monetizing the gas being
flared presently in Jorhat region is nominating AGCL for the entire gas present in the region.
This would not only help ONGC in tapping the unfruitful wastage of natural gas in the region
but also would help in sufficing the long standing energy needs in the upper Assam region. If
the gas- transporter and distribution companies are not willing to augment its
infrastructure in a time bound manner, ONGC may also check the feasibility of constructing
its own gas-grid connecting the various isolated fields of the Jorhat sector and terminating
the same either at Nazira with suitable provision of recovering the compression and
transportation cost from the gas consumers. The option of JV creation for laying pipeline
and connecting all installations in Jorhat with Nazira Sector (between ONGC and other gas
off-takers, viz- AGCL, ASEB, etc.) may also be one option for connecting and monetizing gas
from Jorhat Sector.

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❖ Ch- 6 Conclusion

➢ Early monetization of gas is not only about money but has several other facets like
environment protection, safety of operations, energy independence etc.
➢ Several factors need to be considered in the evaluation and selection of the gas
monetization options. These factors include: Technical, business, and market
considerations.
➢ Site-specific conditions have a significant impact on the selection process; therefore,
no one solution can be considered optimal for all situations.
➢ As the gas economy of the future develops, technology advances—including the
application of gas and derived products to new markets—will have a significant
impact on the selection of the best alternative for monetizing gas.
➢ Current high energy prices have put in play different technologies once
considered too costly.
➢ Added to the constant search for new sources of energy supply, it is only a matter of
time before these technologies enter the market. Improvements in technology,
economies of scale, and synergies will doubtless lower capital costs and
further improve the project economics over the next few years.

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❖ Nomenclature

➢ CNG-compressed natural gas

➢ CPL-coiled pipeline
➢ DME-Dimethyl ether
➢ FT-Fisher-Tropsch
➢ GTG-gas to gas
➢ GTL-gas to liquids
➢ GTM-gas transport module
➢ GTP-gas to power
➢ GTS-gas to solids
➢ GTW-gas to wire
➢ LNG-liquefied natural gas
➢ LPG-liquefied petroleum gas
➢ MMscf/D-Million standard cubic foot per day
➢ mtpa-million tons per annum
➢ NGL-natural gas liquid
➢ VOTRANS-volume-optimized transport and storage
➢ NGH-Natural Gas Hydrates
➢ AC- Alternating Current
➢ DC- Direct Current
➢ AGCL- Assam Gas Company Limited
➢ ASEB- Assam State Electricity Board
➢ BCPL- Brahmaputra Cracker and Polymer Limited.

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❖ References

➢ BP Statistical review of world energy-2018

➢ Official website’s of:
• Ministry Of Petroleum & Natural Gas
• ONGC
• Petroleum Planning and Analysis Cell
• Petroleum and Natural Gas Regulatory Board
• Press Information Bureau
➢ Report by Standing Committee on Petroleum and Natural Gas presented in fifteenth
LokSabha – 2013-14
➢ Indian Petroleum and Natural Gas Statistics 2017-18- MoP&NG
➢ [Link]
➢ [Link]
➢ [Link]

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