What is CGD business?
City Gas Distribution Business
A business arrangement of supplying
Natural Gas to various end users for their
consumption.
A CGD primarily markets PNG and CNG.
Can you envisage what else they could
market?
How is it different from standard gas business?
City Gas Distribution System
The end users are retail customers or at best SMEs
in terms of gas consumption there are no
resellers.
The number of customers is very large.
CGD markets CNG.
The customers are located in a small geographical
area.
The supply of gas is required continuously, although
consumption by end user may not be continuous.
A great deal of vendor support is necessary to run a
CGD business.
Network operated at lower pressure
CGD business is a UTILITY business.
A CGD company is in a commodity business.
Who are the potential customers?
PNG:
Households
Commercial establishments
Industries
CNG:
Public transport autos, taxis, private buses
State transport / city bus service
Individual vehicle owners
What is the competition?
PNG:
Household LPG
Commercial LPG
Industrial LPG/Propane, FO, HSD/LDO
CNG
Auto / cars LPG, MS
LCV, Bus, Cars HSD
Why would a customer switch?
Benefits of Natural gas
Convenience no booking, on tap
Safer lighter than air, can switch off from kitchen and
outside in emergency, LPG expands 250 times
Economical
Hassle free connection and disconnection of
cylinders, leakage and complaint handling
Customer support 24 X 7
Fair billing by meter, as per actual consumption
Versatile can be used in kitchen, geysers, space
heating and air conditioning
Source
$/MMBTU
APM gas*
4.2 to 5.7
RLNG
Tranche A
9.2
Mid term (Marubeni)
13.5
Spot
14.5 to 17
APM*
APM gas prices vary by geographic region
(cheaper in NE states), by production
sources (PMT gets a higher price) and by
end use (cheaper for power and fertilizer
producers)
Price for Tranche-A RLNG is denoted on GCV basis while for APM and PMT gases is
The above
procurement
prices lead to Selling prices by CGDs:
denoted
on NCV basis
CNG Rs
32-50/kg, domestic PNG Rs 20-25/SCM, for I&C Rs 35-45 / SCM
Inclusive of LNG price and re-gasification charges
7
Prices of some competing fuels:
Fuel
Rs / selling unit
LPG - domestic
400 per cylinder of 14.2 kg
LPG - commercial
1300 per cylinder of 19 kg
LPG / Propane bulk
industrial
60 per kg
HSD
45 per liter
LDO
50 per liter
FO
44 per lietr
Price for Tranche-A RLNG is denoted on GCV basis while for APM and PMT gases is
denoted on NCV basis
8
Inclusive of LNG price and re-gasification charges
Economics of gas use on heat equivalent basis (indicative):
APM gas for transport and domestic use, RLNG for I&C use
8500 Kcal/SCM for gas; conversion ratios account for operational conditions
Fuel
Units
Equivalent
units of
gas reqd
Direct
savings Rs
Price per
unit of fuel
MS - auto
1 liter
0.7 kg
1.20 / km
70/l
MS - car
1 liter
0.7 kg
4.50 / km
70/l
LPG domestic
1 cylinder
18 SCM
35 / cyl
400 / cyl
LPG commercial
1 cylinder
24.5 SCM
275 / cyl
1300 / cyl
LPG /
Propane bulk
1 kg
1.28 SCM
10 / kg
60 / kg
HSD
FO
9
Price for Tranche-A
RLNG is denoted
GCV basis while
APM and PMT 45
gases
is
1 liter
0.9onkg
7 /forliter
/ liter
denoted on NCV basis
1 liter
1.05 SCM
Inclusive of LNG price and re-gasification charges
2 / liter
44 / liter
Impact of price
Higher price of natural gas may trigger fuel
switching by consumers
How has the business grown?
Evolution of CGD Network in India
Calcutta Gas Company (1880) -- Coal Gas.
Bombay Gas Company (1900) -- Coal Gas.
OIL and ONGC supplied gas in a limited
manner at Duliajan, Ankaleshwar.
Post 1995, MGL & IGL were formed for
CGD in Mumbai and Delhi respectively.
GGCL also provided the impetus.
Evolution of CGD Network in India
The first major and regular city gas distribution
for domestic and commercial PNG supplies was
by Vadodara Municipal Corporation in 1972
GAIL initiated pilot study for CNG in Delhi,
Mumbai and Vadodara 1994
GAIL engaged Sofregaz and British Gas for
feasibility studies for Delhi and Mumbai
respectively.
JVC formed between GAIL, BG and Govt of
Maharashtra for CGD in Mumbai in 95 MGL
JVC formed between GAIL, BPC and Govt of Delhi
for CGD in Delhi in 98 - IGL
Several events over the past two decades have
shaped IGLs evolution path
IGL
Feb03
IGL
Dec98
Environment and Pollution Control Agency (EPCA) was
formed by court directive, to further oversee pollution control
in Delhi and adjacent areas
IGL formed with 22.5% shareholding of GAIL & BPCL (Oil
Marketing Company) each, and 5% by Delhi govt.
Initial mandate to establish 80 CNG stations in Delhi
Honble Supreme Court directive to GAIL to expand CNG
Jul98
infrastructure and increase CNG stations in Delhi from 9 to
90, by Mar2000
Honble SC directed Delhi govt. to convert all public
transport (buses, taxis and autos) to CNG
Center for Science & Environment (CSE) started a campaign
against pollution through the book Slow Murder: The deadly
story of vehicular pollution in India
IGL
IGL
95-96
IGL
94-95
IGL
85-86
Gas Authority of Indian Ltd. (GAIL) started pilot project to assess
suitability of CNG as an alternate fuel in Delhi, Mumbai & Baroda
Established 9 CNG stations in Delhi
PIL filed in Indian supreme court, to reduce pollution in Delhi
Govt. started Euro 1 compliant pollution testing
IGLs growth momentum is punctuated with rapid
built up of CGD infrastructure in Delhi
Number of CNG Outlets
CNG Outlets
CNG Compression Capacity
IGL pipeline length (steel plus MDPE)
Rapid expansion
in infrastructure
CNG Compression Capacity
(Lakh kg /day)
However, there have been certain factors behind CGD
projects big success story in Delhi
HVJ pipeline passing near Delhi
Big geographical area, hence more travel for commuters
Large population in the main city as well as in satellite towns in NCR
Honble SC directive to run the complete public transport system on Natural
Gas to contain vehicular emissions
No Sales Tax by the State Government
Lower dependence on public transport by the middle class, therefore, higher
number of private vehicles
2 mmscmd APM gas for Delhi - allocations made for CNG purpose
on priority by the MOPNG
INSPITE OF ABOVE FACTORS MISSING, THIS STORY CAN BE RE-WRITTEN
AT OTHER CITIES IN TIME TO COME.
List of CGD Companies
Sr. No.
CGD Company
Assam Gas Company Ltd, Duliajan, Assam
2
3
Tripura Natural Gas Company Ltd, Agartala, Tripura
Gujarat Gas Company Ltd (GGCL), Surat, Gujarat
Vadodar Mahanagar Sewa Sadan (MSS), Baroda
Municipal Corporation Ltd,
4
5
Charotar Gas Sehkari Mandali Limited
6
7
Great Eastern Energy Corporation Ltd.
Mahanagar Gas Ltd (MGL), Mumbai, Maharashtra
Maharashtra Natural Gas Company Ltd, Pune,
Maharashtra
Indraprastha Gas Ltd (IGL), Delhi
Sr. No.
CGD Company
10
Bhagyanagar Gas Ltd, Hyderabad, AP
11
Green Gas Ltd, Lucknow, UP
12
Central UP Gas Ltd, Kanpur, UP
13
Avantika Gas Ltd., MP
Gujarat State Petroleum Corporation Ltd, Ahmedabad,
Gujarat
14
15
Adani Energy Ltd, Ahmedabad, Gujarat
16
Sabarmati Gas Ltd, Gandhinagar, Gujarat
17
Greater Calcutta Gas Supply Corporation Ltd (GCGSCL)
Sr. No.
CGD Company
18
Haryana City Gas Limited, Gurgaon, Haryana
19
Sity Energy Limited, Delhi
20
Gail Gas Limited, UP
21
Sanwariya Gas, Matura, UP
CGD INFRASTRUCTURE IN INDIA
& NEIGHBORING COUNTRIES
Description
India
Pakistan Bangladesh
Cities/ Towns/ Villages (Nos.)
35
1050
15,000
74,000
21,500
14
38
21
13
30
22
CNG Vehicles (in Lacs)
8.5
17
CNG Stations (in Nos.)
500
1925
230
Transmission/ Distribution
Network
(in KM)
Gas Throughput (in MMSCMD)
Gas Customers (in Lacs)
NA
Why the business is generating interest now?
The Natural Gas market in India is influenced by two
key factors at present 1 Gas
Gas Availability
Availability
Limited
Limited gas
gas availability
availability
and
and priority
priority given
given to
to
power
power and
and fertilizer
fertilizer
New
New sources
sources are
are now
now
emerging
emerging yet
yet to
to be
be
fully
fully exploited
exploited
Infrastructure for
for gas
gas
2 Infrastructure
transport
transport has
has been
been aa
limitation
limitation
Pipeline
Pipeline transmission
transmission
network
network trunk
trunk lines
lines
Local
Local pipeline
pipeline networks
networks
New domestic supplies are expected to fuel significant growth in Natural Gas
consumption in India - pipeline network expected to provide access to many
uncovered areas.
With impetus from the Government, the City Gas
Distribution segment is poised for strong growth in
the near future throwing immense opportunities
CGD coverage
expected to
increase to over
250 cities by 2025
Increase in domestic gas
supplies would reduce supply
constraints
Regulatory and policy initiatives
to drive growth of city gas
distribution networks
Greater sensitivity (government /
social) to environmental issues
Superior cost economics for
Natural Gas with respect to
alternate fuels
Increased accessibility to gas for
cities / towns with expected
pipeline network expansion
This has several beneficial effects on the economy and
environment sustained government support, however,
is very important & critical
Key achievements/benefits Indian CGD
sector
government support is critical to
sustain the momentum
Recent focus on Natural Gas
new discoveries have added to
the CGD opportunity
Allocation of gas to CGD
sector
New Delhi has the largest CNG
bus Fleet in the world
Sustained support to keep
CNG / PNG costs low, to
make it economically viable
compared to alternate fuels
More than 800,000 CNG vehicles
on Indian Roads today
Reduction in dependence on oil
India imports 80% of total oil
demand
More than 50% of total
consumption is utilized by
the transport sector
Financial support in laying
out CGD infrastructure
Tax relief
Access to funds for
expansion
New cities for CGD
expansion
After telecom and insurance,
a gas revolution will hit the
country ...
-L Mansingh, Chairman
Petroleum and Natural
Gas Regulatory Board
Objective of establishing CGD Networks
To provide safe, convenient , and reliable gas
supply to populace in the transport, domestic,
commercial & industrial sectors in urban
areas; and
To reduce dependence on oil
To displace LPG so that LPG is made available
for use in remote areas/ small towns/ villages.
This would lead to reduced pollution and
improve health of the citizens.
Development of CGD: An analysis
250 Cities are planned for CGD ( under A, B & C
category)
Order Of Investment Rs. 1,25,000 Crs.
(@ Rs. 500 Crs/ City)
Envisaged Demand 125 MMSCMD
(@ 0.5 MMSCMD/ City)
Conservative prediction for investment & NG
demand is Rs. 75,00 Crores & 75 MMSCMD
respectively.
Opportunities in CGD Business
Various Stakeholders in CGD Business:
Gas Suppliers
CGD infrastructure developing entities/
operators
Consultants: Feasibility Report, Basic
Engg., Project Management, Network
Design..
Equipment Manufacturers: Pipelines,
Fittings, Compression & Dispensing
Equipments, CNG Kit Suppliers, CNG
Cylinder manufacturers/ suppliers, NGV
Manufacturers
Contractors: Pipeline execution, plumbing,
CNG station construction, tubing
contractors..
Users: NGV users, Households,
Commercial corporations, Industrial
users..
Government/ Exchequer
Statutory Authorities/ Civic Bodies
Financial Stakeholders/ Investors
What does a CGD company do?
A network of pipelines and CNG dispensing facilities
Ind
Estate
SV
Pressure redn
HH
SR
HP MP
LP -
Measurement
Measurement
Pressure
redn
Pressure
Odorizationredn
Odorization
CGS
Mother Stn
CNG dispensing
LCV filling
CNG Stn
CNG Stn
D
R
S
Trunk pipeline
MDPE
Network
D
R
S
Pressure redn
CNG Stn
Domestic & Comm
customers
CNG Stn
D
R
S
SV
SV
Business functions of a CGD:
Market development
Network development
Gas sourcing
Non gas procurement and contracting
Operation and Maintenance of network
Billing and Collection
Other service functions internal to the company
Market development:
First step is to make demand assessment through market surveys and
secondary data analysis (vehicle numbers, population,
Next identify load / demand centers for network development activities
to commence
Commence infrastructure development activities for CNG
Sites for CNG dispensing
OMC ROs
STU depots
NROs on own sites
Retrofitters and workshops for conversion and maintenance
Coordinate with administration and RTO for encouraging CNG
Coordinate with automotbile OEM dealer network
Pre-sales for PNG
Coordinate with Industry associations
Arrange seminars / education sessions with target user community
in Industrial and Commercial segments
Seminars in housing societies
Market to builders
Publicise availability of gas and its advantages
Newspaper ads
Brochures and handouts
What network will serve the market?
PNG:
HP steel grid
MP MDPE network
LP Service lines and Last mile connectivity
CNG:
Mother Station
On Line Station
Daughter Booster Station
How is the network development planned?
Market surveys lead to demand assessment and identification of load centers
Network design is carried out by simulation models software application
Based on funding and capability, annual plans are prepared
Rolling plans are prepared for 2/3 year period
The network development has to align with commitments made to PNGRB.
Project execution:
Detailed layout plans are prepared
Material requirement / specifications are prepared
Procurement and contracting is initiated - tendering
Permissions are applied for PESO/CCOE, Local administration,
Fire, Power, Police, NHAI and others as the case may be
On receipt of demand note/s and permissions and after making
payment to authorities, work is started
Close coordination with civic authorities and traffic department are
necessary
Proper markers, barricades and signages are provided for public
Network development activities are carried out in non monsoon period
only. so proper advance planning and action is necessary to utilise
the short time window open for work.
Gas sourcing: Salient features
APM gas is allocated by the Ministry of Petroleum & Natural Gas to a CGD for
supply to domestic and transport sectors.
RLNG is required be sourced by the CGD for supply to I&C customers.
Gas supply contracts may be of 2 varieties firm and reasonable endeavor basis.
Firm contract provides assurance of supply. The gas price is usually lower but it
comes with the riders of Take or Pay penalties. The operation of firm contracts
requires a very meticulous planning, coordination with customers and suppliers and
a sturdy nomination process. Overdrawl has severe penalties.
RE contracts do not assure supplies. The gas is usually more expensive but there
is no take or Pay penalty. The nomination procedure has to be followed in this
case too. Overdrawl penalties apply in RE contracts too.
A CGD typically, contracts gas sourcing and gas sales to its customers on a backto-back basis for Industrial category. For others, there is no commitment from
customers, but usually demand fluctuations are minimal and predictable, which can
be covered by proper nominations..
What is the role of Operations and Maintenance in a CGD?
Operation and maintenance:
O&M is the main function of ensuring that network and equipment operation is
operated and maintained for continuous supply of PNG and CNG to customers.
It is a 24X7 operations round the year.
Taking custody of gas from suppliers at CGS is the start point. Maintaining DRSs,
SVs and SRs and the pipeline network allows gas flows to occur uninterrupted
to all parts of the network.
Compression and dispensing equipment is operated and maintained for CNG
delivery with minimum down time.
CNG delivery by LCVs with cascades is an important function to ensure smooth
supplies to DBSs.
Working very closely with Marketing team and managing contracts and contract
labour for compressors, dispensers at own stations, LCVs, and other equipment,
patrolling pipelines, ensuring statutory compliance, and coordinating with civil
authorities, police and other departments are some key CGD activities which are
handled by O&M team with support from HSE team.
How is billing and collection done by CGDs?
Billing and Collection:
There is usually a dedicated revenue management department for this function.
PNG:
A fortnightly billing cycle is applied for I&C customers. A CGD employee or CGD
appointed vendor employee reads the meter installed at the customer premises
jointly with customer representative.
For domestic customers, the billing cycle is bi-monthly. The meter reading is carried
out by a CGD appointed vendor in presence of customer.
The recording may be manual or on devices which transfer the data to billing s/w.
Bills generated are despatched electronically, or by courier or other means.
I&C customers get a payment window of 3 days from date of billing, while
domestic customers are given 10 days time to pay.
CNG:
It is a cash and carry business.
However, institutional customers (City bus) and OMCs pay to CGD against invoice
on a fortnightly basis.
For STUs, a daily bus wise log is maintained with driver signature for fuelling and
certified by depot manager. This becomes the basis for CGD invoice on STUs,
which is paid in 7 days.
A fortnightly JMR is prepared at OMC ROs dispensing CNG . This is the basis of
invoicing OMC, who pay in 3 days.
