Understanding India's City Gas Distribution Sector

UNDERSTANDING CITY GAS
DISTRIBUTION BUSINESS IN INDIA

Submitted by
KRUNAL PATEL
(11BPE056)
UMANG MODI
(11BPE084)
MOHMADSAJID MALEK
(11BPE085)
SUNIL SONAGARA
(11BPE091)
DARSHAN CHAUDHARY
(11BPE095)
HIREN PATEL
(11BPE096)
SHASHANK JAIJANIYA
(11BPE100)
VIRAJ PARMAR
(11BPE103)
SCHOOL OF PETROLEUM TECHNOLOGY

PANDIT DEENDAYAL PETROLEUM UNIVERSITY
DECEMBER 2014
UNDERSTANDING CITY GAS

DISTRIBUTION BUSINESS IN INDIA
PROJECT REPORT
Submitted in partial fulfilment of the requirement of
B.Tech in Petroleum Engineering
by
Krunal Patel (11BPE056), Umang Modi (11BPE084), Mohmadsajid Malek
(11BPE085), Sunil Sonagara (11BPE091), Darshan Chaudhary (11BPE095),
Hiren Patel (11BPE096), Shashank Jaijaniya (11BPE100), Viraj Parmar
(11BPE103)
Under the guidance of
Mentor:
Co-mentor:
Ms. Shreya Sahajpal
Dr. Anirbid Sircar
Lecturer SPT,
Director SPT,
PDPU
PDPU
SCHOOL OF PETROLEUM TECHNOLOGY

PANDIT DEENDAYAL PETROLEUM UNIVERSITY
Gandhinagar 382007. Gujarat - INDIA
December 2014
Approval Sheet
This report entitled Understanding City Gas Distribution Business in India by Krunal Patel
(11BPE056), Umang Modi (11BPE084), Mohmadsajid Malek (11BPE085), Sunil Sonagara
(11BPE091), Darshan Chaudhary (11BPE095), Hiren Patel (11BPE096), Shashank Jaijaniya
(11BPE100), Viraj Parmar (11BPE103) is recommended for the degree of B.Tech in Petroleum
Engineering.
Examiners
_______________________
_______________________
_______________________
Supervisors
_______________________
_______________________
_______________________
Chairman
_______________________
Date: 1St December 2014
Student Declaration
We, Krunal Patel (11BPE056), Umang Modi (11BPE084), Mohmadsajid Malek (11BPE085),
Sunil Sonagara (11BPE091), Darshan Chaudhary (11BPE095), Hiren Patel (11BPE096),
Shashank Jaijaniya (11BPE100), Viraj Parmar (11BPE103), hereby declare that this written
submission represents our ideas in our own words and where others idea or words have been
included, we have adequately cited and referenced the original sources. We also declare that
we have adhered to all principles of academic honestly and integrity and have not
misrepresented or fabricated or falsified any idea / data / fact / source in my submission. We
understand that any violation of the above will be cause for disciplinary action by the PANDIT
DEENDAYAL PETROLEUM UNIVERSITY and can also evoke penal action from the
sources which have thus not been properly cited or from whim proper permission has not been
taken when needed.
Name of student
Roll no.
Krunal Patel
11BPE056
Umang Modi
11BPE084
Mohmadsajid Malek
11BPE085
Sunil Sonagara
11BPE091
Darshan Chaudhary
11BPE095
Hiren Patel
11BPE096
Shashank Jaijaniya
11BPE100
Viraj Parmar
11BPE103
Date: 1st December 2014
Signature
Acknowledgement
It has been an immense pleasure and truly enriching experience doing our project at School of
Petroleum Technology, PDPU.
We are extremely thankful to our mentor Ms. Shreya Sahajpal and co-mentor Dr. Anirbid
Sircar under whose guidance we executed this project. Their constant guidance, ideas and
willingness to share their vast knowledge made us understand this project and its manifestations
in great depths and inspired us to work with sheer commitment.
We are also taking this opportunity to express our gratitude to everyone who supported us
throughout the course of this B. Tech project.
Abstract
21st century is said to be the gas century as the environmental impact of the usage of liquid
fuels are deeply concerning. Natural gas is all set to strengthening energy security of India as
the share of natural gas in energy basket of India is expected to reach 20% by FY 2025. The
availability of natural gas by domestic production and R-LNG has driven the development of
natural gas sector. Being a last mile of natural gas value chain, CGD is a mean to provide
natural gas to end-users like industrial, domestic, commercial and automotive, through
interconnected pipelines. The natural gas scenario in India vis--vis world has been discussed
in this report. CGD business in India dates back to 1880, when Calcutta Gas Company
commenced operation. After a long hiatus, city gas distribution took place in 1972 in Vadodara,
Delhi and Mumbai. Considering high environmental pollution in the metro cities, the judiciary
mandate for enforced conversion of public vehicles to CNG provided a thrust for the
development of CGD sector in India. The evolution of CGD business in India as well as the
profiles of major CGD business players have been discussed in detail. The Government of India
and Ministry of Petroleum and Natural Gas was giving authorization to CGD entities for
business before 2007. However, to protect the interests of consumers and increase the
confidence of stakeholders, an independent regulatory body Petroleum and Natural Gas
Regulatory Board (PNGRB) was established in 2007. This report highlights the role and
functions of PNGRB as well as the important regulations given by PNGRB. The regulations
are interpreted and the loopholes have been highlighted in the report. This report equally
emphasizes on the technical aspects of CGD business i.e. CGD value chain. The entire CGD
value chain - starting from gas gathering lines through the CGS, DRS stations to end users of
PNG and CNG - is thoroughly understood and well discussed in the report. Risk assessment is
of vital importance to any business, which will be covered in detail in the later part of the
project. A case study of an undergoing CGD project will be carried out to understand the project
management aspects of a CGD business. Field trips to various stations and pipelines will be
done to help understand the technical aspects of CGD value chain thoroughly. The project aims
to take account of the technical, managerial, commercial and regulatory aspects of a CGD
business in order to achieve a complete understanding of CGD business.
II
Table of Content
No.
1.
2.
3.
Title
Page no.
1
Natural Gas Overview

1.1
Introduction
1.2
Natural Gas: World Scenario
1.3
Natural Gas in India
1.4
Natural Gas in Gujarat
5
6
City Gas Distribution

2.1
Overview
2.2
Evolution Of CGD Business in India
2.3
CGD Sector Natural Gas Demand
2.4
CGD Business in Gujarat
2.5
GSPC Gas Indias Largest CGD Company
2.6
Profile of Major CGD Players in India
10
Regulations in CGD: Developments And Critique
12
3.1
Pre-PNGRB Era
12
3.2
Need for the Independent Regulatory Body
13
3.3
PNGRB Emergence
13
3.4
Role of PNGRB
13
3.4.1 Functions of PNGRB
14
Important Regulations by PNGRB
14
3.5.1 PNGRB (Access Code for City or Local Natural
14
3.5
Gas Distribution Networks) Regulations, 2011

3.5.2 PNGRB (Authorizing Entities to Lay, Build,
15
Operate or Expand City or Local Natural Gas

Distribution Networks) Regulations, 2008
3.5.3 PNGRB (Exclusivity for City or Local Natural Gas
Distribution Network) Regulations, 2008
III
15
3.5.4 PNGRB (Technical Standards and Specifications
15
including Safety Standards for City or Local

Natural Gas Distribution Networks) Regulations,
2008
3.5.5 PNGRB (Determination of Network Tariff for City
15
or Local Natural Gas Distribution Networks and

Compression Charge for CNG) Regulations, 2008.
3.5.6 PNGRB (Code of Practice for Quality of Service
16
for City or Local Natural Gas Distribution

Networks) Regulations, 2010
3.6
3.7
4.
3.5.7 Salient features
16
Post PNGRB
16
3.6.1 Challenges faced by PNGRB
16
3.6.2 Notification of Section 16
17
Critique
18
19
CGD Value Chain

4.1
Introduction
19
4.2
Value Chain
20
4.2.1 Gathering Lines
20
4.2.2 Gathering Station
20
4.2.3 City Gas Station
20
4.2.4 District Regulation System
21
4.2.5 Piping system
22
4.2.6 Piped Natural Gas (PNG)
24
4.2.7 CNG Infrastructure
25
5.
Way forward
27
6.
References
28
IV
List of Tables
Table no.
Page no.
1.1
Top ten Gas producing countries in the world
1.2
Top ten Gas consuming countries in the world
1.3
Sector wise natural gas consumption in India
2.1
Summary of History of CGD in India
2.2
Profile of Major CGD Players in India
10
List of Figures
Figure no.
Page no.
1.1
Energy Mix of India in 2011
1.2
Reserves of Natural Gas in India
4.1
CGD Value Chain
19
4.2
Main Gas Transmission Pipeline
23
4.3
CGD Pressure Regimes
24
4.4
Gas Transmission and Distribution system
25
4.5
CNG Stations
26
Abbreviation
AGL
Adani Gas Limited
ASME
American Society of Mechanical Engineers
AEL
Adani Energy Limited
bcm
Billion Cubic Meter
btu
British Thermal Unit
BG
British Gas
BGL
Bhagyanagar Gas Limited
BPCL
Bharat Petroleum Corporation Limited
CGD
City Gas Distribution
CGS
City Gas Station
CGSML
Charotar Gas Sarkari Mandali Limited
CNG
Compressed Natural Gas
DRS
District Regulating Station
FY
Financial Year
GA
Geographical Area
GGCL
Gujarat Gas Company Limited
GGL
Green Gas Limited
GGS
Gas Gathering Station
GSPC
Gujarat State Petroleum Corporation
GSPL
Gujarat State Petronet Limited
IGL
Indraprastha Gas Limited
LPG
Liquefied Petroleum Gas
mmscmd
Million Standard Cubic Meter per Day
MDPE
Medium Density Polyethylene
MGL
Mahanagar Gas Limited
MNGL
Maharashtra Natural Gas Limited
MoPNG
Ministry of Petroleum and Natural Gas
ONGC
Oil and Natural Gas Corporation
PNG
Piped Natural Gas
PNGRB
Petroleum and Natural Gas Regulatory Board
R-LNG
Regasified Liquefied Natural Gas
scm
Standard Cubic Meter

VI
Understanding City Gas Distribution Business in India
CHAPTER 1 - NATURAL GAS OVERVIEW
1.1 INTRODUCTION
Natural Gas is gaseous fossil fuel consisting primarily of Methane. NG may also content other
gaseous heavier hydro carbon namely, Ethane, Propane Butane etc. Sometime Nitrogen,
helium, Carbon dioxide, Traces of Hydrogen sulphide & water is also present in Natural gas.
The Exact composition of Natural gas varies between gas fields. Natural Gas is a vital
component of the world's supply of energy. It is one of the cleanest, safest, and most useful of
all energy sources.
Properties of Natural Gas:
1. Natural Gas is colourless, odourless clean gas.
2. It is lighter than Air so tend to dissipate.
3. Explosive concerns of compressed natural gas are almost non-existent.
5. Processed natural gas is, in itself, harmless to human body.
6. Natural gas is a simple asphyxiated particularly in confined place and can kill if it displaces
air.
7. Natural Gas has high calorific value. (Anonymous, 2011)
1.2 NATURAL GAS: WORLD SCENARIO

Natural gas reserves of 6,647,341 billion cubic feet, with Natural gas production 309 billion
cubic feet in 2010-11.
The global energy consumption slowed down in 2008-2009 given the global economic
slowdown and high energy prices. This was true for each of the fossil fuels. Unlike oil, global
natural gas consumption grew by 2.5% in 2008. The largest incremental growth came from
China with a consumption growth of 15.8%.
As per BP Statistical Review 2013, the estimated worldwide proven gas reserves are to the tune
of 187 TCM with India sharing only 0.7% of these reserves i.e. 1.3 TCM. The world natural
gas production has been pegged at 9216 mmscmd. At the current rate of production, the natural
gas reserves will last for 60 years. (Standing Committee on Petroleum & Natural Gas, 2013)
School of Petroleum Technology, PDPU
Page 1
Table 1.1 Top ten Gas producing countries in the world (BP Statistical review 2013)
Rank
Country
Production in 2012 Production in 2012

(BCM)
(MMSCMD)
US
681.39
1886.81
Russian Federation
592.27
1622.67
Iran
160.50
439.73
Qatar
157.05
430.27
Canada
156.55
428.89
Norway
114.92
314.84
China
107.22
298.75
Saudi Arabia
102.80
281.64
Algeria
81.50
223.29
10
Indonesia
71.07
194.70
Table 1.2 Top ten Gas consuming countries in the world (BP Statistical review 2013)
Rank
Country
Consumption
in Consumption
2012 (BCM)
2012 (MMSCMD)
US
722.1
1978.48
Russian Federation
416.2
1140.38
Iran
156.1
427.64
China
143.8
394.09
Japan
116.7
319.83
Saudi Arabia
102.8
281.64
Canada
100.7
275.90
Mexico
83.7
229.20
United Kingdom
78.3
214.48
10
Germany
75.2
206.13
in
Page 2
1.3 NATURAL GAS IN INDIA

Natural Gas Despite major new natural gas discoveries in recent years, India is considering
large-scale imports via pipelines and LNG terminals to help meet growing demand. (US Energy
Information Administration)
In 2011, coal accounted for 41 per cent of total primary energy demand. (India Brand Equity
Foundation, 2013)
The bulk of Indias natural gas production comes from the western offshore regions, especially
the Mumbai High complex. The onshore fields in Assam, Andhra Pradesh, and Gujarat states
are also significant sources of natural gas. The Bay of Bengal has also become an important
source of natural gas for the country.
Fig 1.1 Energy Mix of India in 2011 (Energy Information Administration)
The share of natural gas in the energy mix of India is expected to increase to 20% in 2025 as
compared to 11% in 2010.
Natural Gas demand was 242.6 MMSCMD in 2012-13 which all set to grow significantly to
746 MMSCMD in 2029-30.
Page 3
The total supply of natural gas is expected to grow from 145.7 MMSCMD in 2012 to 400
MMSCMD by 2021-22 and 474 MMSCMD by 2029-30.
The availability of natural gas in India is expected to fall short of the total natural gas demand
by around 97 MMSCMD in 2012-13. However, this shortfall will reduce by 2017-18 due to
substantial addition in regasification capacity and natural gas supply through cross border
pipeline (TAPI). (Industry Group for Petroleum & Natural Gas Regulatory Board, 2013)
Fig 1.2 Reserves of Natural Gas in India (Directorate General of Hydrocarbons)
Table 1.3 Sector wise natural gas consumption in India mmscmd, January 2013 (Ministry of
Petroleum & Natural Gas)
Sector
Domestic
Gas
RLNG
Total
30.36
5.80
36.2
28%
Fertilizers
31.02
8.37
39.4
31%
CGD/CNG
6.69
7.28
14.0
11%
Court Mandated Customers 0.98
2.89
3.9
3%
6.02
0.37
6.4
5%
2.07
8.62
10.7
8%
extraction - LPG etc.

Refineries
total
Consumption supply
Power
Shrinkage for liquid
of
Page 4
Petrochemicals
3.5
1.37
4.9
4%
Sponge Iron/Steel
1.11
3.49
4.6
4%
2.38
0.01
2.4
2%
0.75
3.29
4.0
3%
1.45
1.5
1%
86.33
41.49
127.8
100.0%
Small consumers
(<50,000 scmd)
Other users
Internal Consumption in
pipelines
Total
1.4 NATURAL GAS IN GUJARAT

Gujarat is by far the most developed gas market in the country. It is the landfall point from
where gas is transported and sold to the Northern and Western parts of the country. Despite the
increased prices of natural gas and LNG, the demand for gas is expected to substantially
increase in the coming years. Drivers for demand growth are the energy needs of a growing
economy, growth of end-user segments, affordability vis--vis liquid fuels, introduction of
regulation and continuing environmental concerns.
Gas demand in Gujarat is likely to grow at 6.4% CAGR from 70 mmscmd in 2009 to 146
mmscmd by 2020. Gujarat currently has the most developed pipeline network in the country
and is the only State where gas pipeline network is being operated by more than one player i.e.
GAIL (India) Limited, Gujarat State Petronet Limited and Gujarat Gas Company Limited.
Supply is expected to grow from 47 mmscmd in 2009 to 101 mmscmd by 2020.
GSPC in collaboration with private investors plans to set-up a 27 MMTPA refinery to cater to
the export market and make Gujarat the petroleum product export hub of India. The said
refinery is likely to be commissioned by FY2015 timeframe. The total cost of the refinery is
expected to be around Rs. 60,000 Crores. (Gujarat Infrastructure Development Board, 2009)
Page 5
CHAPTER 2 - CITY GAS DISTRIBUTION
2.1 OVERVIEW
A City gas distribution means a distribution system in which CNG & PNG sold to various
segments by interconnecting gas pipeline & related equipments. In CGD system, high pressure
steel pipeline has been laid across various areas of city. The city gas distribution accounts for
4-6 MMSCMD in the country. It is assumed to increase to an amazing 20 MMSCMD in the
next three years.
The city gas distribution in the India is increasing at a rapid rate for the usage of PNG for the
domestic, commercial, industrial and CNG for transportation. Two factors that will drive this
growth are increase in gas production and the development of the infrastructure. (Anonymous,
2011)
2.2 EVOLUTION OF CGD BUSINESS IN INDIA

The CGD business in India dates back to 1857 when Calcutta Gas Company & Bombay Gas
Company commenced operations in Kolkata and Mumbai respectively, with coal gas as the
primary input.
As a pilot project first city gas distribution project was taken up with the help of ONGC at
Vadodara city in 1972. Gujarat Gas Company Ltd. (GGCL) was the first commercial city gas
distribution company in India. GGCL in association with British Gas developed distribution
network in Bharuch and Ankleshwar cities. Subsequently, they expanded their network to
Surat.
Mahanagar Gas Limited (MGL) started city gas distribution in Mumbai in 1995. The focus of
the company was to supply gas to domestic households and to transport sector and in an event
of surplus cater to the industrial demand.
Indraprastha Gas Limited (IGL) started city gas distribution in Delhi in 1998. The focus of the
company was to supply gas to transport sector.
Page 6
India today has a vast network of underground pipelines being used for transportation and
distribution of natural gas. As on date, gas is available in 41 cities in India and in another 14
cities establishment of gas pipeline network is in project stage. (Gupta, 2009)
Taking a look in the Indian history, the CGD started in the late 1800s. The following is a
summary regarding the history of CGD in India:
Table 2.1 Summary of History of CGD in India (Dubey, 2011)

Year
City
Company
1880
Calcutta
Calcutta Gas Company
1900
Mumbai
Bombay Gas Company
1972
Vadodara
Vadodara Municipal Corporation
1980
Delhi
Delhi Municipal Corporation
1982
ONGC colony Mehsana
ONGC
1985
Duliajan
Assam gas company
1986
Sibsagar
Assam gas company
Surat, Ankleshwar, Bharuch
Gujarat Gas Company Ltd.
1994
Mumbai
Mahanagar Gas ltd.
1995
Delhi
lndraprastha Gas
2004
Vadodara, Ahmedabad
Adani
2005
Hyderabad
Bhagyanagar gas
2006
Kanpur, Lucknow
CUGL & GGL
Gandhinagar, Kadi, Vapi, Mehsana,
GSPC/ SGL
1989-91
2006-07
Rajkot, Morbi
Page 7
2.3 CGD SECTOR NATURAL GAS DEMAND

City Gas Distribution (CGD) sector in India has seen rapid growth in recent years and
consumes approx. 13.6 MMSCMD of natural gas. Natural gas demand for CGD sector is
expected to rise steadily due to the addition of gas networks in new cities, price advantage of
CNG and increased use of PNG in domestic, industrial and commercial sectors.
The cumulative sales volumes for three major CGD players IGL, MGL and GGCL grew at
around 8%-9% from 2007 to 2011. However, this rate of growth is expected to slow down as
the existing businesses become mature on higher base effect. Therefore, the natural gas demand
from the existing CGD entities has been assumed to grow at a rate 20%-30% lower than their
growth rate in the past five years till the end of 13th five year plan. The total demand from
CGD sector is expected to grow from 15.3 MMSCMD in 2012-13 to 85.6 MMSCMD in 202930 at a CAGR of 10.7%. (Industry Group for Petroleum & Natural Gas Regulatory Board,
2013)
2.4 CGD BUSINESS IN GUJARAT

Gujarat is the showcase for piped gas in India. It has a consumer base of over 7.67 lakh
industrial, commercial and domestic users, connected through over 10,000 km long pipeline
network that carries about 8 mmscmd of gas.
CGD Sector has proved a saviour for ceramic, pharma and chemical industries. On account of
steep crude price rise post 2007 coupled with competition from China, state-based energyintensive industrial units were struggling to survive. However, piped gas network made
business viable for the industry in Gujarat. In the absence of gas allocation from RIL's D6, the
CGD companies in Gujarat are banking on expensive imported gas.
According to a recent study by the government of Gujarat, the state has the potential to have
20 lakh piped gas consumers and over 300 CNG stations in next five years from 225 today.
Gujarat claims that it can reduce the huge subsidy burden of the Centre if it is allotted cheaper
gas as PNG network requires government assistance. (Thakkar, 2011)
Page 8
2.5 GSPC GAS INDIAS LARGEST CGD COMPANY

Gujarat State Petroleum Corporation (GSPC) is the chief of its related group that holds eight
other huge companies. The Government of Gujarat along with its public sector undertakings
holds more than 97% of equity of Gujarat State Petroleum Company GSPC operate the largest
gas transmission and distribution network in the state of Gujarat.
GSPC work through its subsidiaries and associates to supply gas services across the state.
Gujarat State Petronet Limited (GSPL) is a gas transmission company working on a common
carrier basis. GSPS Gas and Sabarmati Gas are two entities engaged in City Gas distribution
and related pipeline infrastructure and Piped Natural Gas services. GSPC Gas is playing a vital
role to cater to the natural gas demand up to the last mile of the retail network.
GSPC Gas is supplying natural gas to more than 347,909 domestic households, 1,292
commercial and non-commercial segments and 1,629 industrial customers. GSPC Gas also
supplies natural gas in the form of Compressed Natural Gas (CNG) through 137 CNG stations
across the state that caters to more than 75,000 vehicles per day. Presently, the daily gas sales
volume is in tune of 4.3 MMSCMD catering to a variety of domains and segments for various
applications through PNG and CNG. (Anonymous, 2011)
Page 9
2.6 PROFILE OF MAJOR CGD PLAYERS IN INDIA
Table 2.2 Profile of Major CGD Players in India (Dubey, 2011)

Sr. no.
1
Entity
MGL
GA (Operating)
GA (Construction)
Mumbai
Total
2
Thane
2
IGL
Delhi
Faridabad (1)
Noida(1)
Gurgaon (1)
Gwallior, Ujjain
Avantika
Indore
CUCL
Kanpur
3
2
Bareily
5
Green Gas
Lucknow (1)
Agra
6
Gujarat Gas
Surat
Ankleshwar
Bharuch
7
MNGCL
Pune, Chinchwad
TNGCL
Agartala
BGL
Vijaywada
Kakinada
Hydrabad
10
Sabarmati
Gandhinagar (1)
Mehsana
11
GAIL
Vadodara (1)
12
HPCL
Ahmedabad (1)
13
Charotar Gas
Anand
14
VMSS
Vadodara
15
Adani energy
Ahmedabad (2)
Khurja
Faridabad (2)
Lucknow (2)
Vadodara (3)
Noida (2)
Jaipur
Udaipur
Page 10
16
GSPC Gas
Gandhinagar (2)
Bhavnagar
Godhara
Bhuj
10
Hazira
Valsad, Vapi,Navsari
Rajkot
Morbi
Surendranagar
Nadiad
17
Sity energy
Moradabad
18
Haryana city
Gurgaon (2)
1
Bhivandi
Jhajhar
19
AGCL Assam
Duliajan
Dilbrugarh
Sibsagar
Moran, Naharkatia
20
GEECI
Asansol
Durgapur
21
GCGCL
22
Gail Gas
Kolkata
1
Dewas
Kota
Sonepat
Meerut
23
Saumya DSM
Total
Mathura
41
1
20
61
Page 11
CHAPTER 3 - REGULATIONS IN CGD: DEVELOPMENTS AND

CRITIQUE
3.1 PRE-PNGRB ERA

Till 2007, the CGD sector in India was governed by Government of India and MoPNG.
However, to increase the private participation and augment investors confidence, an
independent regulator for the downstream sector, Petroleum and Natural Gas Regulatory Board
(PNGRB) was established in 2007.
Historically, the natural gas market was entirely serviced through the PSUs with a direct control
of the central government. The major initiative for CGD development in the country was
undertaken by GAIL which started a pilot project at Delhi, Mumbai and Vadodara in 1992 for
promoting CNG as an automobile fuel. The Government of India and MoPNG has initiated and
driven the CGD progress in the country prior to the establishment of the regulator.
The CGD business in India was initiated in 1880 with the inception of Calcutta Gas Company.
The natural gas distribution business in India was also established at Mumbai in 1990,
Vadodara in 1972 and Okhla, Delhi in the past. However, the growth of CGD sector did not
attain the critical mass owing to the lack of infrastructure and reluctance on the part of end
users for fuel conversion.
The primary impetus for progress of CGD sector in India was driven by the judiciary mandate
for the enforced conversion of public transport fleet into CNG at Mumbai and Delhi. The high
levels of pollution in the cities and the lower quality of liquid fuels were the catalyst for the
mandate which accelerated the expansion of CNG in country.
Once the CGD sector gained momentum in the country, the central government authorized
several CGD entities for CGD operations in particular Gas. A total of 11 companies were
authorized for 21 GAs by the central government. The entities authorized by central
government include Indraprastha Gas Ltd. (IGL), Mahanagar Gas Ltd. (MGL), Maharashtra
Natural Gas Ltd. (MNGL), Central U.P. Gas Ltd. (CUGL), Bhagyanagar Gas Ltd. (BGL),
Sabarmati Gas Ltd. (SGL), Green Gas Ltd., Gail Gas and Aavantika Gas Ltd.
Page 12
3.2 NEED FOR THE INDEPENDENT REGULATORY BODY

Prior to PNGRB, MoPNG was responsible for authorizing the CGD entity for a particular city.
With MoPNG deciding the CGD authorizations, it was alleged that public players would get
preference over the private players. An independent regulator was expected to remain neutral
and increase the investors confidence in the CGD sector.
3.3 PNGRB EMERGENCE

PNGRB was established under the ambit of the Petroleum and Natural Gas Regulatory Board
Act, 2006. The PNGRB Act was preceded by two major bills the Petroleum Regulatory Board
Bill, 2002 and the Petroleum and Natural Gas Regulatory Board Bill, 2005.
The Petroleum Regulatory Board Bill was introduced in Parliament on May 6, 2002 which was
then referred to the Parliamentary Standing Committee. The standing committee gave its nod
for the bill subject to the recommendations and changes. The recommendations were primarily
specific to the natural gas segment wherein provisions essential for handling specific problems
of natural gas segment was incorporated.
The amended bill was introduced in the parliament in 2003 with appropriate provisions related
to affiliate code of conduct, pipeline access code, concept of contract carrier, marketing service
obligations of CGD entities and methodology for fixation of transportation tariffs. However,
the Bill could not be taken up for consideration and it lapsed. The bill was again reintroduced
in December 2005.
The government enacted the PNGRB Act on March 31, 2006. Subsequently, PNGRB was
constituted under the Act on October 1, 2007. (InfralineEnergy, 2011)
3.4 ROLE OF PNGRB

PNGRB was established to regulate the refining, processing, storage, transportation,
distribution, marketing and sale of petroleum, petroleum products and natural gas. The primary
objective of PNGRB is to protect the interest of consumers and entities engaged in specified
activities, to ensure uninterrupted and adequate supply of natural gas and to promote
competitive markets. However, the E&P activities are not under the purview of PNGRB.
Page 13
3.4.1 Functions of PNGRB
Protect the interest of consumers by fostering fair trade and competition amongst the
entities
-
Ensure adequate availability of natural gas
Monitor price of PNG and CNG
Prevent restrictive trade practices in CGD
Secure equitable distribution of natural gas
Authorization and Registration of CGD Entities
Declaration of pipeline as common carrier or contract carrier
Maintain a data bank of information on activities relating to petroleum, petroleum products

and natural gas;
Levy fees and other charges as determined by regulations
Ensure adherence to service obligations
Lay down the technical standards and specifications including safety standards
Resolve disputes amongst the entities and between entity and consumer (PNGRB Act,
2007)
3.5 IMPORTANT REGULATIONS BY PNGRB

3.5.1 PNGRB (Access Code for City or Local Natural Gas Distribution Networks)
Regulations, 2011
The regulation defines the contract between the authorized entity and the shipper and applies
to the authorized CGD entity immediately after the end of marketing exclusivity period.
The authorized entity is required to declare the entry point and exit point capacity for open
access 180 days prior to the end of the marketing exclusivity period.
The regulation necessitates that the gas accounting is required to be done on a daily basis in
energy terms.
Page 14
The charges which are to be paid by the shipper to the authorized entity includes network
tariff, compression charge, overrun charge, system imbalance charge, off-spec gas charge,
applicable taxes and any other mutually agreed charge in the access arrangement.
3.5.2 PNGRB (Authorizing Entities to Lay, Build, Operate or Expand City or Local
Natural Gas Distribution Networks) Regulations, 2008
The regulation defines the framework for CGD network development in a particular GA. It
determines the modes of initiation of proposal, public consultation and the mechanism for
initiating the CGD bidding procedure. The bidding criteria are lowness of network tariff,
lowness of compression charge for CNG, highness of inch-km of steel pipeline and highness
of domestic connections.
3.5.3 PNGRB (Exclusivity for City or Local Natural Gas Distribution Network)
Regulations, 2008
The regulation applies to the authorized entity developing the CGD network. The rationale
behind providing exclusivity are incentivizing investments, allowing time for volume build
up and gas ramp-up and making the authorized entity solely responsible for CGD
developments.
The authorized entity is given an infrastructural exclusivity of 25 years. The marketing
exclusivity wherein the network is exclusive from the purview of contract and common carrier
is of 5 years for an entity which is authorized by the bidding process. The entities authorized
under Section 17 and 18 are given a marketing exclusivity of 3 to 5 years depending upon the
operating period of such entities.
3.5.4 PNGRB (Technical Standards and Specifications including Safety Standards for
City or Local Natural Gas Distribution Networks) Regulations, 2008
The regulation specifies that the design, materials, equipments, welding, fabrication,
installation, testing, operation and maintenance of the CGD network needs to be done in
accordance with the requirements of ASME.
Page 15
The regulations specify the technical standards and specifications including the safety
standards. The regulation is instrumental in minimizing the hazards and risks in operation and
maintenance of CGD networks.
3.5.5 PNGRB (Determination of Network Tariff for City or Local Natural Gas
Distribution Networks and Compression Charge for CNG) Regulations, 2008.
3.5.6 PNGRB (Code of Practice for Quality of Service for City or Local Natural Gas
Distribution Networks) Regulations, 2010
These regulations lay down code of practice for promoting reliable service to consumers and
the public and obligations of consumers. The regulation necessitates the entities to display the
comprehensive procedure and all necessary information for obtaining the PNG connection on
available platforms such as internet and newspaper.
3.5.7 Salient features
Service Obligations
Exclusivity
Level Playing Field
Competition and Efficiency
Transparency
Conflict Management
Safety Maintenance
Quality Assurance (InfralineEnergy, 2011)
3.6 POST PNGRB

3.6.1 Challenges faced by PNGRB
Formation of PNGRB lead it to the challenges of fixing pipeline tariffs, identifying regions
needing gas pipelines and awarding contracts, ensuring transporters' service quality, allowing
third-party access to the existing pipelines and ensuring fair play in a sector naturally prone to
Page 16
monopolies. Besides, since pipeline infrastructure gives an edge to the first entrant, the
regulator has to be extra careful in ensuring access to subsequent players to pipelines.
These functions can be performed only from a position of strength and utmost vigil, as
operators might tend to take advantage of regulatory arbitrage that is common in a sector
regulated by a central agency and is operating in far-flung areas. Often, operators might be
tempted to start work with a mere no-objection certificate from a local authority without
PNGRB's mandate. Such instances are, to some extent, responsible for the delay in empowering
the Board.
The draft license rule issued by the Board for companies laying gas pipelines resolved a
longstanding issue of the status of entities like Indraprastha Gas Ltd, which started operations
with the central government's permission before the Board was set up, by exempting them from
the need for a fresh PNGRB authorization. But the Board will monitor the performance of these
entities in laying pipelines. All new entrants in city gas distribution and transportation of natural
gas will need the Board's clearance.
The real challenge is the implementation of these norms, for which the regulator would need a
system to redress disputes and solve grievances in addition to a strong field force. Despite some
teething problems, the Board's beginning appeared to be promising. (Prasad, 2010)
3.6.2 Notification of Section 16
Fresh from receiving full powers, oil regulator PNGRB invited bids for giving licenses for
retailing CNG to automobiles and piped cooking gas to households.
Nearly three years after it came into existence, the government notified a crucial section that
give the regulator explicit powers to issue city gas distribution licenses. The Section 16 of the
Petroleum and Natural Gas Regulatory Board Act of 2006 was notified with effect from July
15, 2010. The section gives PNGRB powers to authorize companies to retail CNG to
automobiles and pipe cooking gas to households.
PNGRB, however, did not feel constrained by absence of Section 16 and held two rounds of
bidding for giving city gas distribution rights before the notification of Section 16 came into
existence. In March 2009, it conducted the first round for six cities. In the second round in
August 2009, PNGRB invited bids for seven cities, including Ghaziabad.
Page 17
Indraprastha Gas Ltd, which claimed it had central government and Supreme Court
authorization for retailing CNG and piped gas in Ghaziabad, challenged in the Delhi High
Court the PNGRB's authority to issue licenses in absence of the Section 16. The HC in January
ruled that PNGRB had no powers to issue city gas authorization, leading to scrapping of second
round. After the HC ruling, the authority to issue CGD licenses fell on the central government
which authorized winners of the first round of auction conducted by PNGRB and explicitly
gave the license for Ghaziabad to IGL.
Armed with the notification of Section 16, which empowered the downstream oil regulator to
issue authorization for city gas distribution (CGD) licenses, the regulator came out with a third
round of auction. (The Economic Times, 2010)
3.7 CRITIQUE
Inadequate Marketing Exclusivity
Authorization of Pre-PNGRB CGD Entities
Notifications of Section 16
Bidding Issues
Clashes between PNGRB and Government
PNGRB Role Ambiguity
Page 18
CHAPTER 4 - CGD VALUE CHAIN
4.1 INTRODUCTION
CGD represents the last mile in the gas value chain and gas is supplied at low / medium pressure
to residential, commercial consumers and small industrial consumers (PNG) and
Transportation segment as vehicle fuels (CNG).
CGD network involves movement of small volumes of gas through small diameter medium to
low pressure distribution pipelines by a local distribution company to a large number of retail
consumers. It is an integrated network of steel, poly ethylene (PE) and medium density
polyethylene (MDPE) pipelines along with CNG dispensing stations. (Chandra, 2013)
Fig 4.1 CGD Value Chain (www.aga.org)
Page 19
4.2 VALUE CHAIN

4.2.1 Gathering Lines
Gathering lines collect crude oil and raw gas from producing areas.
4.2.2 Gathering Station
The gas produced from the wells has enough pressure to enter gathering lines directly without
compression. Sometimes compressors are added to boost the pressure to overcome other
Gathering lines pressure. These stations are called gathering station. (Dubey, 2011)
4.2.3 City Gas Station
The natural gas that is received at the city gas station is mostly passed through a cleaner to
remove liquids and dust. The primary function of the city gas station is to measure the amount
of incoming gas. It is generally measured through orifice meters. Another function is to reduce
the pressure of the gas to be sent for distribution, as the distribution system requires much lesser
pressure than that in long distance transmission. Mechanical devices called pressure regulators
lower the gas pressure and helps to control the flow rate to maintain desired pressure level
throughout the distribution system with the reduction in pressure the natural gas also becomes
cooler so sometimes it has to be heated up in regions where the temperature is below zero
degree. Last but not the least, at the city gas station the odorization of the natural gas takes
place. Different types of odorants are used so that the smell makes the presence of escaping
unburnt gas recognizable at very low concentration. This serves as a warning well before the
gas accumulates to hazardous levels; a mixture of air and natural gas are explosive over the
range of 5% to 15% natural gas. To ensure safety, odorized natural gas is detectable at
concentration of just 1%. (Anonymous, 2011)
The main components of City Gate station are
a. Gas filtration skid
b. Pressure reduction skid
c. Flow metering skid
Page 20
4.2.3.1 Gas filtration skid

This skid has been designed in such a way as to accept a single stream only. High efficiency
filter separators are used for the removal of liquid and solid particles from the incoming gas
stream over the entire operating range. The gas outlet from the processing industry is cautiously
maintained at free of impurities; the filtration skid ensures the pure gas distributed to the line
.the filter is normally designed to withstand a pressure in the range of 30-49 bar.
4.2.3.2 Pressure Reduction Skid
The pressure reduction skid is installed to reduce the pressure of the incoming gas form the
source from the pressure of 37 bar to 27 bar. Mainly creep relief valve is being installed in this
skid which maintains the downstream pressure.
4.2.3.3 Flow Metering Skid
Flow meters are installed to for a single stream. The normal flow meters used in the CGS is
orifice plates. Orifice flow meters find its use as a large pressure drop is required. The various
parameters such as temperature in the various sections of the line pressure at the inlet & outlet
joints, flow inlet & outlet are controlled by SCADA system in the control room.
4.2.4 District Regulation System
DRS is a device used to reduce the pressure from 27 bar to 4 bar. It is the interface between the
steel grid network & the medium pressure network. The locations the DRS mainly depends on
the requirements of the area i.e., the type of customers to the company.
The various components in the DRS include the following,
a. Slam shut valves for controlling the flow
b. Filtering skid
c. Pressure reduction skid
d. Odorizing Unit
Page 21
Odorizing unit is highly essential to ensure the safe distribution of the both CNG and PNG.
The odorants mainly include the mercaptans. These odorant is injected in to the natural gas to
detect leaks if any. The odorants used is Ethyl Mercaptan.
e. Metering System
Pipeline customers demand to know they receive the same amount of oil or gas they put in.
pipeline companies generally use direct volume meters or inference meters. Some types are as
follows
1. Positive displacement meters
2. Turbine meters
3. Orifice meters
4. Ultrasonic meters
5. Coriolis meters (Dubey, 2011)
4.2.5 Piping system
Pipeline network consists of steel pipeline & polyethylene pipeline. A typical CGD network
should consists of the following:
(a) Primary Network
A medium pressure distribution system comprising of pipelines, gas mains or distribution
mains normally constructed using steel pipes and connects one and more transmission. Pipeline
to respective CGS or one or more CGS to one or more DRS.
(b) Secondary Network
A low pressure distribution system comprising of gas mains or distributions mains usually
constructed using thermoplastic piping (MDPE) and connects DRS to various service
regulators at commercial, industrial and domestic consumers.
Page 22
Fig 4.2 Main Gas Transmission Pipeline (Chandra, 2013)
(c) Tertiary Network

A service pressure distribution system comprising of service lines, service regulators and
customer/consumer meter set an assembly constructed using a combination of thermoplastic
(MDPE) piping and GI/copper tubing components. The connection between consumer meter
set assembly and gas appliance (provided by consumer) may be made by GI pipes or copper
tubing or steel reinforced rubber hose. (Anonymous, 2011)
Page 23
Fig 4.3 CGD Pressure Regimes (Chandra, 2013)
4.2.6 Piped Natural Gas (PNG)

District regulation station are installed where the distribution is to be done like in the industrial
area and commercial segment. Gas to the various consumers is transferred after being
maintained at a pressure of about 4-5 bar. Then the gas is transmitted to single stream regulator
through 4 bar medium pressure PE pipelines. SR further reduces the pressure from 4 bar to 100
mbar. From SR the gas is supplied through a 10 mbar low pressure PE pipeline to a G.I. riser
isolation wall. From this valve the gas is carried through a G.I. (Galvanized Iron) 10 mbar
pipelines to end user. The control valve is placed at the height of 5 ft which controls the flow.
Then a regulator are installed which rings down the pressure to 21 mbar for home users. A
meter is installed which tells the amount of gas being used depending on which they are
charged. (Prasad, 2011)
Page 24
Fig 4.4 Gas Transmission and Distribution system (www.mahanagargas.com)
4.2.7 CNG Infrastructure

4.2.7.1 Mother Station
Mother stations are connected to the pipeline & have high compression capacity. These stations
supply CNG to both vehicles & daughter stations (through mobile cascades). The Mother
station requires heavy investment towards compressor, dispensers, cascades, pipelines, tubing
etc.
4.2.7.2 Online Station
CNG vehicles storage cylinders need to be filled at a pressure of 200 bars. Online Stations
are equipped with a compressor of relatively small capacity, which compresses low pressure
Page 25
pipelines to the pressure of 250 bar for dispensing CNG to the vehicle cylinder. The investment
in an online station is midway between daughter station & mother station.
Fig 4.5 CNG Stations (Das, 2011)
4.2.7.3 Daughter Station

The Daughter Stations dispense CNG using mobile cascades. These mobile cascades at
daughter stations are replaces when pressure falls & a depleted mobile cascade is refilled at the
Mother Station. The investment in a daughter station is least among all types of CNG
stations. There is reduction in storage pressure at daughter stations with each successive filling.
Once the storage pressure drops, the refueling time increases, while the quantity of CNG
dispensed to vehicle also decreases.
4.2.7.4 Daughter-Booster Station
Installing a booster compressor can eliminate drawbacks of daughter stations. Daughter booster
(compressor) is designed to take variable suction pressure & discharge at constant pressure of
200 bars to the vehicles being filled with CNG. The investment in daughter booster station is
higher than that of daughter station. (Das, 2011)
Page 26
WAY FORWARD
This project has covered natural gas and CGD overview, CGD regulations and CGD value
chain so far. Detailed profile of major market players i.e. involvement in each bidding round
and current status. Further in regulations, the impact of regulations and Government policies
on allocation of gas, gas pricing etc. on the development of CGD business in India will be
deliberated and status of each bidding round will be covered. Risk assessment is of vital
importance to any business, which will be addressed in detail in the later part of the project.
A case study of an undergoing CGD project will be carried out to understand the project
management aspects of a CGD business. Field trips to various stations and pipelines will be
done to help understand the technical aspects of CGD value chain thoroughly. Innovations in
IT applications, equipments and safety standards in last 5 years will also be explored and
discussed.
Page 27
REFERENCES
American Gas Association. (2014) How Does the Natural Gas Delivery System Work?
Available from: http://www.aga.org/Kc/aboutnaturalgas/consumerinfo/Pages/NGDeliverySys
tem.aspx [Accessed: 12th Nov 2014]
Anonymous. (2011) CGD Introduction report. (Unpublished report)
Chandra P. (2013) City Gas Distribution: Coming Out of the Woods. Dolat Capital. Jan 2013
Das A.T. (2011) Report on CGD Business in India. School of Petroleum Management,
Gandhinagar (Unpublished report)
Dubey S. (2011) City Gas Distribution. School of Petroleum Management, Gandhinagar
(Unpublished report)
Gas transmission and distribution system. (March 2010) Mahanagar Gas Limited, Mumbai.
Available from: http://www.mahanagargas.com [Accessed: 15th Nov 2014]
Gujarat Infrastructure Development Board (2009). Review of Blueprint for Infrastructure in
Gujarat (BIG 2020) Final Report. CRISIL Infrastructure Advisory.
Gupta, A. (2009) Preparedness to Handle Emergency in City Gas Distribution Networks. In
4th Pipeline Technology Conference. (Unpublished report)
India Brand Equity Foundation (2013). Oil & Gas industry in India. [Online] Available from:
http://www.ibef.org/industry/indian-oil-and-gas-industry-analysis-presentation
[Accessed:
25th Oct 2014]

India. Petroleum and Natural Gas Regulatory Board Act 2006. New Delhi: Petroleum and
Natural Gas Regulatory Board.
India. PNGRB (Access Code for City or Local Natural Gas Distribution Networks) Regulations
2011. New Delhi: Petroleum and Natural Gas Regulatory Board.
India. PNGRB (Authorizing Entities to Lay, Build, Operate or Expand City or Local Natural
Gas Distribution Networks) Regulations 2008. New Delhi: Petroleum and Natural Gas
Regulatory Board.
Page 28
India. PNGRB (Code of Practice for Quality of Service for City or Local Natural Gas
Distribution Networks) Regulations 2010. New Delhi: Petroleum and Natural Gas Regulatory
Board.
India. PNGRB (Determination of Network Tariff for City or Local Natural Gas Distribution
Networks and Compression Charge for CNG) Regulations 2008. New Delhi: Petroleum and
India. PNGRB (Exclusivity for City or Local Natural Gas Distribution Network) Regulations
2008. New Delhi: Petroleum and Natural Gas Regulatory Board.
India. PNGRB (Technical Standards and Specifications including Safety Standards for City or
Local Natural Gas Distribution Networks) Regulations 2008. New Delhi: Petroleum and
India. Standing Committee on Petroleum & Natural Gas. (2013). Allocation and Pricing of Gas
(Nineteenth Report). New Delhi: Ministry of Petroleum and Natural Gas.
Industry Group for Petroleum & Natural Gas Regulatory Board. (2013). Vision 2030 Natural
Gas Infrastructure in India. New Delhi: Petroleum and Natural gas Regulatory Board.
InfralineEnergy. (2011) City Gas Distribution in India: Demystifying the Opportunities,
Growth and Investment Potential. New Delhi: Infraline Technologies (India) Private Limited
Operation and Maintenance Manual, 3rd edition, Gandhinagar: GSPC GAS
Prasad S. (2011) Overview of CGD Business in India. School of Petroleum Management,
Gandhinagar (Unpublished report)
Prasad, G. C. (2010) Real challenge awaits PNGRB. Financial Express. Aug 9. Available from:
http://archive.financialexpress.com/news/Real-challenge-awaits-PNGRB/657713 [Accessed:
12th Nov 2014]
Thakkar, M. (2011). The success story of piped gas in Gujarat. The Economic Times. May 8.
Available from: http://articles.economictimes.indiatimes.com/2011-05-08/news/30160805_1_
gas-network-cgd-gas-consumers [Accessed: 15th Nov 2014]
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The Economic Times. (2010) PNGRB invites bids for retailing gas in 4 states. July 28.
Available from: http://articles.economictimes.indiatimes.com/2010-07-28/news/27589301_1_
pngrb-cgd-city-gas [Accessed: 5th Nov 2014]
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Page 30

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UNDERSTANDING CITY GAS

DISTRIBUTION BUSINESS IN INDIA

SCHOOL OF PETROLEUM TECHNOLOGY

UNDERSTANDING CITY GAS

Ms. Shreya Sahajpal

Dr. Anirbid Sircar

SCHOOL OF PETROLEUM TECHNOLOGY

Date: 1St December 2014

Date: 1st December 2014

Natural Gas Overview

Natural Gas: World Scenario

Natural Gas in India

Natural Gas in Gujarat

City Gas Distribution

Evolution Of CGD Business in India

CGD Sector Natural Gas Demand

CGD Business in Gujarat

GSPC Gas Indias Largest CGD Company

Profile of Major CGD Players in India

Regulations in CGD: Developments And Critique

Need for the Independent Regulatory Body

3.4.1 Functions of PNGRB

Important Regulations by PNGRB

3.5.1 PNGRB (Access Code for City or Local Natural

Gas Distribution Networks) Regulations, 2011

Operate or Expand City or Local Natural Gas

3.5.4 PNGRB (Technical Standards and Specifications

including Safety Standards for City or Local

or Local Natural Gas Distribution Networks and

for City or Local Natural Gas Distribution

3.5.7 Salient features

3.6.1 Challenges faced by PNGRB

3.6.2 Notification of Section 16

CGD Value Chain

4.2.1 Gathering Lines

4.2.2 Gathering Station

4.2.3 City Gas Station

4.2.4 District Regulation System

4.2.5 Piping system

4.2.6 Piped Natural Gas (PNG)

4.2.7 CNG Infrastructure

Top ten Gas producing countries in the world

Top ten Gas consuming countries in the world

Sector wise natural gas consumption in India

Summary of History of CGD in India

Profile of Major CGD Players in India

Energy Mix of India in 2011

Reserves of Natural Gas in India

CGD Value Chain

Main Gas Transmission Pipeline

CGD Pressure Regimes

Gas Transmission and Distribution system

Adani Gas Limited

American Society of Mechanical Engineers

Adani Energy Limited

Billion Cubic Meter

British Thermal Unit

Bhagyanagar Gas Limited

Bharat Petroleum Corporation Limited

City Gas Distribution

City Gas Station

Charotar Gas Sarkari Mandali Limited