Development of Natural Gas

Market In India
a Regulatory perspective

Dr Basudev Mohanty
Member, PNGRB
26 May 2017
World Gas scenario
Todays gas market- buyers market ?

The special edition of World Energy Report 2011 by

International Energy Agency (IEA), Paris had
come with the exciting caption, Are we entering
a Golden Age of Gas.
producers voicing skepticism, where
buyers loving the price downtrend.
The International Energy Outlook 2016 ( EIA, US
dept. of Energy) puts Asia-Pacific Market at the top
The Non-OECD Asian Market (China, India etc.) is
set to be the fastest rising gas market in the world.
Contd.......
IEO 2016 projections.......
The Non OECD Asian gas demand was less
than 50% of North America in 2012 , but
25% above it in 2040

China (15 Tcf) , USA (11.3 Tcf) and Russia (10

Tcf) will account for 44% of increase in world
gas production.

Shale Gas and LNG will be key drivers.

Short term and Spot LNG trade in Asia-Pacific

market tripled from 2010 to 2014.

LNG prices has fallen from the height of US$

20/mmbtu in 2011 to around US$ 3 at present.
 World LNG infrastructure growing
LNG Report for 2016 by IGU
LNG Liquefaction capacity set to expand
sharply from 302 Mmtpa (Jan 2016) 890
Mmtpa (proposed)

Regasification capacity already exceeded 750

Mmtpa in 2015 : as on June 2016, 15 new
terminals (8 in China alone) and 73 Mmtpa
added

Floating regas (FSRU) is already 77 Mmtpa

(10%) in end 2014;
Indian Gas Scenario
Golden Age of Gas
Can INDIA seize the opportunity?

Government policy and PNGRBs

regulatory scheme to prepare the ground
and

rationalise price-tax-subsidy paradigm,

improve & augment capacities in ports ,
terminals, pipelines, Grid , CGD and
other facilities
 Government Policy in positive direction

The Governments policy thrust towards a

Gas-based economy.
OALP to replace NELP
domestic gas price linked to international
markets
Govt. Gas allocation to residential PNG &
CNG
Govt. Capital grant for development of
Jagadishpur-Haldia/Bokaro-Dhamra Gas
Pipelines
 Govts vision - increase Gas share from 7%
(150 mmtoe) in 2015 to 15% (750 mmtoe) in 2030.

Niti Ayogs three-year Action Plan (April 2017)

gives a push to gas consumption
LNG regas capacity to double by 2022 by facilitating
evacuation and marketing of LNG

Policy for commercial storage of gas by 2019-20

100 smart cities to have gas facilities

326 CGD networks by 2022 to be authorised by PNGRB

Work on 11,000 KM gas pipelines to resume through better

incentivizing the entities, better tariff and VGF facilities.
 The Targets look challenging
Domestic production of Gas and
LNG imports since 2004-05
Govt. Action Plan on use of
Renewable in Electricity
60.00
generation means less use of
50.00 Gas
40.00 BP statistical Review 2016 and
30.00 Energy analysts have reduced
total gas demand to 7% 0f
20.00
primary energy demand in
10.00 India by 2030 (Govt target is
15%)
0.00
2008-09
2005-06

2009-10
2010-11

2013-14
2012-13

2014-15
2015-16
2006-07

2011-12
2004-05

2007-08

Policy vision for electric

vehicles means less use of
CNG
LNG Imports (MT)
Domestic Production (MT)
Pipeline and CGD infrastructure lagging
A. Gas Pipeline scenario
Prior to PNGRB = 14,790 KM
Pipelines authorized by PNGRB = 12,620 KM
Proposals = 3,470 KM
TOTAL = 30,880 KM
Less than 50% capacity utilization of the operating gas
pipelines.

Of the authorized, only a few KM has been built

WHY
Right of Use problems in States
Lack of anchor load demand chicken-egg dilemma
High LNG price not afforded by power sector
B: City Gas Distribution skewed and bumpy
76 CGD networks operate in 13 States and 4 UTs,
accounting for 64.6% 0f national population. 16
states mostly in East and NE do not yet have CGD
facilities.

Gujarat (47 %) Maharashtra (30%) and Delhi (15%)

accounts for 92% of domestic PNG connections in
the country.

The 33 pre-PNGRB CGD networks have around 30

lakh households, but the 47 which came up after
2009 have only around 1/10th of the former group.
Basic Natural Gas facts: International Vs. Domestic
USA GERMANY JAPAN CHINA INDIA

High Pressure 5,00,000 19,200 1,544 50, 000 15,000

pipeline
(kilometre) (2012)
Residential 70 15 25 73 3.2
Units
connected to million million million million Million
CGD network s (95%) (42%) (81% (18%) (1 %)
Residential 35 % 31% 40% 20 % 0.8 %
PNG as %age
of domestic
Demand
Price of Higher Higher Higher 30 % Lower
residential
lower
PNG vs.
industrial
Regulatory Challenges
A: Natural Gas Pipeline Regulation

Main Issues

1. Bidding criteria

2. Determination of Tariff

1. Unbundling of Transportation activity

2. Open Access
 B: City Gas Distribution
Bidding Rounds and Widening gaps
40
34
30

Awarded
20
20
14 6 Multi Bids

10 6 7 7 2 One Bid
14 2
5 8
3 0 No bid
0 1 1
TOTAL
-10
RD 1 RD2 RD3 RD4 RD5 RD6 RD7

-20
B: CGD Regulation

Main Issues

1. Selection of Geographical Areas

2. Bidding criteria

3. Determination of CGD network Tariff

4. Marketing Exclusivity Vs Open Access

Making regulations more effective
Need of a

(i) National Master Plan for Natural Gas

Infrastructure
(ii) Stable and predictable Regulatory
system.
Comprehensive review and recast of Regulations
relating to
- authorisation of pipelines and CGD networks,
- determination of Tariff,
- Third party assess, etc. in progress
 Thank you
for your time