CGD

CITY GAS DISTRIBUTION (CGD)
OVERVIEW EVOLUTION OF CGD IN INDIA CGD INFRASTRUCTURE VALUE CHAIN OF CGD PROJECT MANAGEMENT ASPECT OF CGD FINANCING OF CGD PROJECT RISK
OVERVIEW
The City Gas distribution (CGD) segment of natural gas industry is a small fraction of the total gas market, but its share is rapidly expanding. The growth of this sector has been constrained so far because of lack of policy focus and deficient investment in the distribution infrastructure. The rising demand from commercial and small industry customer within the city limit , in addition to domestic and automobile demand are the key drivers of this sector. The expectation of availability of larger volume in the next two to three year from both domestic findings and imports , has created greater compulsion for the development of GGD market in India.
Evolution of CGD in INDIA

1880 - first gas retail business was started by Calcutta Gas company followed by Bombay gas company in 1960. Legacy systems exist in Assam, Tripura and Kolkata 1972 Vadodara Municipal Corporation started gas distribution operations 1989 PNG network for industrial supply started by GGCL in Surat,Ankleshwar and Bharuch 1992 Introduction of Natural Gas as alternate commercial fuel launched by subsidiaries of GAIL in Delhi, Mumbai 1998 Supreme Court mandated GAIL in July1998 to expand the CNG infrastructure and to increase the number of CNG stations from 9 to 80 by March 31, 2000 in Delhi 2003 Supreme Court of India has issued a directive to the Union of India and the state governments to draw plans to introduce clean fuels in 11 cities apart from the existing cities of Delhi and Mumbai 2006 City gas networks (PNG and CNG) started in multiple locations including Delhi, Mumbai, Vadodara, Surat, Ankleshwar, Ahmedabad and Kanpur 2006 Notification of PNGRB as regulator 2008 Finalization of City Gas regulations by PNGRB 2009 Two rounds of Bids conducted by PNGRB for grant of city gas authorisations
CGD INFRASTRUCTURE
What Is CGD? An integrated network of steel, PE/ MDPE pipelines including city gate, CNG stations & related infrastructure for supply of natural gas in identified geographical area (*)over economic life of project (25 years) to automobiles as CNG & residential customers, industrial & commercial segments with volume requirement of < 50,000 SCMD as piped gas (*) geographical area shall be decided by PNGRB based on principle of contiguity (economics by geography) through open seasons process CGD network is further divided into charge areas, where each charge area is a convenient sub-set network of pipelines to reach all individual customers
CGD INFRASTRUCTURE contd.

The Cross Country Pipe Line infrastructure is one of the major facility available to serve the CGD market. Until Reliances East- West pipe line got commissioned , India had only one transmission pipe line from Hajira - Vijaypur- Jagdishpur commissioned in 1986.
How ever in last few years have seen tremendous strive in pipeline infrastructure is expected to doubled by 2014.
As of 2011 India have effectively 14,513 Km length pipe line with carrying capacity 425.25 MMSCMD.
CGD INFRASTRUCTURE contd.

COMPANY WISE PIPELINE OWNERSHIP Company GAIL GSPL GGCL RIL OTHERS Pipeline Length in KM 6800 1664 1285 1440 213
Existing Pipeline
Future Proposed Pipeline
VALUE CHAIN OF NATURAL GAS

Gathering Lines
Gathering Stations City gate centre District Regulation Station Odorizing Unit Metering System
Steps Followed for CGD Project

Preparation of Base Map of city from satellite imagery. Preliminary Reconnaissance Survey Assessment of Consumer Demand Detail Engineering of Pipeline Route survey & Geo- Technical Investigation Obtaining Statutory clearance
Investigation for City Gas station (CGS)

Land Acquisition for City Gas Station EIA/ EMP Study Risk Assessment and disaster management EPC
FINANCING ORGANISATION OF CGD PROJECTS

Equity Financing
Financial Institutions/ Private Equity Investors have invested in CGD and
Gas Transmission Company.

oIDFC, ILFS, Axis Bank
Debt Financing
Financial Institution, Commercial Banks and Multi funding Agency(IFC &
ADB)
Successful IPO by Gujarat Gas, IGL, GSPL

Companies such as EKC, Nitin Fire Protection System got PE
investors as well as launched successful IPO
STAKE HOLDERS OF CGD
GSPA : Gas Sale And Purchase Agreement, GTA : Gas Transporter Area GSA : Gas Service Administration, LD: Liquidate Damage, SSA : Stock Subscription Agreement
Typical Investment in a CGD Project
Project Equity Structure

Company Leading JV Partener with GAIL HPCL HPCL Present Equity Structure Debt Equity Ratio Govt :5% Public/ FI : 50% Public/ FI : 50% GOVT:5% FI:40% Individual :10% Public/FI:5 0% NA NA
Avantika Gas Limited Bhagyanagar Gas Limited Central UP Gas Limited Gujarat Gas Limited Maharastra Natural Gas Limited
GAIL 22.50% GAIL : 25% GAIL : 22.50% GAIL: 25% GAIL:22. 50%
HPCL : 22.50% HPCL :25%
BPCL IOCL BPCL
BPCL:10% IOCL:25%
2.3:1 2:1 2:1
BPCL:22.50 Govt:5% %
Source: IndiaInfrastructure
GAS PRICING
APM Pricing :There are several gas prices prevailing in the country. The gas priced under Administered Price Mechanism (APM) is for the gas produced from blocks that were awarded by the government on a nomination basis to ONGC and OIL. The price of the gas produced from the fields operated by private companies or joint ventures of public and private companies is approved by the government. PSC pricing :For the gas produced from the NELP blocks, the contractor who develops and produces from the field can propose a selling price of gas. However, the formula or basis for that price has to be approved by the government. For the imported RLNG, which is the other source of gas apart from domestic supplies, the price is not regulated. This is the only segment in the gas market that can reflect the short term demand and supply scenario of India. In May 2010, the government increased the APM price of gas by 135% from USD 1.79 per MMBTU to USD 4.2 per MMBTU bringing it par with KG D6 prices. This substantial increase in the APM price in one go is an indication of the governments intent to make the gas market viable for investors. It also eliminated the subsidy and brings in a level playing field for various consumers of gas.
OVERVIEW EVOLUTION OF CGD IN INDIA CGD INFRASTRUCTURE VALUE CHAIN OF CGD
PROJECT MANAGEMENT ASPECT OF CGD FINANCING OF CGD PROJECT RISK MNGL
RISK
Type of Risk Technological Cost Over Run Time Over Run Legal / Political Risk Market Risk Force Majeure Execution Work Force Details No such Criteria , But prequalification required for Bidding LSTK EPC Contract Indian projects takes more time in construction and procurement in comparison to foreign projects Approval and ROU (Right to Use) are demanded from the authorities in the feasibility stage. Supply Side: long term gas supply from PLL & Niko resources. Demand Side: Huge demand in small scale ceramic industries Project insurance of 5% of project cost Congested City area Lack of Skilled work Force
MAHARASTRA NATURAL GAS LIMITED Maharastra Natural gas limited

Equity Structure GAIL (India) Limited : 22.5% BPCL : 22.5% Govt. of Maharashtra : 5% IDFC PE : 20%, IL & FS : 20%, AXIS Bank : 10% Project Cost Total Project Cost : ~ Rs. 470 crs Capital Structure Debt : Equity Ratio: 2.33:1 Distribution Area: Pune & Pimpri-Chinchwad city including adjoining areas of Hinjewadi, Chakan & Talegaon Connections: 3500 House hold connection Targeted - another 15000 house hold connection till march 2013

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CITY GAS DISTRIBUTION (CGD)

Evolution of CGD in INDIA

CGD INFRASTRUCTURE contd.

CGD INFRASTRUCTURE contd.

Future Proposed Pipeline

VALUE CHAIN OF NATURAL GAS

Steps Followed for CGD Project

Investigation for City Gas station (CGS)

FINANCING ORGANISATION OF CGD PROJECTS

Gas Transmission Company.

Successful IPO by Gujarat Gas, IGL, GSPL

STAKE HOLDERS OF CGD

Typical Investment in a CGD Project

Project Equity Structure

HPCL : 22.50% HPCL :25%

BPCL IOCL BPCL

2.3:1 2:1 2:1

OVERVIEW EVOLUTION OF CGD IN INDIA CGD INFRASTRUCTURE VALUE CHAIN OF CGD

PROJECT MANAGEMENT ASPECT OF CGD FINANCING OF CGD PROJECT RISK MNGL

MAHARASTRA NATURAL GAS LIMITED Maharastra Natural gas limited

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