15th Annual Conference on “City Gas Distribution in India”

Pipeline Infrastructure: Current Status and Key Challenges

Ashu Shinghal, CGM

GAIL (India) Ltd

24th February 2020

● Third largest primary energy consumer after China & USA

● Fastest growing energy consumers among large

consumers

● With growing population, urbanization and standard of

living, there will be growing need of affordable energy

● Primary energy basket is dominated by Coal and Oil. i.e.

around 86%

● Share of Gas in India’s Energy Mix ~6% i.e. ~60 BCM

● India facing trilemma of achieving higher energy access

alongside high energy security and high sustainability

● Gas based economy is a step towards addressing these

Indian Energy scenario

239, 30%

50, 6%452, 56%

9, 1%

32, 4% 27, 3%

Oil Gas Coal Nuclear Hydro Renewables

India Energy

basket 2018

(809 MToE)

Target to increase gas share to 15% in Primary Energy

mix by 2030 i.e. ~180 BCM

2 © GAIL - Feb 24, 2020

42.0, 33%

29.0, 23%

15.0, 12%

13.0, 10%

8.0, 6%

21.0, 16%

Fertilizer, 41.2, 28%

Power, 32.7, 22%

CGD, 25.3, 17%

Refinary, 19.3, 13%

Petchem, 9.3, 6%

Others, 20.1, 14%

Natural gas sector in India

MMSCMD, % share in

consumption

India Gas

2013-14 Vs

2018-19

Source : GAIL, PPAC

31.1 30.8 31.7 32.1 31.0

21.4 24.827.4 28.7 32.5

52.555.7

59.2 60.863.4

6.6%6.0% 6.2% 6.2% 6.2%

-5.0%

-3.0%

-1.0%

1.0%

3.0%

5.0%

7.0%

-5.0

5.0

15.0

25.0

35.0

45.0

55.0

65.0

75.0

2015-16 2016-17 2017-18 2018-19 2019-20 (E)

Domestic LNG Share of gas in PE

In BCM

* Excludes internal consumption by upstream companies

Consumption pattern shows increasing LNG acceptability

and dominance of anchor sectors i.e. Power and Fertilizer

3 © GAIL - Feb 24, 2020

Sectorial consumption pattern shows growing shift towards CGD and industrial sector

38 40 43 42 44 42 40 41

6244 31 29 30 32 33 33

15

16

1615 15 20 24 25

12

11

1113

1415

18 19

5

7

7 810

1111 9

34

30

2622

1819

19 20

166

148

134129 131

139145 149

0

20

40

60

80

100

120

140

160

180

2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

MM

SC

MD

Fertilizer Power City Gas Refineries Petrochemicals Industrial/Others Total

* Excludes internal consumption by upstream companies

4 © GAIL - Feb 24, 2020

Focused areas to implement the vision of Gas Economy

Enhancing domestic gas production

National Seismic Programme

HELP Policy

Pricing guidelines, 2014

Marketing & pricing freedom

from difficult & new fields (HPHT)

Discovered Small Field Policy

Coal Bed Methane policy

Developing additional gas

infrastructure capacities by

Completion of National Gas Grid

North East Gas grid (IGGL)

Building new LNG import facilities

Development of CGD networks

Promoting Bio-CNG (SATAT)

Improved market access and

promotion of free gas market

Gas Trading Exchange (GTE)

Transport System Operator (TSO)

Boost consumption through

supporting core industries

Source : GAIL, MOPNG

Natural gas consumption to increase 3x to reach ~ 500 MMSCMD by 2030 from current ~ 150 MMSCMD

* Gas based Industries - Fertilizer, Steel ; Ancillary industry includes R&D in CNG automobiles, CGD Equipment manufacturing, Cold storage

Huge investment already lined up for having a gas Eco-system but needs policy support

E&P Investment

1

~ Rs. 402,000 Cr

LNG Terminals

3

~ Rs. 16,000 Cr

Gas Grid

~Rs. 92,000 Cr

2

CGD Networks

4

~ Rs. 90,000 Cr

SATAT

5

~ Rs. 175,000 Cr

402,000

92,000

16,000 38,000

10,000

90,000

175,000

823,000

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

E&P GasInfrastruture

LNGterminal

Gas basedIndustry

AncillaryIndustries

CGDNetwork

SATAT TotalInvestment

Investment over 115 billion USD in next 7-8 years

All figures are in Rs. Cr.

Gas Infrastructure in India - “One Nation-One Grid”

Partial Grid covering Western, Northern & Southern India

(~17,000 Km)

Rs. 92,000 Cr. investment for Gas Grid expansion

Grid expansion to Eastern & Southern parts (~15,000 Km)

Source : GAIL

Gas trading exchange and Transmission System Operator

(TSO)

Existing Pipelines (2014)

North East Grid (SPV)

Envisaged

LNG Terminals (2014)

Under Construction P/L

New LNG Terminals (2019)

New Pipelines laid (2019)

Approved P/L

Upcoming terminals

Infrastructure is primarily concentrated in Western &

Northern India

Rs. 9,265 Cr. investment for creation of Regional gas grid

(IGGL) for 8 NE states

Pipelines are core assets and crucial for ‘Energy Security and Food Security/Urea Production’ to the country

GAIL is currently executing over 6500+ Km pipelines in Eastern and Southern India

Projects under execution by GAIL (6528 km) Length (in Kms)

Urja Ganga (JHBDPL) : Ph-II & PH-III 1915

Barauni Guwahati Project 729

Kochi - Koottanad - Bangalore - Mangalore Pipeline Phase-II 887

Vijaipur Auraiya Pipeline Project 357

Jhajjar-Hissar 130

Haridwar-Dehradun 70

Angul- Srikakulam 690

Dhamra - Haldia 350

Mumbai-Nagpur-Jharsuguda (Expected) 1400

Projects under execution by GAIL’s JV (1836 Km) Length (in Kms)

Indradhanush Gas Grid 1656

Kakinada-Vizag-Srikakulam 628

Status of Pradhan Mantri Urja Ganga Yojana: JHBDPL & BGPL

Sl. Pipeline Name Length (Km) State covered Sch. Completion

1 Jagdishpur Haldia Pipeline- Section 1 750

Uttar Pradesh

Completed

Bihar

2 Dhamra-Angul Pipeline Project (Section-2A) (400 Km) 400 Odisha

Completion

progressively by

Dec’2020

3 Dobhi-Durgapur Pipeline Project (Section-2B)* 500

Bihar

Jharkhand

West Bengal

4 Bokaro- Angul Pipeline Project (Section-3A) 667

Jharkhand

Odisha

5 Durgapur- Haldia Pipeline Project (Section-3B)* 335 West Bengal

6 Barauni-Guwahati Pipeline project (As part of JHBDPL)* 729 BiharCompletion by

Dec’2021

● Gas grid connecting all eight(08) North-Eastern States

● 1656 Km long grid @ Rs. 9265 Crore

● Capacity : 4.75 MMSCMD (Expandable to 16 MMSCMD)

● Connecting isolated E&P fields (8-9 new fields) of NE to

national grid

● Enabling industrialisation in NE India along with energy

security to the region by expanding CGD across NE India

● Support to downstream industries & entrepreneurship in

the region

● Potential to connect Myanmar gas fields with grid and

Bangladesh gas markets.

Northeast Natural Gas Pipeline Grid - Indradhanush Gas Grid Limited (IGGL)

Viability Gap Funding (VGF) approved for 60% of project

cost ( Rs. 5559 Crore)Likely completion date : Dec 2022

IGGL: State-wise Length & District Details

State Length (km) Name of Districts enroute

Assam 75311 No. (Kamrup; Darrang; Udalgui; Sonitpur; Biswanath; Lakimpur; Majuli; Jorhat,

Golaghat; Cachar; Karimganj)

Arunachal Pradesh 15 01 No. (Papum pare)

Nagaland 126 02 No.(Dimapur; Kohima)

Manipur 105 02 Nos (Senapati, West Imphal)

Meghalaya 176 04 No.(Ri Bhoi; East Khasi hills; West Jantia hills; East Jantia Hills)

Tripura 256 07 No. (North Tripura; Unakoti; Dhalai; Khowai; West Tripura; South Tripura; Gomati)

Mizoram 95 02 No. (Mamit; Aizawl)

West Bengal 95 02 No. (Jalpaiguri; Darjiling)

Sikkim 35 01 No. (East District)

Indian gas infrastructure - LNG terminals

Rs. 15,800 Cr investment in new LNG Terminals

Jafrabad (Swan) 5.0 MTPA 5900 Cr

Dabhol Expansion 3.5 MTPA 3000 Cr

Jaigarh (H Energy) 4.0 MTPA 1700 Cr

Dhamra (Adani/ Total) 5.0 MTPA 5200 Cr

----------------------------------------------------------------------------------------------

Total 17.5 MTPA 15,800 Cr

LNG Terminals (2019)

Upcoming LNG Terminals

Existing LNG Terminals (2019)

Mundra (GSPC/ Adani) 5.0 MTPA (2019)

Dahej (PLL) 17.5 MTPA

Hazira (Shell) 5.0 MTPA

Dabhol (GAIL) 1.5 MTPA

Kochi (PLL) 5.0 MTPA

Ennore (IOCL) 5.0 MTPA (2019)

-----------------------------------------------------------------------------

Total 39.0 MTPA

Source : GAIL

Consumption in CGD is expected to grow in coming years

Source : PNGRB

CGD in India after 9th & 10th Round (Dec 2019)

• 46 Entities - 406 Districts - 228 GAs

• Expansion is under progress to cover 70% of population

and 53% of geographic area

• Expected investment of Rs. 90,000 Cr. in CGD in next 10

years

• Participation of foreign investors through FDI in CGD

• Target to provide 42 million additional DPNG

connection and 8000 CNG stations by 2030

• 175,000 Km CGD pipelines by 2030

• 5000 compressed Bio-gas (CBG) production plants

under SATAT with investment over Rs. 175,000 Cr

Draft CNG policy to be adopted by states launched

Bio-CNG and LCNG stations are being explored to create

CGD infrastructure

All CGD GAs will be covered either by trunk pipelines or

virtual pipelines by 2024

BAU : Business as usual

Significant CGD infrastructure is expected to be in place by 2029-30

470 lakhs

DPNG

2019

20292019

2029

1838 CNG

Stations 9800 CNG

Stations

● CNG network to reach 70% of population and 53% of India’s geographical area

● Investment over Rs. 90,000 Cr. in CGD network expansion

24

37

60

0

10

20

30

40

50

60

70

FY18 FY23 FY30

Projected gas consumption in

CGD by 2030 (MMSCMD) - BAU

CGD expansion is a significant initiative to leapfrog to higher gas usage and address pollution

Source : GAIL, PNGRB

55 lakhs

DPNG

14 © GAIL - Feb 24, 2020

Huge

investment

opportunities

Potential for

significant

employment

generation

Vendor

Development for

equipment and

spares market in

CGD

CNG for intracity

busesMobile Refueling

Units

Gas generators in

telecom service

towers

Compressed

Bio-Gas

(SATAT Scheme)

LNG as a fuel in

inland waterwaysLNG for Cold

Warehouse

LNG in long

distance transport

LNG bunkering in

fishing/ sea-going

vessels

* Inclusive of investment in CGD and value added services

Emerging opportunities in gas value chain

Challenges for Indian natural gas sector

Fall in domestic production from ~125 to ~74 mmscmd from FY11 in FY19

No large domestic discovery in recent yearsGas supply

Infrastructure

Demand

Fiscal &

Regulatory

Low pipeline utilization (50% pan India)

New pipelines additions slow due to lack of return to network developers

Acquisition of RoU/RoW is a challenge – Needs state support

CGD infrastructure creation needs several permission, high restoration charges, high land cost in cities

~15 GW gas based power assets stranded : No supporting policy for gas based power after PSDF

Alternative Polluting fuels - Fuel Oil, Pet Coke, Coal economical for industrial customers

New anchor consumers like fertilizer has limited demand

Natural gas is outside GST (FO/Petcoke/LPG under GST regime). VAT varies from 0 to 20%

Additive tariff mechanism across transmission systems

CNG under 14% excise duty

High taxes on CNG vehicles (28%), No incentive to switch to CNG or LNG based vehicles

16 © GAIL - Feb 24, 2020

National Gas Grid (NGG) can be the key enabler for gas based economy but needs active support

• Gas under GST

• Reforms in gas based power

• Expansion and promotion of CGD

• Creation of Transmission System Operator

(TSO)

• Enforcement of RoU rights by the state

to support on ground execution

• Faster environment and forest

clearance for trenchless methods

• Development of dedicated Gas

Pipeline Utility Corridors across India

• Strict enforcement of penalties for delayed execution

• Rationalization of pipeline tariff

• Incentivize pipeline infrastructure developers

for ensuring assured returns

• Viability gap funding/Capital

grant schemes can be

instrumentalIncrease

utilization by downstream

reforms

Funding &

reasonable

return

Timely

Implementation

13

2

Challenges for Indian pipeline segment: low pipeline utilization (Pan India 50%) hampering future infrastructure development

105 104

145

162156

135128

124128

136144

14958% 58%

71% 72%

68%

51%

47%45% 45%

49%51% 51%

0%

10%

20%

30%

40%

50%

60%

70%

80%

0

20

40

60

80

100

120

140

160

180

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

Net Gas Available - India (MMSCMD) Capacity utilization of GAIL Pipelines

All India pipeline length: 16, 981 Km ; Capacity : 387 MMSCMD ; Consumption : 149 MMSCMD

Pipeline utilization - PIL/RGTL : 26% ; GSPL : 80%; GAIL : 51%

18 © GAIL - Feb 24, 2020

Due to huge investment and low return, there is limited participation in gas pipeline transportation segment

Entity Length (Kms) % Share

GAIL 12160 71.6%

PIL 1470 8.7%

RGPL 304 1.8%

GSPL 2692 15.9%

AGCL 215 1.3%

IOCL 140 0.8%

Total 16981

Fast-track completion of awarded authorized pipelines is essential

Authorized pipelines to other entities Length (in Kms)

Bhatinda-Jammu-Srinagar 725

Mehsana-Bhatinda 2052

Mallavaram-Bhilwara 2042

Ennore-Nellore 250

Ennore-Tuticorin 1385

Jaigarh-Mangalore 635

Kakinada-Vijayawada-Nellore 522

Kanai Chhata- Srirampur 315

Envisaged pipelines Length (in Kms)

Langtala - Bhilwara 580

1. Redefine statutory / policy framework to assure reasonable post tax return - Demand risk currently lies with the

developer

2. State support for faster RoU and land acquisition

3. Development of dedicated Gas Pipeline Utility Corridors across India

4. Funding support for viability of project including capital grant/ viability gap funding/ public private

partnership model similar to JHBDPL & IGGL

5. Exemption from permission in case of forests, where pipelines are proposed to be laid through trenchless

methods such as Horizontal Directional Drilling without affecting forest property

Supporting measures are needed to boost the expansion of pipeline network

● Currently distinct Tariffs for each separately authorized/accepted pipelines which leads to adding up of tariffs for usage

of multiple pipelines

● Higher cost gas, as well as, higher tariffs for hinterlands puts new regions at a competitive disadvantageous position

● Benefits of a Rationalized Tariff Mechanism

– Will avoid high cascaded tariffs for far-off customers

– Removes disparity among customers

– Will provide a level playing field for all connected LNG terminals

– Improves competitiveness of gas vis-à-vis alternate fuels

– Tariff for customers on pipelines like JHBDPL will reduce substantially

– Better viability for entities; Aids infrastructure development

Introduction of Rationalized Tariff Mechanism can further facilitate the network expansion

22 © GAIL - Feb 24, 2020

Reforms required and way forward

Power

Infrastructure CGD

Industry

• In near-term, improving PLF

for gas based capacity to

enable integration of RE

capacity

• Factor True Cost of Public

Health in merit order

dispatch

• Peaking power policy for

purchase of gas power

• Export of gas based power

(apart from RE) to

neighbouring countries

• Waive cross-subsidy

surcharges

• Incentivize pipeline

developers for reasonable

returns

• Support on RoUs and

environmental clearance

• Timely completion of

revived fertilizer plants

• Single window clearance

mechanism

• Reduce GST for CNG

vehicles inline with EVs

• Standardize restoration

charges

• Push for PNG by replacing

LPG and increasing

conversion from industry

• CNG to be exempted from

excise duty (14.5%)

• Allocation of land for CGD

• Bring gas under GST

• Restrictions on polluting

fuels like petcoke and

furnace oil in CGD areas

• Impose carbon levy

based on higher carbon

number to ensure parity of

liquid fuels vis-à-vis gas

• Aim to replace 10% of

liquid fuel usage with gas

24 © GAIL - Feb 24, 2020

● State Level Committee on CGD Development

– A Committee to be formed under the Chairmanship of Chief Secretary for Single Window Clearance Mechanism

to facilitate creation of CGD infrastructure and value added services by formulating policies, streamlining the

processes for various permissions

– Committee will meet at least once in three months for expeditious development of CGD networks

● Permissions/Clearances from Local Bodies

– Various states departments to formulate policy mechanism/rules/regulations inline with advisory issued by

Ministry of Housing and Urban Affairs for permission, restoration charges, Acquisition and usage conversion of

Land etc.

● Adoption of CNG/LNG as Preferred Transportation Fuel

– State Transport Corporations will accord priority to CNG/LNG buses while purchasing new buses and retrofitting

in present alternate fuel fleet

● Adoption of LNG bunkering in fishing Vessels and inland waterways

● Conversion of Diesel Generators in Telecom service towers in the Authorized area with gas generators

● Taxation and Finance Related Aspects

– VAT rates may be reviewed and rationalized to a uniform VAT rate with a ceiling of 5%

– Rationalizing road tax for factory fitted CNG/LNG vehicles and making them at par with Electric Vehicles (EVs)

Draft CNG policy to be adopted by states

25 © GAIL - Feb 24, 2020

Composition of State Level Committee for CGD Development

● Chief Secretary to the Government—Chairman, Ex-officio

● Secretary to Government –Finance department- Ex-officio

● Secretary to Government –Public works department- Ex-officio

● Secretary to Government –Highways department- Ex-officio

● Secretary to Government –Revenue department- Ex-officio

● Secretary to Government –Transport department- Ex-officio

● Secretary to Government –Municipal Administration/Urban development department- Ex-officio

● Secretary to Government –Food and Civil supplies- Ex-officio

● Representatives of Authorized CGD entities.

● Representatives of Auto Industry body (SIAM)

● HOD, Nodal department, will be the Convener of the committee