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Domestic PNG Challenges

Sanjay Srivastava, GM (Marketing) Mahanagar Gas Ltd, Mumbai

Contents
Present Energy & CGD Scenario Overview of MGL Opportunities Domestic PNG Challenges Need for Policy and Regulatory Measures Conclusion

Per capita energy consumption


(Source: Infraline))

(In KG of oil equivalent)

8000 7000 6000 5000 4000 3000 2000 1000 0


Brazil Ukraine
2968 4423

7795

1575 1068 457 512

Pakistan

Russia

India

US

Argentina

Natural Gas consumption & share of house hold NG usage in various countries
(Source: EIA) (figures in BCM) 1 BCM = 2.8 MMSCMD/ year
700
653

600
481

500

400

300

NG Consumption House hold consumption

200

178 137

100
20
0.4

66
14.5

31
5.5

42
0.25

44
11

Brazil

Ukraine

Pakistan

Russia

India

US

Argentina

CGD Demand Potential in India

64

42

Number of Towns as per 2001 Census 4378 nos. Projected Population as on 2010 - 34.7 Crores. Number of Household - 6.94 Crores. Unit Demand/Household 0.6 SCMD. Total demand of NG in Household is 42 MMSCMD i.e. 13% of the total demand of 336 MMSCMD.

230
in MMSCMD

Household Transport Industries & Commercial

CGD in India Snap Shot

About 22 entities are in CGD business. CGD infrastructure available in 42 cities and 20 more are being constructed. Over 12 lakh domestic and 14,400 I & C connections. CNG supply to over 10.27 lakh vehicles. Total Natural Gas Consumption by operating CGDS is over 12.09 MMSCMD. GOI has plans to implement CGDs in approx. 250 cities/ towns in next five years.

Contents
CGD Present Scenario Overview of MGL Opportunities Domestic PNG Challenges Need for Policy and Regulatory Measures Conclusion

Current Operational Areas and Expansion Area


Since 2004

Expected by 2012 Since 1995

Since 2007

MGL Growth Profile Domestic Consumers


442417

Domestic Consumers

385585 345793 293302 254354 221390 195054 168047 103516 50045 30070

100 3000 5000 10114

809 '0

304

596

697

899

900

102

798

405

001

203

607

708

'0

'0

'0

'9

'9

MGL has created infrastructure to connect over 1 Million customers

'9

'9

'9

'0

'0

'0

'0

'0

'0

910

506

Key Success Factor for MGL

Demographic and Psychographic Profile of Mumbai.

Vertical Housing - More connections with relatively less pipelines as compared to other CGDs Nuclear family - Convenience is priority

Mumbai biggest metropolis and high consumption centre. Expertise of GAIL & British Gas. Availability of APM gas. Proximity to gas production centre (Bombay High). Constraints in supply chain of LPG facilitated usage of PNG.

Key Challenges for MGL

Delay in execution of work owing to delay in grant of permission by Authorities. Many railway lines and highway crossings. Large areas under encroachment and technically not feasible. High reinstatement charges (around 2.5 times from 2005 level). Narrow corridors, crowded with utilities. Edge to edge concrete road.

Contents
CGD Present Scenario Overview of MGL Opportunities Domestic PNG Challenges Need for Policy and Regulatory Measures Conclusion

Opportune time for PNG business


Facilitation by Government for usage of cleaner and safer fuels. Increased source of natural gas both indigenous and imported. Available Natural Gas pipeline network is 11,000 km, additional 8000 km is planned in XIth plan. Regulatory framework is in place for developing market for City Gas Distribution. Increased awareness about environment, health and safety among the house holds. Increasing household Income levels Scope for promoting various applications of NG is high.

Domestic PNG Benefits to various Stake holders


Domestic PNG Key Stake Holder Benefits to key stake holders

End users Individual, Housing Societies, Builder, Institution

Safe, convenient, continuous, hassle free and versatile fuel. Value addition to property. Payment after usage. Better family safety viz aviz LPG.

Company City Gas Distribution, Transmission Company, E&P Company, LNG Importer

Perpetual revenues. Sustained business growth. Assured demand quantities.

Government

Energy Security. Fuel Distribution parity. Balance of payments. Employment opportunities.

Contents
CGD Present Scenario Overview of MGL Opportunities Domestic PNG Challenges Need for Policy and Regulatory Measures Conclusion

Development of Domestic PNG Business Challenges

PNG relatively new concept when compared to LPG Safety & Reliability is the major concern of prospective customers. No subsidy in the Gas price little incentive for a customer to switch over to PNG. High upfront cost of domestic PNG connection. Late entrant amongst utilities - Clear corridor not available. Limitation to reach every household of the city PNG connection only for permanent structure. Non transferability connections. (shifting) of Domestic PNG

Development of Domestic PNG Business Challenges..


Maintaining high level of customer services standards by project execution team. High maintenance requirements due to static connections and climatic conditions. Permissions required from multiple authorities. Time taken is in months to years. Crowding of all utilities work in post monsoon period. Limited opportunity for enhancing gas consumption per capita energy consumption is less as compared to developed countries.
- Space heating cannot be considered as a component for gas sales enhancement due to sub tropical climate of India. - Air conditioning in India is still a luxury, confined to small fraction of house holds. - Approx. 70% of population of India resides in rural areas, where bio mass/ cow dunk cakes are still most dominant domestic fuels. CGD infrastructure development in small towns may not be commercially feasible at this point of time.

Development of Domestic PNG Challenges to meet customer aspirations Delivery commitments. Technology for enhanced customer base. Value added services. Latest communication technologies for customer delight. Higher vigilance/ Awareness to curtail fraudulent activities. Customization of processes.

Contents
CGD Present Scenario Overview of MGL Opportunities Domestic PNG Challenges Need for Policy and Regulatory Measures Conclusion

Need for Policy & Regulatory Measures


Need to align indigenous gas field production with project execution schedules of transmission and distribution infrastructure ensure gas reaches to consumers in the shortest possible time. Priority to be given for domestic PNG in gas utilization policy.

CGD has a low priority as per gas utilization policy but entity to secure gas supply with top priority for Domestic PNG.

Need to encourage investment in domestic PNG by providing right mix of potential of domestic, industrial-commercial and transport segment. Need differential pricing for domestic PNG segment. Creation of exclusive corridors for gas pipeline. Grant of essential utility services status to Domestic Piped Natural Gas. Single window system should be promoted by the Government for all the Statutory clearances to the entity.

Ways for Developing Domestic PNG Market

CGD network planning needs to be undertaken early on as part of the city development plan. Natural Gas applications (CCHP solutions, gas geysers, gas air conditioners) need to be promoted since inception stage. Adoption of optimum gas sourcing strategy. Effective Marketing Communication for generating interest amongst the customers. Reticulated system should be promoted to enhance the productivity in Domestic PNG connections. Adopting latest technology ERP Solution IVR solution Emergency handling system Network Monitoring system.

Contents
CGD Present Scenario Overview of MGL Opportunities Domestic PNG Challenges Need for Policy and Regulatory Measures Conclusion

Conclusion
Despite all the challenges, Domestic PNG segment of City Gas Distribution remains a lucrative business prospect, as it provides Sustainability and Brand to CGD Companies. Domestic PNG segment acts as a cushion in securing supplies of Natural Gas. Domestic PNG may not bring high profits margins but is a very critical segment due to its huge socio- political impacts.

Share of NG in energy basket & corresponding household consumption

NG Share in Energy Basket


60% 50% 50% 40% 30% 20% 10% 0% Brazil Ukraine Pakistan Russia India US 7% 9% 25% 50% 55%

House hold usage as a percentage of Total NG usage


40% 35% 30% 25% 20% 15% 10% 5% 0% Brazil Ukraine Pakistan Russia India US 2% 1% 22% 18% 21% 37%

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