Introduction to CNG

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Summary of Report

The estimated one crore CNG vehicles by 2024-25 will include passenger vehicles, three-wheelers and
busses, according to the report.6.1 The estimated one crore CNG vehicles by 2024-25 will include
passenger vehicles, three-wheelers and buses, according to the report. 6.2

Maruti Suzuki India Vice-President (Corporate Planning and Government Affairs) Rahul Bharti said when
there is proper infrastructure for CNG stations it could even encourage automobile manufacturers to
develop pure CNG vehicles. 7.1

Why Gas Could Be the Future of India’s Transport?

India’s push for cleaner fuels will not just trigger an electric car boom. It will also drive consumption of
natural gas. 7.2 Investors are betting on the potential growth. Shares of Gujarat Gas, Indraprastha Gas and
Mahanagar Gas have gained between 40 to 77 percent so far this year.7.3

Natural gas lowers your car and kitchen fuel bill. 8.1 Compressed natural gas increases car
mileage and lowers costs. In all, it’s 59 percent cheaper than petrol and costs 41 percent less
than diesel, according to BloombergQuint’s analysis. 8.2 Natural gas is cleaner and less polluting
than other fossil fuels.8.3 Demand from industries is expected to rise after the Supreme Court
banned the use petcoke and fuel oil in Rajasthan, Uttar Pradesh and Haryana, in addition to the
existing curbs in Delhi. Highly polluting Petcoke is a key fuel for cement makers. The ban is
expected to boost gas demand further. 8.4 The stricter BS-VI standards will be rolled out from
April 2020 in a bid to reduce sulphur emissions. 9.1 The new standards would increase the costs
of trucks and buses running on petrol and diesel. That could make CNG more cost-efficient. 9.2
Natural gas, like other petroleum fuels, is out of the ambit of the Goods and Services Tax. 9.3 So, including
natural gas under the GST would bring down retail prices, Oil Minister Dharmendra Pradhan said recently.

9.4

Petroleum and Natural Gas Regulatory Board has been mandated by the government to expand the gas
grid and improve city distribution network by inviting bids from interested developers. The board
identified 223 areas and will invite bids through multiple rounds, Even the government’s think tank NITI
Aayog has drafted a plan to expand the network in 326 cities by 2022 from existing 87 regions. That
would throw up new opportunities for gas distributors. 9.5

India Imports

Looking to add 11 import terminals over next 7 years. 12.1 India has four terminals to receive liquefied
natural gas (LNG). 12.2 The government plans to build another 11 terminals; 12.3 India would eventually
require even more than 15 terminals to meet its demand. 12.4 India plans to raise the share of natural gas
in its energy mix to 15 per cent by 2022 from about 6.5 per cent now. 12.5 The 70 million-tonnes-a-year
target a few years later would mean Indian would need to import more than China took last year via both
pipelines and tankers, and it would put India close to what top importer Japan currently buys. 12.6 India
Also plans to reduce its heavy reliance on thermal coal.13.1

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Taneja said the gas would also be needed to provide power to electric vehicles, which India plans to
account for all new car sales by 2030. 13.2 India is also pushing for more scooters and motorcycles to run
on compressed natural gas (CNG) 13.3

Government was encouraging Indian railway companies and LNG importers to look at fuelling trains by
LNG instead of diesel. 13.4 India also wants to become a hub for supplying ships that run on LNG. 13.5

Growth Potential in Indian Market

The attractiveness of LNG terminals has increased in gas-deficient countries such as India, as it is an
opportune time to secure global natural gas supplies easily and at a competitive rate. 23.1 Globally, LNG
suppliers can be divided into three categories: Atlantic Basin suppliers (located mainly in North Africa),
Middle Eastern suppliers (Oman, Qatar and Abu Dhabi) and Asia-Pacific suppliers (Australia, Indonesia and
Malaysia). Due to India’s strategic location, it can source gas from both Middle Eastern and Asia-Pacific
suppliers. Qatar is the most preferred source for India due to its proximity and the availability of abundant
and cheap gas reserves. Further, the country has super-large LNG carriers, which have low transportation
costs. 24.1 Iraq and Iran have the potential to become an abundant source of LNG in the future. 24.2 In
2003, the Supreme Court of India issued a directive to the Union of India and to state governments,
asking them to draw plans to introduce clean fuels in 11 cities in addition to Delhi and Mumbai. 25.1 Due
to the successful development of CGD networks in Delhi and Mumbai, coupled with the support provided
by the Government, CGD outreach has currently reached 41 cities. 26.1 During the FY04–09 period, the
number of private vehicles running on CNG in Delhi increased from 16,098 to 175,313. 26.2 Licenses are
issued with an exclusive marketing right for five years for a new company and three years for an entity
that has been operating a CGD network for at least three years prior to the creation of PNGRB on 1
October 2007. Pipeline infrastructure exclusivity is offered for 25 years. 27.1 Table 3 includes Cities
awarded under the first two rounds of bidding. 28.1 The CGD segment is expected to witness significant
growth in coming years due to the rapid increase in natural gas consumption in the transportation,
industrial, commercial and residential sectors. 28.2 Recently, PNGRB invited bids for CGD networks in 16
new geographical areas across eight different states in the third and fourth rounds of bidding. 28.3 Table 4
shows Bids invited for geographical areas in the third round of bidding. 29.1 PNGRB projects CGD coverage
to extend to 243 cities over the next 10 years. 30.1 CGD networks are being set up to cater to four
consumer segments — industrial, commercial, automobile and domestic. 30.2

Our analysis shows that although natural gas prices follow crude oil price trends, it is cheaper on a per
unit of energy basis, which makes the viability of a CGD network attractive. 30.3 The establishment of a
CGD network in a mid-size and a large city is estimated to require an investment of around INR 2 billion
and INR 3–4 billion, respectively. The majority of this amount would be spent on laying common
pipelines and setting up last-mile connectivity. 31.1 With the CGD network projected to reach 243 cities by
2020, the segment is likely to witness an investment of around INR 400–435 billion. 31.2

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ssLNG could be a 7-10mmtpa market

>30% of India’s LNG consumption in FY18E
• We estimate that LNG trucking could create demand of 4.5mmtpa within five years of
• implementation. Buses could add another 2mmtpa. 33.1

LNG trucking – we estimate a market of 4.5mmtpa

• On the West Coast, we have existing LNG terminals at Dahej, Dabhol, Hazira and Kochi while H-Energy
is expected to come up with an FSRU at Jaigarh and Swan Energy has announced FSRU at Jafrabad.

• On the East Coast as well, IOCL is coming up with an LNG terminal at Ennore and Adani has
announced a terminal at Dhamra. Apart from these, there are a few more announcements that may
take longer to come up.

• Our estimates suggest that an LNG truck could take ~4 years for breaking even, considering that
diesel is priced at INR64.93/liter and FOB LNG at USD7/mmBtu. This is assuming a daily run of only
300km, much less than in developed countries. The management suggests a breakeven period of ~3
years.

• Considering that every year, LNG takes only 10% of new M&HCVs sales, in the fifth year, we could see
a demand of as much as 4.5mmtpa of LNG for road transportation. If we were to extend this to
include buses as well, the demand could rise to above 6mmtpa.

• PLNG has already identified ~4,000km of highways on the West Coast to set up 20 LNG refuelling
stations. H-Energy plans to invest INR10b to create LNG refuelling infrastructure. Shell also plans to
build a truck-loading station at Hazira to service fuelling stations and sale to off-grid industrial
consumers.

• PLNG is finalizing its plan with Tata Motors and Ashok Leyland for trucks and buses. In Phase-I, it aims
to develop LNG trucking on Delhi-Mumbai and Kochi- Mangalore sections. In Phase-II, it aims to
develop five corridors – Jammu-Delhi- Mumbai, Delhi-Chennai, Mumbai-Chennai, Delhi-Bangalore
and Kandla- Mumbai-Kochi. In Phase-III, it plans to launch pan-India services.
Exhibit 27: Expect breakeven in four years (see Appendix-1 for LNG price build-up) 33.2

Distance travelled per day (km) Diesel LNG
Additional cost for LNG vehicle (INRm) 300 300
Fuel consumed (km/lit, km/kg for LNG) 2.5
Fuel consumed per day (lit, kg for LNG) 4.0 3.6
Fuel cost (INR/lit, INR/kg for LNG) 75 84
Cost of fuel per day (INR) 64.93 37.5
Cost of fuel per year (INRm) 4,870 3,153
Saving per year (INRm) 1.8 1.2
Additional cost for LNG vehicle (INRm) 0.6
Breakeven period (years) 2.5
4.0

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Exhibit 28: India could see ssLNG demand potential of 4.5mmtpa from trucking 34.1

Major assumptions Data Remarks
Average addition in FY16-18E
M&HCV addition in year 1 263,080
Countries like US see much higher runs per day
Growth in addition every year 5%

LNG mileage (km/kg) 3.6

Average run per day (km) 300

LNG market share in new sales10%

Consumption in year 1 (mmt) 0.8

Consumption in year 5 (mmt) 4.5
Source: ICRA, Platts, MOSL

Marine bunkering is not expected to be a significant market

• In FY16, only 6% of India’s domestic cargo movement was coastal. India has not exploited inland
waterways so far.

• With the Sagarmala project, the government aims to increase coastal/inland movement of domestic
cargo from 80mmt in FY16 to 465mmt in FY25.

• We estimate that this would generate demand of 0.3mmt of LNG considering 20% penetration. 35.1

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7-10mmtpa from above applications could absorb new supplies

• As per Exhibit 15, India’s consumption would be slightly ahead of available capacities in FY22. This
assumes 50% utilization at Kochi, 40-50% utilization at H- Energy, 50% utilization at Mundra and 50%
utilization at Dabhol.

• We also assume that Hazira runs at 100% utilization. ssLNG demand could broadly absorb full
utilization of all assets that we have assumed would remain under-utilized due to infrastructure
bottlenecks.

• Hence, we continue to believe that there is no threat of under-utilization for PLNG’s Dahej facility
even after expansion to 17.5mmtpa in early 2019.

• Due to brownfield expansion at fraction of a greenfield capacity, Dahej remains the cheapest
alternative available to anyone who wants to import LNG. While we do not build any expansion in
tariff at Kochi, we have not assumed expansion in Dahej regas tariff post FY22. 36.1

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India could have 10 million CNG vehicles on roads by 2025: Report

The estimated one crore CNG vehicles by 2024-25 will include passenger
vehicles, three-wheelers and busses, according to the report. 6.1

New Delhi: India could have one crore CNG vehicles on the roads by 2024-25 if an additional
5,000 filling stations are added, thereby providing answers to calls for alternative sustainable and
eco-friendly mobility, according to a report.
According to the report by Nomura Research Institute (NRI) Consulting, scaling up the total
number of CNG stations from the current 1,349 to 5,000 could also result in crude oil
imports saving by around Rs 95,000 crore by FY2024-25.
The estimated one crore CNG vehicles by 2024-25 will include passenger vehicles, three-wheelers
and buses, according to the report.
"At present, the existing CNG stations in India support around a total of 30 lakh CNG vehicles and
we are way below the global standards," NRI Consulting and Solutions Partner Ashim Sharma
said.
Speaking on the side-lines of NGV India Summit by Messe Frankfurt, he said as per global
standard one CNG station would cater to 1,500 vehicles only.
"Once we add 5,000 new CNG stations by FY25, we could be reaching close to the global
benchmark," Sharma said.6.2
When asked if the target of 5,000 CNG stations by FY25 is achievable, Adani Gas Ltd Senior Vice
President (City Gas Distribution) Bhashit Dholakia said it could be possible when the new 86
geographical areas (GAs), for which bids have been opened for gas distribution licensing, comes
through.
Sharma said CNG for automobiles is a proven technology in terms of eco-friendliness, providing
better air quality and sustainability.

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A favourable policy is required for promotion of natural gas vehicles (NGVs) through development
of CNG infrastructure in order to increase customer acceptance and provide cost competitiveness,
he added.
"A stable CNG pricing policy and selling environment needs to be set up to ensure that the total
cost advantages of the vehicles are considered during purchase decisions," he said.
The report said fiscal incentives would go a long way in promoting NGVs. Apart from facilitating
the establishment of additional 5,000 CNG stations by FY25, support must be given in purchase of
CNG and LNG vehicles could be considered.
Moreover, attractive finance rates for NGVs, favourable VAT rates for gas fuels could also help in
increasing adoption of NGVs, it added.
"For the automobile manufacturers, he said government could look at providing tax benefits on
R&D activities in CNG technology improvements," Sharma added.
Maruti Suzuki India Vice-President (Corporate Planning and Government Affairs) Rahul Bharti said
when there is proper infrastructure for CNG stations it could even encourage automobile
manufacturers to develop pure CNG vehicles. 7.1
Currently, CNG is mostly offered as option in bi-fuel vehicles thereby compromising on boot space
but despite that these vehicles are popular in cities where there are adequate CNG stations, he
said.

Why Gas Could Be the Future of India’s Transport

India’s push for cleaner fuels will not just trigger an electric car boom. It will also drive consumption
of natural gas 7.2 as the nation weans car owners away from polluting fuels like petrol and diesel,
among the largest contributors to Asia’s third-largest economy’s import bill.
Gas will offer cheaper mileage, especially after the stricter Bharat Stage VI emission standards
are rolled out in April 2020. Which means, city gas distributors like Mahanagar Gas Ltd.,
Indraprastha Gas Ltd. and Gujarat Gas Ltd. stand to gain.
Investors are betting on the potential growth. Shares of Gujarat Gas, Indraprastha Gas and
Mahanagar Gas have gained between 40 to 77 percent so far this year. 7.3

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Here are the five reasons why gas may be the future of India’s passenger transport...

Cheaper

Natural gas lowers your car and kitchen fuel bill. 8.1
Compressed natural gas increases car mileage and lowers costs. In all, it’s 59 percent cheaper than
petrol and costs 41 percent less than diesel, according to BloombergQuint’s analysis. 8.2 This
doesn’t factor in the price of the car, and maintenance and insurance costs.

As a kitchen fuel, piped natural gas is 26 percent cheaper than a subsidised liquefied petroleum
gas cylinder of 14.2 kilograms. And it costs half the price of a non-subsidised refill.

Greener

Natural gas is cleaner and less polluting than other fossil fuels. 8.3 New Delhi already uses CNG for
public transport. Mumbai has been increasing the fleet of its gas-powered passenger vehicles and
other cities may follow suit.
Demand from industries is expected to rise after the Supreme Court banned the use petcoke and
fuel oil in Rajasthan, Uttar Pradesh and Haryana, in addition to the existing curbs in Delhi. Highly
polluting Petcoke is a key fuel for cement makers. The ban is expected to boost gas demand
further,8.4 ES Ranganathan, managing director of Indraprastha Gas, told BloombergQuint in an
interview.

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The judiciary’s curbs on oil and petcoke could propel the growth of city gas distributors,
brokerage Motilal Oswal said in a report.

Stricter Emission Standards

The stricter BS-VI standards will be rolled out from April 2020 in a bid to reduce sulphur
emissions.9.1 In Delhi, the government decided to bring BS-VI fuel two years earlier than planned.
That came after the national capital remained blanketed in a toxic fog, which doctors said was
equivalent to smoking 45 cigarettes a day, for about two weeks earlier this month.
Motilal Oswal said the new standards would increase the costs of trucks and buses running on
petrol and diesel. That could make CNG more cost-efficient, it added. 9.2

GST Push

Natural gas, like other petroleum fuels, is out of the ambit of the Goods and Services Tax. 9.3 Which
means, city gas distributors don’t get credits for inputs that can be set off against future
liabilities, a key element of the new nationwide sales tax.
Companies don’t get input tax credit for the GST they pay on equipment, gas infrastructure and
transportation charges. That increased cost of operations, warranting gas price hikes.
Indraprastha Gas lost close to Rs 14 crore in the three months ended September as it failed to
pass on the hike to consumers for 25 days, Ranganathan told BloombergQuint.
So, including natural gas under the GST would bring down retail prices, Oil Minister Dharmendra
Pradhan said recently. 9.4

Expansion

Petroleum and Natural Gas Regulatory Board has been mandated by the government to expand
the gas grid and improve city distribution network by inviting bids from interested developers. The
board identified 223 areas and will invite bids through multiple rounds, according to Motilal Oswal.
Even the government’s think tank NITI Aayog has drafted a plan to expand the network in 326 cities
by 2022 from existing 87 regions. That would throw up new opportunities for gas distributors. 9.5

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The Benefits of Compressed Natural Gas (CNG) Vehicles

Imagine that we could take advantage of dramatic technology discoveries that increase
production of an abundant, clean, safe and inexpensive transportation fuel…WE HAVE!
Natural gas offers many advantages over conventional petroleum products. Compressed natural
gas (CNG) is the smart and affordable choice for fleet vehicles, transit buses, school buses, waste
disposal trucks, delivery vehicles, and more. With CNG, you'll save money on fuel, reduce emission
levels, and extend the life of your vehicle.

Reduced Fuel Cost

Natural Gas (CNG) represents almost a 50% savings over petroleum products such as gasoline
and diesel fuel. In a very competitive economy, there is no better time to look for alternative ways
to fuel our vehicles.
According to the Ministry of Petroleum and Natural Gas, CNG is a viable choice for many vehicle
operators.

Domestically Produced, Abundant Fuel

The INDIA import of crude oil will jump 25% s in FY 2018. It is estimated that the United States
has well over a 100-year supply of natural gas. Plus, 98% of the natural gas we use in the United
States is produced right here in North America.
The compressed natural gas industry helps to support US jobs and the economy! Did you know?
40% of all jobs created in the United States in 2013 were in the energy sector. It has also been
estimated that converting our eight million over-the-road vehicles to operate on natural gas
(CNG) would replace the oil we import from Saudi Arabia!

Well-Established and Growing Infrastructure

A well-established pipeline infrastructure exists in the United States to deliver natural gas to
almost every urban area and most suburban areas.
Compressed natural gas (CNG) refuelling stations are
available across the United States with new stations
opening daily. For the most comprehensive, up-to-
date list, please visit the interactive Alternative
Fuelling Station Locater

Environmentally Friendly

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Compressed natural gas (CNG) is the cleanest burning transportation fuel on the market today.
CNG burns cleaner than petroleum based products because of its lower carbon content. CNG
produces the fewest emissions of all other fuels and contains significantly less pollutants than
gasoline. CNG produces 20-30% fewer greenhouse gas emissions and 95% fewer tailpipe
emissions than petroleum products. And because CNG fuel systems are completely sealed, CNG
vehicles produce no evaporative emissions.

Reduced Maintenance Cost

CNG does not contain lead, so spark plug life is extended
because there is no fouling. CNG does not dilute or
contaminate crankcase oil, so intervals between oil
changes and tune-ups are extended. Pipes and mufflers
last longer because CNG do not react to the metals. All of
this reduces maintenance costs while extending the overall
life of the engine.

Performance Advantages

CNG is superior to petroleum-based products because
natural gas has an octane rating of about 130. CNG vehicles experience less knocking, no vapor

locking, and since natural gas is already in a gaseous state,
CNG vehicles have superior starting even under severe cold or
hot weather conditions.

Safety Advantage

Compressed natural gas (CNG) fuel storage tanks are stronger
and safer than gasoline or diesel tanks reducing the likelihood
of accidental release. If released, CNG disperses quickly into
the air instead of on the ground, reducing the risk of fire and ground contamination. Plus, CNG
gives off little to no emissions during refuelling.

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India plans massive natural gas expansion, LNG imports to soar

The push to double share of natural gas in the country’s energy mix will more than triple imports
to 70 million tonnes per year by 2022 (file photo) Looking to add 11 import terminals over next 7
years ;12.1 to more than triple LNG imports.
India’s push to more than double the share natural gas has in its energy mix to 15 per cent by
2022 will require a huge increase in imports and the construction of more LNG terminals, a
government official said on Wednesday.
India has four terminals to receive liquefied natural gas (LNG) 12.2and imports around 20 million
tonnes of the super-chilled fuel a year. But over the next seven year the government plans to build
another 11 terminals, 12.3 said Narendra Taneja, spokesman for the ruling Bhartiya Janata Party
(BJP).
That would raise India’s LNG import capacity to more than 70 million tonnes per year in the
coming seven years, in what would be one of the fastest gas import expansions since China
embarked on its huge gasification programme last year.
India would eventually require even more than 15 terminals to meet its demand, 12.4 Taneja said,
speaking at an industry conference in Bali, Indonesia.
“India is looking at LNG in a very strategic manner. Once we get into it, we are talking about 15
terminals but it will be many more as the need is going to be there,” he said.
India has stated it plans to raise the share of natural gas in its energy mix to 15 per cent by 2022
from about 6.5 per cent now, 12.5 he said.
The 70 million-tonnes-a-year target a few years later would mean Indian would need to import
more than China took last year via both pipelines and tankers, and it would put India close to what
top importer Japan currently buys. 12.6

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Electrification, shunning coal

India plans to electrify millions of households that still burn wood for light, heat and cooking. Like
China, it also plans to reduce its heavy reliance on thermal coal, 13.1 a bigger polluter than gas.
Taneja said the gas would also be needed to provide power to electric vehicles, which India plans to
account for all new car sales by 2030. 13.2
India is also pushing for more scooters and motorcycles to run on compressed natural gas (CNG),
13.3 with pilot schemes recently launched in major cities including New Delhi and Mumbai.
Beyond LNG, India is looking to access untapped domestic gas reserves off its east coast.
As part of its drive to reduce pollution by increasing natural gas use, Taneja said the government
was encouraging Indian railway companies and LNG importers to look at fuelling trains by LNG
instead of diesel. 13.4
India also wants to become a hub for supplying ships that run on LNG, 13.5 with plans to build more
facilities like a fuelling station at Kochi port, Taneja said.
LNG as a shipping fuel is being pushed by International Maritime Organization (IMO) rules that
come into effect by 2020 and require the use of cleaner fuels.

Decline in Petrol Pump Stations

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Exploring
opportunities

Growth potential in the
Indian natural gas market

Knowledge Partner

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Contents Chapter 1 Snapshot of India’s natural gas market 2

Chapter 2 Outlook for demand-supply 4

Chapter 3 Future role of LNGin India 7

Chapter 4 Prospects for CGD 11

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Exploringthe Indiannaturalgas opportunity | 1

Chapter 1
Snapshot of India’s natural gas market

India’s natural gas consumption lags far behind the global average

An expanding economy and a growing population have resulted in increased consumption of
primary energy resources, such as coal, oil and natural gas, in India. In the last five years, the
country’s primary energy consumption increased at a compounded annual growth rate (CAGR) of
7 % to reach 469 million tonnes of oil equivalent (MTOE) in 2009. The share of natural gas in the
country’s primary energy mix increased from in 2008 to 10 % in 2009. However, this share is quite
low compared to the global average (24 %, primarily due to supply side constraints. India’s 44
cubic meter (cm) per capita of natural gas consumption also lags the global average of 429 cm
per person. Going forward, given its increasing availability, natural gas is expected to account for
a significant share of the country’s primary energy mix.

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Significant gas deficit — supply trails demand

India’s natural gas market is characterized by a supply deficit, primarily due to the low availability
of natural gas and inadequate transmission and distribution infrastructure. In the past, demand
for natural gas increased significantly, but domestic production was unable to keep pace with the
growth in demand. Natural gas production in India has been almost stagnant during the decade
through FY09. This resulted in a major deficit of natural gas as well as a greater reliance on
imported liquefied natural gas (LNG) to meet the ever-increasing demand for electricity. As a
result,
gas-based consuming units (mainly in the power and fertilizer sectors) were underutilized and
had to rely on expensive alternative fuels such as naphtha, diesel and furnace oil. In FY10,
domestic gas production received a huge fillip with the commencement of production
at Reliance Industries’ KG D6 field. As a result, the country’s gas production jumped by 44.8 %
year-over- year to reach 130 million metric standard cubic meter per day (mmscmd) in FY10.
India’s domestic gas supply, including LNG, was pegged at around 163 mmscmd, marginally
lower than the country’s estimated demand of around 170 mmscmd for FY10. If the latent
demand for natural gas is included, then natural gas demand would have been above 200
mmscmd. During FY10, domestic gas production accounted for 80 % of the total gas supply, with
LNG accounting for the balance.

Transmission infrastructure on the rise, but still inadequate

India has a relatively under-developed gas pipeline infrastructure; however, it is growing rapidly
in tandem with burgeoning demand and growing supplies. India currently has a network of
~10,000 km of trunk natural gas pipelines with a capacity of around 300 mmscmd. Of this, 3,000
km of pipelines, with a capacity of around 120 mmscmd, were commissioned during the past 3–4
years.

GAIL has been a pioneer in developing a pan-India gas transmission infrastructure. The company
currently owns and operates approximately 7,850 km of high- pressure natural gas pipelines with
a transmission capacity of more than 150 mmscmd. At around 3,750 km in length, GAIL’s Hazira-
Vijaipur-Jagdishpur (HVJ) pipeline is the longest natural gas pipeline network in the country, and
is operating at 100 % capacity. Since the pipeline network has no free capacity, it is unable to
meet the increase in domestic natural gas supplies stemming from the commencement of
production at the KG D6 field and the increase in India’s overall LNG capacity. To overcome this
problem, GAIL is expanding and upgrading its network. The company commissioned around 700
km of gas pipelines during FY10. The rest of the country’s natural gas trunk pipelines network is
owned by Gujarat State Petronet Limited (GSPL), Reliance Gas Transportation Infrastructure
Limited (RGTIL) and Gujarat Gas Company Limited (GGCL).

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The lack of adequate gas transportation infrastructure is also one of the major reasons for India’s
low natural gas consumption and current natural gas shortage. Although the gas pipeline
coverage has increased, it is still inadequate to channelize all of the gas supply to demand centers
in the country. During FY10, inadequate transmission pipelines have resulted in:
• The KG D6 field not being able to operate at full capacity
• Spot LNG volumes nearly drying up despite the significant increase in LNG re-gasification

capacity

Chapter 2
Outlook for demand-supply

Spurt in gas supply

Domestic natural gas supplies are estimated to increase significantly, to 405–410 mmscmd, by
FY20, on the back of incremental supplies from the KG D6 field, as well as from the new gas
fields of ONGC and Gujarat State Petroleum, coal bed methane (CBM) and new LNG facilities.
India’s gas production is expected to increase considerably in the next few years due to the
significant gas discoveries made by independent private players in the blocks awarded under the
New Exploration Licensing Policy (NELP) and Pre-NELP rounds. Domestic production is therefore
expected to increase from around 130 mmscmd in FY10 to around 265–275 mmscmd by FY20.
A reasonable amount of the supply boost is expected to come from the development of CBM
blocks. The Director General of Hydrocarbon (DGH) estimates CBM production of around 7
mmscmd by 2014. However, these numbers are optimistic, given that the current production is
around 0.1 mmscmd and the current pipeline infrastructure is inadequate to channelize the
projected spurt in CBM supplies. The Government is also looking to explore and develop other
unconventional resources, such as shale gas, which have significant potential to further boost
domestic production.

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Going forward, a considerable change is expected in India’s gas supply mix. Natural gas supply
from ONGC and OIL India Limited’s (OIL) APM gas field is projected to decline due to maturing
producing basins. This, along with the increase in supplies from new sources, is expected to result
in APM gas accounting for a much smaller portion of the total gas supply in India — APM gas
share is projected to fall from 30 % in FY10 to less than 10 % by FY20. Gas production from new
gas fields and/or new discoveries (including CBM) is expected to account for 24 % of the total gas
supply by FY20.

Transmission infrastructure to witness substantial expansion

The Indian Government, with due assistance from the Petroleum and Natural Gas Regulatory
Board (PNGRB), is aggressively promoting the build-up of gas transmission infrastructure across
the country to
monetize the expected increase in natural gas supplies by encouraging the participation of
private and public sector companies. Consequently, several companies have significant gas
transmission pipeline expansion plans on the anvil.

• At an investment of INR303 billion, GAIL plans to add 6,663 km of pipelines by FY13.
• Reliance Gas Transportation Infrastructure plans to add 2,875 km of pipelines.
• Gujarat State Petronet aims to add around 800 km of pipelines to its existing capacity in
Gujarat.
In June 2010, the PNGRB approved provisional tariffs for some of the major pipelines in the
country. This is expected to boost investor confidence in the segment due to the visibility of
potential returns. With the above-mentioned expansion plans and last-mile connectivity
receiving a boost with the entry of several players in the city gas distribution (CGD) domain, the
bottleneck caused by limited pipeline connectivity is set to be
alleviated. The reverse flow configuration of current and future pipelines will help even out the
regional demand- supply mismatch and lead to optimum utilization of natural gas by promoting
swapping between different regions or consumers going forward.

Demand for natural gas to grow rapidly

With India’s enhanced economic growth, its energy requirement is likely to increase at a high rate
in the future. Natural gas is expected to play a significant role in meeting the country’s energy
requirement. India’s demand for natural gas is projected to increase more than three-fold, from
around 170 mmscmd in FY10 to around 540–550 mmscmd in FY20. The increase in the
availability of natural gas and the simultaneous development of transmission and distribution
infrastructure, as well as the overall favorable economics of supplying gas at reasonable prices to
end consumers, is expected to make it easier for the power, fertilizer and CGD sectors, as well as
industrial and commercial establishments, to switch over to natural gas for their energy
requirements. Demand for natural gas is expected to be well distributed with the installation of
adequate transmission and distribution infrastructure.

19 | P a g e

The power and fertilizer sectors are expected to remain the anchor segments for natural gas.
These sectors will continue to dominate natural gas consumption, accounting for approximately
58 % of total gas demand in FY20. Additional supply of natural gas will help to augment
production in the power, fertilizer and CGD sectors, and will also help these sectors to realize
substantial cost savings as they make the switch from costlier alternatives to natural gas. Going
forward, significant demand for natural gas is expected to come from the industrial and CGD
segments. According to our estimates, the CGD sector is likely to witness the highest growth in
demand for natural gas (at a CAGR of 27 %) during FY10–FY20, followed by the power sector (at
14 %), the primary steel sector (12 %) and the fertilizer sector (10 %).
We also estimate that the share of the power sector in the overall demand pie for natural gas is
likely to grow from around 33 % in FY10 to around 38 % by FY20.

The sector is likely to witness significant incremental demand for natural gas from existing and
new gas-fired power plants. Existing power plants, which currently use naphtha, diesel and other
liquid fuels due to shortage of natural gas, are likely to switch to gas to increase their utilization
rates at a lower cost.
In the fertilizer sector, India’s urea imports have increased over the past few years as demand has
risen, whereas domestic capacity additions continue to remain virtually stagnant. Going forward,
the demand-supply gap for urea is expected to increase further, making capacity additions,
expansion and de-bottlenecking of existing capacity imperative. Most of the new urea capacity
addition is likely to be based on natural gas, due to the lower production costs of gas-based urea
plants as compared to those using alternate liquid fuel (naphtha, low sulphur heavy stock or fuel
oil). An increase in the availability of natural gas is also likely to encourage existing liquid fuel-
based urea plants to switch to natural gas.

20 | P a g e

The thrust on the development of the CGD sector is expected to augment demand from small
cities and towns across India. These locations have strong potential as far as their latent demand
for natural gas is concerned. For instance, the development of state- wide gas transportation and
distribution infrastructure has created new natural gas consumers in Gujarat — industrial and
commercial establishments in the ceramics, glass, chemicals, textile, pharmaceuticals and
diamond industries, among others. With some degree of intervention from the judiciary and local
state governments, the household and automobile segment have the potential to further boost
CGD demand as well.

Supply deficit expected to remain in the market

Despite the significant increase in the supply of natural gas in India, the gas market is expected to
remain in supply deficit in the long term. Although it is possible that some surplus or demand –
supply equilibrium will be achieved in the short to medium term, this is likely to change after the
commissioning of transmission pipelines. Until FY15, we estimate gas shortage of 5–11 % of the
total demand in India. This shortage is expected to swell to around 25 % by FY20, with demand
exceeding supply by 130–140 mmscmd

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Chapter 3
Future role of LNG in India

LNG poised to maintain its stake in the domestic market

India currently has three LNG re-gasification terminals, of which two are operational: Dahej (with
a capacity of 10 MMTPA) and Hazira (3.7 MMTPA) in Gujarat. The Dabhol terminal (capacity of 5
MMPTA) is expected to be operational in FY11 after tie-ups for gas supplies are completed. As a
result of brownfield and greenfield expansions of re-gasification terminals in India, the share of
LNG imports in the total domestic gas supply has improved significantly, from a mere 1 % in FY04
to 20% in FY10. Imports of LNG are expected to continue to play a crucial role in partially bridging
the country’s natural gas demand-supply gap. We estimate LNG supplies to increase to around
140 % mmscmd, and to account for approximately 26 % of the total natural gas demands by
FY20. This significant increase in supplies will be from the proposed brownfield expansion of two
existing terminals, Dahej and Hazira; as well as from greenfield projects; the commissioning of
new terminals in Kochi, Ennore and Mundra; and the commencement of operations at the Dabhol
terminal.

22 | P a g e

Going forward, we expect CGD and industrial units to be major LNG consumers, as the power and
fertilizer sectors continue to rely primarily on domestic production.

Need for aggressive capacity augmentation

Despite the expansion of LNG capacity, the shortage of
natural gas is expected to persist in the long term. We
estimate a demand shortage of 130–140 mmscmd by FY20,
which is more than the current domestic production. This
gap can be bridged either through a further ramp-up in LNG
capacity and/or the addition of transnational gas pipelines.
Notably, India has a strategic geographic location, with
large natural gas reserves in Bangladesh and Myanmar on
the eastern front; Iran and Qatar in the west; and
Turkmenistan and other Central Asian countries on the
north-western frontier. Although the Government did
pursue discussions on transnational pipelines, none of the
projects were implemented due to geopolitical concerns
and pricing disagreements. For India, LNG is a preferred source over transnational pipelines, as it
not only addresses geopolitical concerns, but also has a shorter gestation period. In addition, at
distances of more than 3,000 km, gas is cheaper to transport as LNG than through pipelines.
Furthermore, pipeline projects can be delayed due to environmental issues and problems with
land acquisitions. Companies transporting gas across national borders may encounter technical
problems, such as differences in system pressure and directionality in pipelines, as well as
differences in commercial terms around issues such as access rights to infrastructure and tariff. In
addition, these companies could face political security issues that could affect gas supply. Rapid
technology advances (such as the development of floating LNG terminals) have the potential to
further lower the cost of LNG (due to lower capital investment in gasification terminals) besides
increasing its reach to small and/or remotely located natural gas reserves.

Sourcing and pricing of LNG are critical factors

The attractiveness of LNG terminals has increased in gas-deficient countries such as India, as it is
an opportune time to secure global natural gas supplies easily and at a competitive rate. 23.1 The
global LNG market is undergoing a structural shift, with buyers gaining more negotiation power
over suppliers. This is due to a supply overhang in the sector on account of worldwide growth in
liquefaction capacity and demand contraction in major gas-consuming regions such as North
America and Europe. The development of shale gas in the US adversely impacted the global
demand for LNG; however, this dilutive trend helped bridge the gap between demand and
indigenous production in the US. In 2009, global liquefaction capacity increased by 11 year-over-
year, but global LNG trade rose by a modest 1%. During 2010, global LNG capacity is projected to
increase by 30 million tons, with Qatar accounting for 60 of this additional capacity. Capacity

23 | P a g e

additions are expected to continue with brownfield and greenfield projects in all major natural
gas exporting nations worldwide. Gas suppliers/shippers are now facing pressure from utilities
over the take-or-pay clauses in their supply agreements, especially in Europe. LNG prices are
expected to remain depressed for a few years, which could result in more LNG being traded on a
spot basis, with cargos diverted from their original destinations. Moreover, the additional
capacity coming on-stream may not have buyers lined up, resulting in the higher availability of
uncontracted gas supplies, which might be sold on a spot basis.
Globally, LNG suppliers can be divided into three categories: Atlantic Basin suppliers (located
mainly in North Africa), Middle Eastern suppliers (Oman, Qatar and Abu Dhabi) and Asia-Pacific
suppliers (Australia, Indonesia and Malaysia). Due to India’s strategic location, it can source gas
from both Middle Eastern and Asia-Pacific suppliers. Qatar is the most preferred source for India
due to its proximity and the availability of abundant and cheap gas reserves. Further, the country
has super-large LNG carriers, which have low transportation costs.24.1 Australia offers a distinct
advantage in terms of a reliable counterparty with vast gas resources and LNG capacity. Apart
from traditional gas suppliers, Iraq and Iran have the potential to become an abundant source of
LNG in the future.24.2

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Nevertheless, the supply glut is not expected to persist for an extended period as global gas
demand is expected to rebound, with the economic revival in the developed economies and China
prompting a switch to LNG. Therefore, India should focus on securing long-term LNG contracts for
uninterrupted supplies at stable prices.

This could be done in one or more of the following ways:
• Acquiring a stake in upcoming LNG export projects and/or gas fields in major natural gas
exporting countries

• Offering equity in LNG import terminals in India to LNG suppliers
Further, LNG prices are projected to follow the natural gas demand trend in the future. In
addition, the majority of LNG produced is still sold on long-term contracts, with prices linked to
movements in the price of competing fuels, primarily crude oil. Stable LNG prices are an
imperative, as India’s LNG demand is very price sensitive due to the following reasons:
Consumers in CGD segment have the option of switching to alternatives, such as petrol, Diesel,
Kerosene and LPG, while those in the Industrial segment can opt for naphtha and furnace oil.
Therefore, piped natural gas and compressed natural gas prices have to be lower than prices of
competing fuels.
Power units find it difficult to purchase expensive gas as their production costs would increase.
Power utilities are unable to transfer higher production costs to consumers as electricity is sold at
a fixed price. As a result, utilities prefer to curtail electricity production by operating at lower
utilization levels. This issue can be addressed through the Government’s proposal of pooling gas
prices. While this solution does look appealing, it concurrently appears to be regressive in terms
of the development of a competitive and integrated domestic gas market. A viable solution could
be linking LNG prices with global gas prices, such as the Henry Hub Index and the National
Balancing Point.

Chapter 4

Prospects for CGD

CGD’s gas consumption is on the rise, but demand is constrained
by supply shortage and inadequate infrastructure

India originally had legacy systems in the form of CGD networks in Assam, Tripura, Vadodara
(Gujarat) and Kolkata (West Bengal). In the 1990s, PNG (piped natural gas) networks were set up
in Surat, Ankleshwar and Bharuch in the state of Gujarat. This was followed by the Supreme Court
of India issuing a directive to GAIL to expand the CNG infrastructure in the country. In 2003, the
Supreme Court of India issued a directive to the Union of India and to state governments, asking
them to draw plans to introduce clean fuels in 11 cities in addition to Delhi and Mumbai. 25.1 In
recent years, the use of natural gas in the residential, industrial and commercial sectors has
increased rapidly due to favorable regulatory policies (court directives on the use of CNG for
commercial vehicles) and the cost benefits of using natural gas. As a result, during FY05–09,
natural gas consumption in India’s CGD segment increased at a CAGR of 30 to reach 4.5

25 | P a g e

mmscmd. (CGD comprises compressed natural gas [CNG] for vehicles and PNG for the
residential sector, as well as up to 50,000 cubic meters per day for industrial and/or commercial
use.) Further, CGD’s share of India’s total natural gas consumption doubled from 2% to 4% during
the same period. Due to the successful development of CGD networks in Delhi and Mumbai,
coupled with the support provided by the Government, CGD outreach has currently reached 41
cities. 26.1 As of April 2009, there were approximately 377 CNG stations in India. Among these, the
majority of CNG stations were located in Delhi (171) and Mumbai (136). There were
approximately 0.61 million vehicles running on CNG and 0.85 million PNG connections in 2009.
Currently, the CGD segment accounts for approximately 6–7% of the country’s Gas consumption.
The discretionary switch of private vehicles to CNG is rising rapidly with the increase in CNG
stations and escalating petrol and diesel prices. For instance, the Supreme Court directive initially
spurred demand for CNG in Delhi, but the city is witnessing a rise in discretionary conversion of
private vehicles to CNG. During the FY04–09 period, the number of private vehicles running on CNG
in Delhi increased from 16,098 to 175,313. 26.2

Although CGD outreach has increased to 41 cities, the network rollout is still in its infancy in a
majority of cities. Only Delhi, Mumbai and a few cities in Gujarat have significant CGD networks.
CGDs share of total gas consumption is much lower in India, as compared to other developed
and developing countries. The major reasons for the limited use of natural gas in city gas
applications in India in the past include:
• Absence of a gas pipeline network: Most developed and developing countries have
a well- developed network for imports, transmission and local distribution of gas. India’s existing
natural gas pipeline infrastructure is inadequate to meet the country’s gas requirements. The
absence of cross-country gas transmission and distribution infrastructure to connect gas sources
with demand load centers has hampered the use of gas in industrial and city gas applications.
Absence of a clear regulatory framework: The absence of clear regulatory provisions associated
with awarding licenses and approvals to establish networks hampered the development of local
distribution zones. However, with the establishment of a regulator — PNGRB — under the
Petroleum & Natural Gas Regulatory Board (PNGRB) Act, this issue has been addressed

26 | P a g e

Regulatory framework

CGD and gas transmission sectors come under the purview of PNGRB, which also regulates
refining, processing, storage, transportation, distribution, marketing and sale of petroleum
products. The creation of the regulator in 2007 paved the way for the long-term growth of the
midstream and downstream segments, as it has ushered in greater regulatory clarity in areas
such as CGD and laying of gas-transmission pipelines. PNGRB has enacted various regulations to
encourage investments through prospects of promising returns as well as promotion of
competition to improve service delivery.
Licenses are issued with an exclusive marketing right for five years for a new company and three
years for an entity that has been operating a CGD network for at least three years prior to the
creation of PNGRB on 1 October 2007. Pipeline infrastructure exclusivity is offered for 25 years, 27.1
which means that no other entity will be authorized to lay a CGD network in that geographical
area during this period. After the expiry of marketing rights, the network will be open to
competition and new players can use the existing network by paying a network tariff to the
existing player. The compression charge and network tariff for CNG are determined on the basis
of 14% rate of return on the capital employed plus a normative level of operating expenses for
the pipeline. For PNG, the network tariff comprises two elements:
• Charge for the common CGD network before the pipe is connected to the metering unit
• Charge for last-mile connectivity

27 | P a g e

Under the terms of the latest bidding framework for the third round, the bidding variables need
to be within a 20 % range of the detailed feasibility report (DFR) parameters subject to a
minimum internal rate of return (IRR) of 6 %.

28.1

Development of CGD networks to gain momentum

The CGD segment is expected to witness significant growth in coming years due to the rapid
increase in natural gas consumption in the transportation, industrial, commercial and residential
sectors. 28.2 The phasing out of the subsidy on domestic LPG could lend further impetus to
residential natural gas consumption.
The CGD segment is expected to emerge as one of the fastest-growing segments of the Indian
natural gas industry, as the development of CGD networks across the country is likely to gather
momentum with the commissioning of cross-country and regional gas pipelines. The segment is
witnessing overwhelming interest from various players. Both existing and new players propose to
establish new CGD projects in many more cities in India. Recently, PNGRB invited bids for CGD
networks in 16 new geographical areas across eight different states in the third and fourth rounds
of bidding. 28.3

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29.1

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PNGRB projects CGD coverage to extend to 243 cities over the next 10 years. 30.1 With this increase
in CGD coverage, we expect natural gas demand originating from this segment to increase more
than 10 times during the next 10 years to reach between 105 mmscmd and 110 mmscmd by
FY20. As a result, the share of CGD in the country’s total gas demand is projected to increase to
around 20 % during this period.
CGD networks are being set up to cater to four consumer segments — industrial, commercial,
automobile and domestic. 30.2 Natural gas supplied through CGD networks competes with the
alternate fuels (petroleum products) — such as liquefied petroleum gas (LPG), diesel (HSD), petrol
(MS), furnace oil (FO) and low sulphur heavy stock (LSHS) — that are being consumed by these
segments. The price of these alternate fuels is a function of crude oil prices. Therefore, the price
of natural gas supplied to these segments has to be economical vis-à-vis the price of petroleum
products. Our analysis shows that although natural gas prices follow crude oil price trends, it is
cheaper on a per unit of energy basis, which makes the viability of a CGD network attractive. 30.3
However, considering that domestic gas supply has been lower than the country’s demand, LNG
terminal capacities have been, and are being, added across the country. As CGD consumers are
paying higher prices for liquid fuels, in most crude oil price scenarios, CGD networks are viable
based on LNG supplies also.

30 | P a g e

Development of CGD market offers tremendous business opportunities

The establishment of a CGD network in a mid-size and a large city is estimated to require an
investment of around INR2 billion and INR3–4 billion, respectively. The majority of this amount
would be spent on laying common pipelines and setting up last-mile connectivity. 31.1

With the CGD network projected to reach 243 cities by 2020, the segment is likely to witness an
investment of around INR400–435 billion. 31.2 This presents a significant opportunity for players
dealing in products such as:
• Pressure regulators, control systems, storage facilities, gas conditioning, metering
skids and compressor packages for setting up, receiving and dispensing stations
• Small-sized steel pipes for common pipelines
• Polyethylene pipes for last-mile connectivity
• Regulators and gas meters for PNG in domestic use
• CNG kits for vehicles
• Gas handling and injection systems, and alterations to exhaust handling of industrial boilers
using liquid fuel

31 | P a g e

CGD players/operators can also benefit by providing ancillary services such as plumbing, repairs
and maintenance of home electrical, kitchen and heating appliances and the sale of home and
car safety products. For e.g., Centrica, the leading gas utility in the UK, offers a wide range of
services to residential customers, such as plumbing; repairs and maintenance of home electrical
equipment, kitchen and heating appliances; sale of home and car safety products; insurance
brokering; and the sale of boilers. This business generated revenues of £1.4 billion in 2009,
accounting for 11 of the company’s revenues from its UK downstream gas and electricity business

Essentials for a robust CGD market in India

As CGD comes at the end of the natural gas value chain, development is contingent on the
development of the rest of the value chain. It is up to the Government and industry players to
ensure adequate supply of natural gas in the CGD market. This can happen only if the country has
a fully integrated gas infrastructure with uniform natural gas pricing and affordable end- user
prices with favorable and clear regulatory policies. Taking due cognizance of the strong
credentials of the UK’s CGD market, one of the most developed CGD markets in the world, the
Indian Government should develop the CGD market with an objective of :

• Allowing customers to select their supplier Avoiding dominance by a single player
• Keeping the ownership and operation of different segments of the natural gas value chain
clear and segregated
• Allowing open access to natural gas infrastructure such as transmission and distribution
pipelines, storage and LNG terminal
We have identified and collated some critical success factors for a robust CGD network in India.
The following illustration highlights these market requisites (figure 11)

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ssLNG could be a 7-10mmtpa market

• >30% of India’s LNG consumption in FY18E

• We estimate that LNG trucking could create demand of 4.5mmtpa within five years of
• implementation. Buses could add another 2mmtpa.33.1
• Off-grid power and industrial applications could require additional 1.8mmtpa. Coastal as

well as inland bunkering is likely to be a small player, with 0.3mmtpa of demand.

LNG trucking – we estimate a market of 4.5mmtpa

• On the West Coast, we have existing LNG terminals at Dahej, Dabhol, Hazira and Kochi while H-
Energy is expected to come up with an FSRU at Jaigarh and Swan Energy has announced FSRU at
Jafrabad.

• On the East Coast as well, IOCL is coming up with an LNG terminal at Ennore and Adani has
announced a terminal at Dhamra. Apart from these, there are a few more announcements that
may take longer to come up.

• Our estimates suggest that an LNG truck could take ~4 years for breaking even, considering that
diesel is priced at INR64.93/liter and FOB LNG at USD7/mmBtu. This is assuming a daily run of
only 300km, much less than in developed countries. The management suggests a breakeven
period of ~3 years.

• Considering that every year, LNG takes only 10% of new M&HCVs sales, in the fifth year, we
could see a demand of as much as 4.5mmtpa of LNG for road transportation. If we were to
extend this to include buses as well, the demand could rise to above 6mmtpa.

• PLNG has already identified ~4,000km of highways on the West Coast to set up 20 LNG refueling
stations. H-Energy plans to invest INR10b to create LNG refueling infrastructure. Shell also plans
to build a truck-loading station at Hazira to service fueling stations and sale to off-grid industrial
consumers.

• PLNG is finalizing its plan with Tata Motors and Ashok Leyland for trucks and buses. In Phase-I, it
aims to develop LNG trucking on Delhi-Mumbai and Kochi- Mangalore sections. In Phase-II, it
aims to develop five corridors – Jammu-Delhi- Mumbai, Delhi-Chennai, Mumbai-Chennai, Delhi-
Bangalore and Kandla- Mumbai-Kochi. In Phase-III, it plans to launch pan-India services.

Exhibit 27: Expect breakeven in four years (see Appendix-1 for LNG price build-up) 33.2

Diesel LNG

Distance travelled per day (km) 300 300

Additional cost for LNG vehicle (INRm) 2.5

Fuel consumed (km/lit, km/kg for LNG) 4.0 3.6

Fuel consumed per day (lit, kg for LNG) 75 84

Fuel cost (INR/lit, INR/kg for LNG) 64.93 37.5

Cost of fuel per day (INR) 4,870 3,153

Cost of fuel per year (INRm) 1.8 1.2

Saving per year (INRm) 0.6

Additional cost for LNG vehicle (INRm) 2.5

Breakeven period (years) 4.0

Source: Company, MOSL

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Exhibit 28: India could see ssLNG demand potential of 4.5mmtpa from trucking 34.1

Major assumptions Data Remarks
M&HCV addition in year 1 263,080 Average addition in FY16-18E
Growth in addition every year
LNG mileage (km/kg) 5% Countries like US see much higher runs per day
Average run per day (km) 3.6
LNG market share in new sales 300
Consumption in year 1 (mmt) 10%
Consumption in year 5 (mmt) 0.8
4.5

Source: ICRA, Platts, MOSL

Off-grid power and industrial demand of 1.8mmtpa

We estimate that diesel consumption by gensets in India stood at 4.5mmt in FY17. Assuming that
20% of these gensets convert to gas, this could create demand for ~1mmtpa with five years.

• We estimate that fuel oil (FO) consumption in India that could be replaced with LNG is 5.4mmt.
If we assume that 20% of this gets converted into gas, then it would create demand of 0.8-
1.1mmt in five years.

• The central government is mulling a ban on petcoke usage in the country. This would further
add to growth in consumption of gas.

• Inox CVA has already been setting up some facilities for off-grid industrial applications. It is
expected to come up with its four more installations soon.

Exhibit 31: Off-grid power could consume ~1mmtpa of LNG

Diesel consumption by gensets (FY13, mmt) 3.7
Diesel consumption by gensets (FY18, mmt) 4.8 assuming 5% rise YoY

Diesel consumption by gensets (FY18, TBtu) 211.7
Gas consumption by gensets (FY18, TBtu) 211.7
Gas consumption by gensets (FY18, mmtpa) 4.2

Assuming 20% conversion 0.8
FY23 @20% penetration 1.1 considering 5% CAGR

Source: Shakti Foundation, MOSL

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Exhibit 32: Fuel oil substitution could generate 0.8mmt of demand 5,338
Consumption which could be replaced (tmt) 211
Consumption which could be replaced (TBtu) 0.8
LNG demand considering 20% penetration (mmt) 1.1
Demand in 5 years (mmt) PNGSTAT, MOSL

Source:

Exhibit 33: Off-grid installations by INOX CVA

Company name Location Usage Distance from
General Motors Gujarat Paint shop (heating) source (km)*

180

Vidushi Wires Maharashtra Furnace (heating) 450
Modern Insulators Rajasthan Kiln (heating) 470

Rama Cylinders Gujarat Furnace (heating) 600

Tetra Pak India Maharashtra Gas Engine (captive power) 600
HEG Madhya Pradesh Furnace (heating) 600

Linde India (BOC) Maharashtra Feedstock (hydrogen production) 700
Bedmutha Industries Maharashtra
Furnace (heating) 400

Mahindra & Mahindra Maharashtra Paintshop (heating) 500

Sunita Hydrocolloids Rajasthan Furnace (heating) 700

Bhoruka Gases Karnataka Specialty gases (mixing) 600

Linde India (BOC) Andhra Pradesh Feedstock (hydrogen production) 1,000

Bharat Wire Ropes Dhule, Maharashtra Furnace (heating) 250

Marine bunkering is not expected to be a significant market

• In FY16, only 6% of India’s domestic cargo movement was coastal. India has not
exploited inland waterways so far.

• With the Sagarmala project, the government aims to increase coastal/inland
movement of domestic cargo from 80mmt in FY16 to 465mmt in FY25.

• We estimate that this would generate demand of 0.3mmt of LNG considering 20%
penetration. 35.1

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7-10mmtpa from above applications could absorb new supplies

• As per Exhibit 15, India’s consumption would be slightly ahead of available capacities in FY22.
This assumes 50% utilization at Kochi, 40-50% utilization at H- Energy, 50% utilization at
Mundra and 50% utilization at Dabhol.

• We also assume that Hazira runs at 100% utilization. ssLNG demand could broadly absorb full
utilization of all assets that we have assumed would remain under-utilized due to infrastructure
bottlenecks.

• Hence, we continue to believe that there is no threat of under-utilization for PLNG’s Dahej
facility even after expansion to 17.5mmtpa in early 2019.

Due to brownfield expansion at fraction of a greenfield capacity, Dahej remains the cheapest
alternative available to anyone who wants to import LNG. While we do not build any expansion in
tariff at Kochi, we have not assumed expansion in Dahej regas tariff post FY22 36.1

36 | P a g e

•
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FINANCIALS (A+B+C)

(A) BUILDING INFRASTRUCTURE: 1 CRORE APPROX.
• Investment after approval within 4 to 5 months
• Government listing contractors will commence the work
• CLU CHARGES: AS PER STATE

(B) Government Fee ~65 LACS via Demand Draft and Bank guarantee

(C) PLUS+ CONSULTANCY & OTHER MISC. EXPENSES

SITE REQUIREMENTS

• Land should be on Highway OR on 30 m road.
• Land should be minimum 50m X 30m or 40m X 40m (Additional land may add benefits for other

related operational activities.)
• Land should be rectangle or square in shape.
• No High-tension wire should pass above the proposed land.
• Attested Papers regarding Ownership & Possession of land must be tagged with the application.

Note: - Land can be on Lease (with 30 years lease agreement OR 15 + 15 years).

FEATURES OF CNG STATION 7
2
Total Number of Dispensers - 5
For Buses/Trucks - 14 [7x2 Nozzles for each Dispensers]
For Other Vehicles -
Numbers of Nozzles -

DOCUMENTS REQUIRED FOR APPLICATION for putting up CNG stations

Property papers Khatauni with sizra EOI
Search report & key location plan Application for dodo
I'd proof and address proof 5-page format
2 years Itr with financials Application for NOC.
1 year Bank statement DD of Rs 2500/-
Educational certificates (degree)

38 | P a g e

STATE WISE CITIES LIST:

• PUNJAB JMEPL JM Environment Pvt Ltd
JMEPL JM Environment Pvt Ltd
Ludhiana IEPL Ideal Energy Pvt Ltd.
Jalandhar BPCL Bharat Petroleum Corporation Ltd
Fatehgarh sahib Distt
Rupnagar Distt BPCL Bharat Petroleum Corporation Ltd
BPCL Bharat Petroleum Corporation Ltd
• HARYANA IGL Indraprastha Gas Limited
IGL Indraprastha Gas Limited
Rohtak HPCL Hindustan Petroleum Corporation Ltd
Yamuna Nagar HPCL Hindustan Petroleum Corporation Ltd
Rewari
Karnal GGL & BPCL Bharat Petroleum Corporation Ltd
Ambala
Kurukshetra Gas Authority India Ltd
Bharat Petroleum Corporation Ltd
• UTTRAKHAND East Gas Company Ltd
Green Gas Limited
Haridwar Central UP Gas Ltd

• UTTAR PARDESH GAIL Bharat Petroleum Corporation Ltd
BPCL
Varanasi EGCL
Saharanpur GGL
Bhagpat Distt CUGL
Firozabad
Kanpur /Bareilly

• DELHI -NCR BPCL
Delhi - NCR

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