CITY GAS DISTRIBUTION FOR INCLUSIVE GROWTH
Dr. U. D. Choubey
Chairman and Managing Director, GAIL
Energy Supply and Gas Retailing
There has been a growing concern for availability of primary commercial energy to meet the country’s growth imperatives. Our economy is growing at a brisk rate of around 9% and is projected to become the 2nd largest economy of the world by 2050 as per a report by Goldman Sachs. Such growth requires a corresponding increase in the sources of energy as well as in supply infrastructure. Under these circumstances, the requirement of adequate and reliable energy supply at economic prices for optimal and inclusive growth of the country is a prime concern today.
It is in this context, that the role of natural gas as a potential source of clean and efficient energy supply becomes important. With recent promising gas discoveries made in various parts of the country and ongoing exploration activities, natural gas is poised to play an important role in the development of our economy. Gas is emerging as an important policy element in achieving equitable, balanced and sustainable economic growth through widening its user base beyond industries.
Specifically, City Gas projects offer a way to improve the availability of lifeline energy to the masses through large scale distribution of Piped Natural Gas (PNG) to households and Compressed Natural Gas (CNG) to transport sector. PNG for City Gas Distribution (CGD) provides an avenue to spread the gains of a new and liberalized economic policy to the common man by meeting the most essential requirement of the domestic sector. CNG is equally important in furthering this objective since it is linked to improving our health and quality of life through providing a clean and pollution-free environment. Further, CGD projects will also be useful in achieving an equitable distribution of modern energy services as well as in improving the living standards of the people through eco-friendly and efficient energy.
Background of City Gas Projects
The use of Natural gas as a fuel was in vogue for quite some time in India but was limited to industrial applications only. The main driver for the realization of the importance of city gas projects in the initial stage was due to environmental concerns. The rapid growth in urbanization and increasing vehicular emissions in India in the last 10 – 15 years resulted in significant rise in environmental pollution. This has been a major cause of concern in important cities. Based on the ambient air quality monitored in a study in the late nineties, it was found that the contribution from vehicles to the ambient air pollution was as high as 65% of total air pollution. This was also taken cognizance of by the judiciary at various levels.
All this while, GAIL took many initiatives to introduce Piped Natural Gas (PNG) for households and Compressed Natural Gas (CNG) for the transport sector to address the rising pollution levels. Pilot projects were launched by GAIL in two big cities namely Delhi & Mumbai in early nineties leading to start of commercial operation of city gas projects in Mumbai and Delhi through Joint venture mode. Thus GAIL successfully established natural gas as an eco-friendly, economical and safe alternative to gasoline and LPG in transport sector. The results of these ventures are quite visible through improvement in air quality in these cities. As such, GAIL played a role model for introduction of CGD projects in the country.
With the gain of experience and expertise GAIL has replicated City Gas projects in other cities where gas is available along with pipeline connectivity. Going ahead with its plan, GAIL has so far implemented City gas projects in 13 cities independently/through JV route and has formed 8 joint ventures for this purpose. Further, with a planned network expansion of more than 12,000 Kms of high pressure trunk pipelines by 2011-12, GAIL is hopeful that as many as 200 cities are likely to be on city gas distribution map of India in due course connecting the cities and towns falling in the catchment areas of its gas pipelines. These cities would span across 15 states and are estimated to have a population of about 160 million. Similarly, a large number of vehicles including public transport will run also on CNG.
Drivers of CNG
Economics:
On an energy-equivalent basis, natural gas costs considerably lower than the LPG, Gasoline and Diesel. Natural gas is a clean-burning fuel that reduces vehicle maintenance. An added advantage is that unlike liquid fuels, gas can not be adulterated or siphoned-off from a vehicle which is a major concern area with Petrol and Diesel. However, certain fiscal support or incentives may be required for inducing switchovers and conversions.
Emissions:
Exhaust emissions from CNG vehicles are much lower than those from petrol or diesel powered vehicles. For instance, CNG emissions of carbon monoxide are approximately 70% lower, non-methane organic gas emissions are 89% lower, and oxides of nitrogen emissions are 87% lower. In addition, CNG also emits significantly lower amounts of greenhouse gases and toxins than do petrol vehicles.
Safety:
Vehicles that run on clean burning natural gas are as safe as vehicles operating on traditional fuels such as petrol and diesel. Being lighter than air, CNG, unlike gasoline, dissipates into the atmosphere in the event of an accident. CNG fuel systems are “sealed,” which prevents any spills or evaporative losses. Also, natural gas is not toxic or corrosive and will not contaminate ground water.
The City Gas Opportunity
The emerging change in City gas/CNG consumption pattern in India is evident through its growth from 1% of total gas usage in 2000 to 4-5% currently. In fact, the consumption in India’s domestic sector is substantially low as compared to that in developed economies like USA and UK where the domestic and commercial consumption of natural gas is over 40% of total consumption. This only demonstrates the potential for huge expansion and growth in this area.
The higher expected availability of gas and aggressive growth plans of various players are likely to boost the supply, and as a result, demand in household and transport sector. It is projected that CGD projects would account for nearly 20 MMSCMD of gas in the long run as against the current consumption of 5-6 MMSCMD. In addition to these, the demand from commercial and industrial sectors like glass, ceramics, tea plantation etc also is expected to grow at a fast pace. Thus, the CGD segment in India is an opportunity waiting to be tapped.
The Journey Ahead
1. Development of Safety Standards
Public Health and safety are of paramount importance in a densely populated country like India especially when the economically under-privileged sections may be typically lacking in measures to enhance their safety. This also assumes significance in crowded urban settings and scenic rural environments, where the installation of natural gas distribution pipes can be a major inconvenience for residents and business owners.
Here lies the importance of instituting universal standards and codes for designing of CNG stations, equipments, and network laying activities etc. It is the need of the hour to devise mandatory Standards & Code of Practice of pipeline system and others for all connected Industries & Contractors. It might lead to slightly raised costs in the near term but with substantial benefits in the long run.
2. Development of Equipment Manufactures
GAIL has been encouraging the local entrepreneurs by providing technical guidance and sharing with them the market opportunities for developing / manufacturing indigenous CNG kits, Storage cascades, Compressors, NG - Vehicles and related support services. This needs to be institutionalized for the continued growth of this sector in the future.
3. Effective Regulation
Importance of effective regulation cannot be overemphasized. The gas industry in India is still at a nascent stage and the regulator's role would be crucial in ensuring good customer service and stimulating investments by ensuring a level playing field for all players. The Government needs to be complimented for timely enactment of the PNGRB Act 2006, due to which the Petroleum & Natural Gas Regulatory Board is a reality now.
Regulation is crucial to ensure that the natural monopolies vested in distribution companies is not abused while also allowing for an adequate rate of return on their investment. The Regulator will oversee the construction of new distribution networks and proposed additions to the network while disallowing unnecessary duplication of investment and effort. The Regulator can also ensure that Standards & Code of Practice are followed to take care of human safety & consumer interest at large.
4. CNG Corridors
Till date, City Gas projects have been conceptualized in the country in a manner that it has remained confined to the limits of Municipal Boundary of a city. This has virtually ruled out the usage of CNG for a large number of private and commercial vehicles plying on the national highways because of lack of distribution network and limited availability through dispensing centres. To overcome this limitation and to make a quantum improvement in the pollution levels, mandatory use of CNG through creation of a network along the key highway corridors would be highly beneficial. Over a period of time, such network would also spread into cities and towns as well as promote industries along such Corridors.
From a social perspective, the implementation of CNG Corridors would not only lead to enhanced development of infrastructure along the corridors, but would also expand the gas market, improve the health and living conditions of the populations and create new economic and employment opportunities. In addition, it will lead to substantial cost savings to the users as well as the Government in the form of reduced forex outgo due to lesser import of costlier Crude.
Conclusion:
It is beyond contention that City Gas project implementation is definitely going to play a significant role in the growth of Indian economy. The next decade is going to be the decade of City Gas Distribution in India. For GAIL, this would be a continuing journey of creating new economic and social opportunities and developing business competencies.