The ambitious plan of the petroleum ministry to connect over 300 towns in the city gas distribution (CGD) network is facing an uncertain future due to acute shortage in gas supply and regulatory constraints in laying of pipelines.
Regulatory challenges in the transmission and supply of piped natural gas for cooking and CNG for the transport sector and infrastructural bottleneck to bring more gas from abroad is threatening to derail the expansion of the CGD network. While the petroleum ministry, through the Petroleum and Natural Gas Regulatory Board (PNGRB), is set to conduct competitive bidding to cover the 300 towns and cities soon, experts said implementing the project will be a tough task.
Currently, only around 50 cities and towns are connected under the CGD network.
Though the government has laid out ambitious plans, the regulatory challenges faced by the sector would come in the way of achieving the target, experts said. Currently, around 13,000 km of the cross-India pipeline network excludes a large part of the country, especially the southern and eastern regions.
?We are getting authorisation from PNGRB to lay pipelines. So far, we have laid down 12,500 km of pipeline. In the absence of the national gas grid the sector will continue to face a huge challenge,? said Gail India projects director RD Goyal.
The CGD also faces challenges in sourcing gas for networks. The constant decline in output from Reliance’s KG-D6 field has compelled the government to cut off gas supply to priority projects like CGD in addition to sectors like power and the steel. Reliance had committed to drill 31 wells and produce 80 million metric standard cubic metres per day (mmscmd) of gas, but the current output is less than 29 mmscmd.
In the absence of domestic gas, the country is now relying on sourcing highly expensive liquefied natural gas (LNG). The spot price of the cargo is currently at $15-16 per unit and even the long-term contracts are priced high as it is linked to crude.
?Gas price is going to be a big question; unless the government allows priority-sector lending to CGD, it will have to depended on spot gas,? Goyal said.
Despite the hurdles, the country’s largest oil explorer ONGC has plans to foray into the CGD business and in selling imported LNG.
