Unlocking Upcoming Multimillion Dollar Opportunity in City Gas Distribution (CGD) Sector in India | Analysing 86 Geographical Areas notified under PNGRB Round IX Bidding (2018)

Published: May 2018
No. of Pages: 520
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The City Gas Distribution projects in India are emerging as an important driver for overall natural gas value chain development. The new bidding parameters, diversity & vastness of the notified geographical areas and government's push for a natural gas fuelled nation are indicating towards an enhanced enthusiasm in the upcoming bidding round. However, a major challenge for both experienced bidders and new entrants alike is the development of a robust demand assessment model (baseline and forecasted demand), network layout, technical configuration/simulation and most importantly a bottom-up assessment of viable CNG station location. As experienced before, the biggest ask of bidders (and consultants supporting these bidders) is the limited timeframe for conducting the assessment and putting together a robust strategy for a winning bid.

At Mergen Advisory, we are sensitive t- the needs and concerns of the gas industry, especially when it comes t- an interesting bidding round such as this. The upcoming report, ‘Unlocking Upcoming Multimillion Dollar Opportunity in City Gas Distribution (CGD) Sector in India | Analysing 86 Geographical Areas notified under PNGRB Round IX Bidding (2018)' offers CGD industry stakeholders a strategic insight on the potential & viability of the notified individual geographical areas.

India has sustained a strong economic growth, above XX% mark, since 2014 surpassing China and emerged as a high economic growth nation amongst other emerging and developing economies in the world -

In 2016, India registered a XX% y-o-y growth in GDP at Constant Price, whereas, China stood at XX%. The GDP growth average of emerging and developing economies in the world was XX% (2016). In absolute terms, India's share of Global GDP (at current prices, USD Bn) was XX% (India: XX Bn USD and World: XX Bn USD).

At an impressiveXX% CAGR (2010 - 2016), India's primary commercial energy growth testifies the need for energy (actual XX MTOE, 2016). Natural Gas (actual XX MTOE, 2016) has a number of economic & environmental merits and is als- endorsed the government -

India's commitment towards clean energy and carbon reduction offers a tremendous adoption potential for natural gas by targeting Oil (multiple drivers & incentives for switching over t- gas) and Coal (mostly policy push) - Both having major share in India's total primary commercial energy consumption.

India has been registering a sustained growth in terms of demand for natural gas and its outlook towards sourcing LNG from global supply destinations has been nothing less than promising. The positive sentiments around India's LNG adoption and a key market received a significant push when India (at COP 21, Paris) committed t- reduce its carbon intensity by a third from XXkg per capita of GDP in 2005. All the same, the government's plan t- double the share of natural gas in India's energy mix - from XX in 2015 t- XX% over the medium term goes well with the positive perception of India's outlook towards developing its gas market.

Strong alternate fuel segment consumption growth and regulatory & policy push for City or Local Gas distribution projects by GoI/MoPNG gives significant leverage t- future natural gas penetration via CGD, RLNG Terminals and Gas Pipelines -

India's natural gas consumption is currently driven by the CGD. MoPNG has accorded priority t- PNG (Domestic) and CNG (Transport) segments of CGD sector in domestic gas allocation. At present, domestic gas is being supplied t- meet entire requirement of CNG (transport) and domestic PNG segments based on last six-monthly consumption data by the respective CGD networks. Further, Government has envisaged t- connect One crore households with PNG supplies for cooking purpose by 2020. It has als- been envisaged t- expand the coverage of CGD networks in addition 146 GAs in coming years. Guidelines have been issued for allowing the development of PNG network int- defence establishments across the country. Further, Public Sector Undertakings have been advised t- have the provisions of PNG in their residential complexes.

Despite the regulatory control on the consumption of polluting fuels (Ban on consumption of Furnace Oil and Petcoke in North Indian states), strong growth in alternate fuels are a good indicator for industrial growth. Alternate fuels in transportation sector als- showed a healthy trend which makes a strong case for CGD led investments in the country.

The upcoming CGD Round IX Bidding is different from the previous rounds not just in terms of a change in bidding guidelines and evaluation parameters, but also, in terms of the magnitude of the geographical areas and the way these projects are uniformly covering all regions of the country -

As on December 2017, nearly 31 CGD entities are developing CGD (PNG & CNG) network in 81 geographical areas (mostly on Northern, Western and Southern region) in 21 States/Union Territories. A total number of 32,500 industrial and commercial units are currently connected on a PNG network and around 1282 CNG stations are established overall in India, according t- various public domain sources. Interestingly, of the total 107 geographical areas identified (from CGD bidding round 1 - 8) only 51 geographical areas (roughly 50%) were finally awarded t- successful bidder.

It is important t- note that while most of the existing CGD projects are state or PSU run, the last eight rounds have als- witnessed winning bids from private sector players such as Adani, Sanwariya, Jay Madhok, Mahesh Resources, Megha Engineering, Unison, IRM Energy, Perigon Infratech and IMC limited. All the same, unlike previous round, the CGD round IX bidding includes geographical areas marking each region of the country. The round IX announced list includes 86 geographical areas covering 156 complete districts and 18 part districts.

Published By: Mergen Advisory
Product Code: Mergen Advisory11

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