With the growth in demand from Power, Fertilizer, city gas etc and the presence of several forces, scenario and scope of natural gas sector is changing. With a growing concern for climate change, emphasis on clean energy is increasing and natural gas thus has been assuming a great significance. At present, demand is coming predominantly from the fertilizer and power sector while the demand from city distribution and petrochemicals is comparatively lower. Once natural gas picks up on these sectors the demand will shoot up. Such a rapid rise in expected demand and re-alignment of sources of gas supply will interact to determine the robust future gas industry structure. Companies operating in this sector are continually trying to tap new sources.
The sector on the whole is becoming competitive and multiple players are emerging in the industry. Yet, gas distribution is majorly under the control of GAIL. It controls over 70% of the market along with substantial equity stakes in other players operating in the industry such as Indraprastha Gas and Petronet LNG.
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Gail owns and operates a network of over 7000 km of natural gas high pressure trunk pipeline with a capacity to carry 148 MMSCMD of natural gas across the country. It supplies nearly 82 million cubic metres of natural gas per day as fuel to power plants, as feedstock for gas based fertilizer plants and to over 500 other small, medium and large industrial units.
- GAIL Gas Ltd.: For implementation of City Gas Distribution projects, GAIL has incorporated a wholly owned subsidiary, GAIL Gas Ltd.
- BCPL: 70% equity stake with GAIL, 10% share each with OIL, Numaligarh Refinery Ltd. (NRL), Govt. of Assam.
- Avantika Gas Ltd.: joint venture of GAIL and Hindustan Petroleum Corporation (HPCL). 22.5% equity stake with HPCL as equal partner.
- Bhagyanagar Gas Ltd. (BGL): 22.5% equity stake with HPCL as equal partner.
- Central U.P. Gas Ltd. (CUGL) and Maharashtra Natural Gas Ltd. (MNGL): 22.5% stake along with BPCL as equal partner.
- Green Gas Limited (GGL): 22.5% stake along with IOCL as equal partner.
- Mahanagar Gas Ltd. (MGL): 49.75% stake along with British Gas as equal partner.
- IGL: 22.5% stake in the company along with BPCL as equal partner.
- Petronet LNG Limited (PLL). 12.5% equity stake in the company with BPCL, ONGC, and IOCL as equal partners.
- Ratnagiri Gas and Power Private Ltd. (RGPPL): 28.33% stake in company along with NTPC as equal partner.
- Tripura Natural Gas Company Ltd. (TNGCL): 29% stake in company.
- GAIL China Gas Global Energy Holdings Ltd: 50% equity interest in the company along with China Gas as equal partner.
IGL operates is in retail gas distribution business supplying CNG to transport sector and PNG to domestic and commercial sectors. It caters to around 1.33 lac domestic, 313 commercial, 15 small industrial consumers and CNG to over 2.5 lac vehicles through 164 CNG stations in Delhi.
GAIL is the sole supplier of natural gas to the company. Since GAIL is one of the promoters of IGL, the company is unlikely to face any kind of stoppage of disruption in the supply of natural gas.
Gross turnover of for the year ended March 31, 2008 has shown a growth of 14.5% over the previous year turnover. The profitability of the Company also improved as Profit after tax has shown a growth of 26.4%. The improvement in profitability is mainly due to continued efforts of management to augment infrastructure for growth, increased sales and cost control measures taken by the Company.
Petronet LNG Limited (PLL):
PLL was formed for setting up of LNG import and re-gasification facilities. Petronet LNG was the first to import LNG into the country. PLL has a long term LNG supply contract with Ras Gas and Qatar, for import of 7.5 MMPTA of LNG.
An important point to note with respect to LNG is that there are substitutes for LNG such as Naphtha, Coal, Fuel Oil and other similar hydrocarbons. If the prices of these alternate fuels decrease then it can put a price pressure on PNG suppliers and may have an adverse impact on future growth.
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All the major players in the Indian Hydrocarbon Sector have evinced interest in entering the natural gas business. Commencement of natural gas production from the Krishna Godavari-D6 block and availability of gas from new discoveries in Krishna Godavari & Mahanadi Basins would increase domestic supply which may put some pressure on imported LNG. Several Indian and multinational companies are extending their presence in the Indian market and are expected to pose competition across the gas value chain in the foreseeable future. Your Company is fully prepared to face the competition.
Gujarat Gas Ltd:
Gujarat gas ltd is India's largest private entity in terms of volumes in catering to the city gas distribution. However, the company enjoys only 4% of the market share. The company faces a major constraint in terms of the supply of gas. The sector is highly regulated and government issues directive under which companies are nominated to distribute a certain volume of gas. It would be interesting to note that GAIL was nominated by the government to sell the entire gas produced from PMT (Panna-Mukti Tapti fields near the giant Bombay High Field). After prolonged engagement with GAIL, Gujarat Gas was allocated 2.13 MMSCMD of gas. This brings out three important points:
- GAIL enjoys immense support and preference of government.
- The growth of Gujarat Gas is dependent on availability of additional gas.
- Gujarat Gas was able to get some share of gas after negotiation which is a positive sign for the company. It shows the potential of the company in terms of getting the supplies and building goodwill in the sector. Any company that is supported by GAIL would gain well in the long term.
The company has made applications under the appropriate sections of the Regulatory provisions for the grant of authorization to operate in and around areas of Surat, Bharuch, Ankleshwar and Vapi. the company expects the grant of regulatory license in the areas that it has applied for. The company is already authorized by government to operate in the cities if Surat, Bharuch and Ankleshwar.OVERALL ANALYSIS: As it can be seen, the main companies in gas distribution sector are spanning over natural gas distribution. LNG and CNG catering sectors like fertilizers, power, and city gas distribution. However, GAIL is the sole supplier to the major players in the industry. In addition to supplying gas to other firms, it also has its own network through which it controls a major share in the distribution industry as well. It has an equity stake in companies such as IGL and Petronet LNG.
- The sector is highly dependent on supply of natural gas. The existing players are also not able to expand because the demand exceeds supply and getting the permission and access to supplying natural gas is not easy.
- GAIL is spread over the country. Rest of the players are mostly operating at the state level. Gujarat Gas Ltd. has its hold in Gujarat; IGL has its hold in NCT Delhi and so on.
- Players like these are fulfilling demand only from the domestic sector mainly such as city gas distribution. This can be attributed to the limited supply.
- The players other than GAIL are concentrating on only one form of gas such as CNG and PNG for IGL and LNG for Petronet LNG.