Climbing on the CGD bandwagon: ONGC

Vol 14, PW 11 (18 Nov 10) People & Policy

Established retail gas players might tremble with fear when they hear this – a heavyweight is about to enter the ring: ONGC is gearing up to enter the city gas distribution business next year through a possible joint venture with fellow state-owned Bharat Petroleum.

“We believe the CGD (city gas distribution) sector is a good opportunity for us,” confirms a senior ONGC source. ONGC, he adds, has been thinking of formally entering the retail gas sector for nearly two years, but only reached an “in-principle” decision to go ahead this September (2010).

An ONGC committee is currently “studying the CGD business” and has hired consultant AT Kearney to prepare a Detailed Feasibility Report (DFR), at an estimated cost of $384,000. “This study is still ongoing,” we hear, “and the second and final part of the report should be ready by December (next month).

” After the DFR is prepared, ONGC directors will formally consider its city gas committee’s proposals in the first quarter of next year. “ONGC will probably enter the CGD business with BPCL,” we are told.

ONGC signed a MoU with BPCL on February 23 this year, in which the two companies agreed to cooperate to develop city gas networks, lay gas pipelines, market gas and set up CNG stations. BPCL already has stakes in established retail players like Indraprastha Gas where it holds a 22.5% stake; Sabarmati Gas where it holds 25%; Central UP Gas where it holds 22.5%; and Maharashtra Natural Gas where it holds 22.5%.

ONGC also claims it isn’t a newcomer to the retail gas sector, as it already supplies piped gas to several Gujarat factories from its marginal gasfields in the state. But never before has ONGC sold gas directly to homes, businesses restaurants or hotels or as CNG for cars and auto-rickshaws.