Election promise makes Jhansi viable CGD proposition

Vol 17, PW 17 (10 Apr 14) Midstream & Downstream

Expect two pipeline tenders from Central UP Gas (CUGL) in the next six months as the company reverses an earlier decision to junk its CGD licence for Jhansi in Uttar Pradesh.

Within the next three months CUGL will tender for pipe, and soon after for a pipeline contractor. CUGL won the Jhansi licence on February 11 last year but quickly backed out saying it couldn’t make money using expensive R-LNG.

But a November pre-election stunt by the Congress-led government declaring that gas retailers would get 80% of demand from cheap domestic gas persuaded CUGL to change its mind. CUGL submitted its bank guarantee to the PNGRB in January 2014 and received authorisation on March 4.

In February this year the government further increased the domestic gas allocation to 100%. “High R-LNG prices make it impossible to sell gas unless you have many industrial customers,” says CUGL.

“But with 100% domestic gas it makes sense.” CUGL must connect 617 households in the first year of operations, laying 23.6-inch km of steel pipeline in a 101-sq km district; in year two CUGL must add 3704 homes and 37.9-inch km of pipeline; in year three it must add another 6215 homes and 10.4-inch km of pipeline.

CUGL must connect another 6585 households in the fourth and fifth years.