History in the making as Board prepares gas licences

Vol 12, PW 21 (26 Mar 09) Midstream & Downstream

History will be made in a few days when India’s downstream and gas regulator issues licences for retail gas networks in six towns: Meerut, Mathura, Kota, Dewas, Sonipat and Kakinada.

These will the first licences issued by the Petroleum and Natural Gas Regulatory Board since its inception in October 2007. Indications are that financial bids will be opened on (Friday) March 27 or early next week.

Bids were received on March 3 and the regulator has promised to issue licences for each town within 30 days. Sonipat in Haryana, on the outskirts of Delhi, received the most attention with bids from Bharat Petroleum with Cairn India; Indian Oil with Adani Energy; GAIL Gas; Indraprastha Gas; and little-known Infratech.

GAIL Gas was the only bidder for Mathura, where the award is likely to be delayed by one month because it is the sole bidder. Kakinada received bids from Hyderabad-based Bhagyanagar Gas and, predictably, Reliance Industries, with its abundant D6 gas nearby.

IGL, GAIL Gas and IOC with Adani are competing for Meerut, while GSPC Gas has made a surprise foray out of its traditional base in Gujarat to bid for Dewas in Madhya Pradesh against GAIL Gas and IOC with Adani. GAIL Gas, IOC with Adani and BPCL with Cairn are bidding for Kota.

After they get the licence, winners will have six months to firm up gas supply and transmission arrangements and nine months for financial closure. Gas sector observers are disappointed with the response.

“If you consider that IGL and GAIL Gas have the same parent, this first round attracted just five companies,â€‌ we hear, “a very low number.â€‌ Going by the poor response to this round, the second round risks even fewer bidders.

Why Many prospective bidders are discouraged because of the regulator’s bias for piped gas connections to households. “They don’t understand that household gas connections do not generate profits,â€‌ we hear.

“Industrial and commercial connections generate profits; the only towns that attracted good bids are the ones where industrial and commercial users can cross-subsidise household gas users.â€‌

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