Indraprastha Gas needs no magic potion

Vol 14, PW 12 (02 Dec 10) Midstream & Downstream

Comic book heroes like Asterix and Obelix drink magic potion to become invincible.

In the real world, potions are in short supply, but Delhi’s sole gas retailer Indraprastha Gas (IGL) has an even better idea. After January 2012, IGL will no longer have exclusive gas marketing rights for Delhi, which it has held since India’s gas regulator began working in 2007.

But IGL is planning ahead and plans to sign ‘exclusivity agreements’ with its major CNG buyers, ensuring that these buyers continue to buy CNG only from IGL in the future. “We are immune to competition,” boasts a top IGL source confidently.

“Losing ‘marketing exclusivity’ will not affect our business even 1%. Our business is 100% secure.

” Currently, he explains, IGL sells 1.7m kg/day of CNG in Delhi. Of this 16% is sold to state-owned Delhi Transport Corporation (DTC) for its public transport buses, while 16% is sold from petrol pumps run by IndianOil, Hindustan Petroleum and Bharat Petroleum.

“The rest is sold from our own outlets,” we learn. DTC is now prepared to sign a 10-year exclusivity agreement with IGL, while IOC, HPCL and BPCL are set to sign similar five-year agreements.

“As for our business selling piped gas to households, factories and commercial establishments (like restaurants and hotels),” says IGL, “we are confident nobody can touch it. Our margins are very thin and nobody can match us, especially considering the (aggressive) way we have sourced gas.

” IGL says it has tied up all necessary gas supplies for its Delhi operations, through till 2025. It also believes its gas sales volumes should rise by 25% every year.

In five years, IGL could be selling as much as 7m cm/d in Delhi as CNG and piped gas. It believes there is “good scope” for gas sales to ‘co-generation’ and ‘captive power’ stations in Delhi and also hopes to supply gas to fuel ‘distributed power systems’ in residential estates.

“These new ‘business lines’ could contribute 10% of our revenues within the next five years,” says IGL.

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