ASSAMGAS COMPANYLTD

GASEOUS FUEL RETAILINGNORTH EAST

2nd NOVEMBER 2010

Kunal MazumderAssam Gas Company Ltd

Duliajan Assam

SPECIAL TRACK ONFuel Retailing – Pricing, Technology & Emerging

Business Models

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CONTENTS

• Assam Gas Company Ltd

• Operational Area

• Sectors : Consumers

• Gas Retailing in North East : Issues

• Challenges & Opportunities

• Gas Retailing : Present Scenario

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Assam Gas Company Ltd

• A Govt of Assam undertaking set up in 1962

• Located in upper Assam in the north eastern fringe of India

• Natural Gas transmission & distribution business since 1967

(Probably the first company in India to do so)

• Small Capital base of Rs 20.00 Crore

• Annual Turnover of Rs 170.00 Crore

• Assets in excess of Rs 230.00 Crore

• Daily gas handling averages 6.0 MMSCMD

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Joint Ventures : TNGCL

• Established Tripura Natural Gas Co Ltd (TNGCL) at Agartala with TIDC in 1989.

- Investment of Rs 25.00 Lakhs

- Present stake 10%

• The only other company in gas retailing in North East

- 7000 domestic & over 100 commercial consumers

- 2 CNG stations servicing nearly 2000 autos & light vehicles

(only CNG stations in North East)

- 20 industrial consumers

• 260 kms of PE & 2 kms of steel pipelines

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Joint Ventures : DNP Ltd

• Established DNP Ltd in 2007 along with OIL and NRL

- Project Cost Rs 346.00 Crore

- Investment of Rs 68.80 Crore

- Present Stake 51%

- Project being implemented with AGCL personnel

• 200 kms 16” dedicated pipeline from Duliajan to NRL

- 3 Nos of compressor units installed at Madhuban(Duliajan) to supply 1 MMSCMD of natural gas

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List of Firsts

• A dedicated gas transmission & distribution company since 1967

• First in Asia to supply natural gas for power generation to a thermal power station (NTPS, Namrup)

• Pioneered supply of piped natural gas to domestic consumers in 1985

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Limited Geographies

• In the 1970s, Natural Gas was produced primarily in Assam and Gujarat in India

• OIL and AGCL joined hands to utilize this natural gas and reduce flaring

• Operating only in areas where natural gas is available, namely

five districts of upper Assam & in Barak Valley of south Assam

• Earlier usage of Natural Gas was limited to geographies where it was easily available. In Assam, situation has not changed.

• Gas finds and present availability do not justify laying of long distance pipelinesin the region

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Operational Area

Current operational area

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Infrastructure

• Steel pipelines of 800 + kms

• PE pipelines of 2000 + kms

• Gas Booster Stations at Duliajan & Golaghat capable of supplying 5.47 MMSCMD and 0.60 MMSCMD respectively

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Sources

Supplier offtake points Allocation

• Oil India Ltd., Duliajan 10 in upper Assam 5.08 MMSCMD

• ONGCL 3 in upper Assam 0.0355 MMSCMD

• ONGCL 2 in Cachar 0.150 MMSCMD

• CRL 1 in Amguri 0.070 MMSCMD

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Sectors : Consumers

6.048TOTAL

OIL & CRLTea & Town0.628Upper AssamTEA & TOWN8

OILE&P0.70DuliajanOIL7

OILPetrochem0.15NamrupAPL6

ONGCLPower0.15SilcharEIPL (DLF)5

OILPower1.40KathalguriNEEPCO4

OIL & CRLPower0.50LakwaASEB(LTPS)3

OILPower0.80NamrupASEB (NTPS)2

OILFertilizer1.72NamrupBVFCL1

SupplierType of IndustryBooked

Quantity

MMSCMD

LocationName of the

Consumer

Slno

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Gas Retailing in North East : Issues

• Landlocked area with limited availability of gas

• Difficult terrain and short working season

• Socio political sensitivities add to overall cost

• Infrastructure cost & ability to pay reasonable cost for product and service

• Major gas based industries concentrated near Duliajan / Namrup in upper Assam

• Towns are spread out with low household density

• Despite the issues compounding the situation, there is an increasing demand for natural gas in this region

• AGCL has the necessary experience to operate in this scenario

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Gas Retailing : Present Scenario

• Tea Factories : over 350 consumers

• Town Gas Supply : over 22000 domestic and 650 commercial consumers spread over 10 towns in upper Assam. All these towns are in the operational areas of mainly OIL and ONGCL

• Together their consumption is only 0.628 MMSCMD. All towns together consume only 36000 SCUM per day

• Tea Factories operate for nine months only and all are closed during the three winter months Dec ~ Feb

• In nearly all cases, small quantities of stranded associated gas is being used

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Challenges : Gas Retailing to the Tea Industry

• Stranded associated gas which was otherwise being flared is mainly used for the retail business. Consumers used to low cost gas are not willing to pay present market rates.

• In most places outside North East, industries are usually located close to each other in industrial parks / areas where gas delivery is easier.

• The 350 + tea factories currently using gas from AGCL are spread over 5 districts with several kms separating each factory from the other. Most of thesefactories are deep in the hinterland away from trunk pipeline routes.

• Moreover the tea industry is seasonal : their demand peaks at the same time within the day, have the same weekly off day, demand gradually increases from April peaking during August and rapidly tapering off and close for the winters in December.

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Challenges : Gas Retailing to Town Consumers

• Each of the ten towns where piped natural gas is being supplied are small.

• Very few high rises (2+ storied !)

• Large number of consumers’ houses are like bungalows with large front yard and kitchen at the tail end of the premises

• High infrastructure cost of supplying gas.

• No demarcated tracks for utility services in towns

• Since alternative non gaseous fuels are easily available, cost becomes an important determinant for the consumer.

• No industrial parks near the towns

• Commercial vehicles such as Autos are diesel driven and therefore conversion to CNG low possibility. No CNG stations in Assam as yet.

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PNG & LPG

• PNG viable in areas where :

- population density is high

- gas is available at reasonable cost

• PNG usage can help release LPG for areas having low population density

• Use of PNG can reduce the burden of subsidy on LPG for domestic use

• Use of PNG can reduce black marketing of LPG cylinders

• PNG usage can reduce dependence on wood and coal for domestic use

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Challenges & Opportunities

• Demand pockets exists within operational areas but volumes do not justify laying of pipelines. Transportation costs will be very high.

• Laying pipelines across rivers for low quantities of gas not viable

• Good demand exists in non operational areas but where is the gas going to come from ?

• Existing producers unable to commit even 1.0 MMSCMD. New gas finds at market rates are in ‘000s SCMD.

• Gas to Guwahati :

- High demand from residential and commercial establishments

- Industrial estates within and near the city

- Stranded power plant near Guwahati without any viable fuel to run it

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Supply Infrastructure & Growth

• Existing gas pipeline extends only 200 kms westward from Duliajan.

• At least 800 kms of trunk pipelines required to cover the south bank of river Brahmaputra upto Guwahati where major towns are located and the north bank beyond Guwahati upto Bongaigaon.

• To connect with national gas grid at Siliguri in West Bengal

• High volume of investments required in transportation via pipelines

• Current additional demand excess of 3.0 MMSCMD

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Proposed Trunk Lines

Numaligarh - GuwahatiNorth BankGuwahati - BongaigaonBongaigaon - Siliguri

LINK UP WITH ARAKAN GAS

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Opportunities

• Procure gas from outside the landlocked region :

- Connect to national grid through pipelines ? High investment !

- Imported LNG Route : No LNG terminal as yet in eastern coast

- Gas from Bangladesh ? Political decision required at highest levels

• Small mobile LNG plants in upper Assam to move stranded gas

- Road shipment of LNG to demand centres

- Regassification at receiving point

- Cost to consumer will be high

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Opportunities

• Seek partners to build pipelines to connect to national grid and make natural gas available in other parts of the North East

• Potential areas : Nagaon, Jagiroad, greater Guwahati, Bongaigaon in Assam

Byrnihat in Meghalaya

Dimapur in Nagaland

• Due to perpetual shortage of LPG cylinders, huge market exists for PNG in the domestic and commercial sectors

• Open up the CNG as automotive fuel in the entire North East using LNG

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Strategic Steps

• AGCL may seek strategic alliance with companies such as GAIL to be its partner in the North East to connect to National Gas Grid

• Benefits :

- Availability of imported gas through proposed LNG terminal at east coast

- Linkage with National Gas Grid thru’ GAIL’s network

- Make gas available to western & central Assam

• Request Govt of India for

- Viability Gap Funding

- Upfront Capex Subsidy

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Thank You

Kunal MazumderAssam Gas Company Ltd

P.O. Duliajan Assam