domestic fuel retailing challenges

7/31/2019 Domestic Fuel Retailing Challenges

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Domestic PNGChallenges

Sanjay Srivastava, GM (Marketing)

Mahanagar Gas Ltd, Mumbai


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Present Energy & CGD Scenario

Overview of MGL

Opportunities

Domestic PNG Challenges

Need for Policy and Regulatory Measures

Conclusion

Contents


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Per capita energy consumption

(Source: Infraline))

(In KG of oil equivalent)

1068

2968

457

4423

512

7795

1575

0

1000

2000

3000

40005000

6000

7000

8000

Brazil Ukraine Pakist an Russia I ndia US Argent ina


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Natural Gas consumption & share of house hold NG usage in various

countries

(Source: EIA)

(figures in BCM)1 BCM = 2.8 MMSCMD/ year

200 .4

66

14.5 315 .5

481

178

42

0.25

653

137

44

11

0

100

200

300

400

500

600

700

Brazil Uk raine Pak ist an Russia I ndia US Argent ina

NGConsumptionHouse holdconsumption


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CGD Demand Potential in India

in MMSCMD

42

230

64

Household

Transport

Industries & Commercial

Number of Towns as per 2001 Census -4378 nos.

Projected Population as on 2010 - 34.7Crores.

Number of Household - 6.94 Crores.

Unit Demand/Household 0.6 SCMD.

Total demand of NG in Household is 42MMSCMD i.e. 13% of the total demand of

336 MMSCMD.


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CGD in India Snap Shot

About 22 entities are in CGD business.

CGD infrastructure available in 42 cities

and 20 more are being constructed.

Over 12 lakh domestic and 14,400 I & Cconnections. CNG supply to over 10.27lakh vehicles.

Total Natural Gas Consumption byoperating CGDS is over 12.09 MMSCMD.

GOI has plans to implement CGDs in

approx. 250 cities/ towns in next fiveyears.


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CGD Present Scenario

Overview of MGL

Opportunities



Conclusion

Contents


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Current Operational Areas and Expansion Area

Since2004

Since1995

Since2007

Expected

by 2012


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MGL Growth Profile Domestic Consumers

100 3000 5000 10114

30070 50045

103516

168047

195054

221390

254354

293302

345793

385585

442417

'95-96

'96-97

'97-98

'98-99

'99-00

'00-01

'01-02

'02-03

'03-04

'04-05

'05-06

'06-07

'07-08

'08-09

'09-10

Domestic Consumers

MGL has created infrastructure to connect over 1 Million customers


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Key Success Factor for MGL

Demographic and Psychographic Profile of Mumbai.

Vertical Housing - More connections with relatively less pipelines as compared

to other CGDs

Nuclear family - Convenience is priority

Mumbai biggest metropolis and high consumption centre.

Expertise of GAIL & British Gas.

Availability of APM gas.

Proximity to gas production centre (Bombay High).

Constraints in supply chain of LPG facilitated usage of PNG.


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Key Challenges for MGL

Delay in execution of work owing to delay in grant of permission byAuthorities.

Many railway lines and highway crossings.

Large areas under encroachment and technically not feasible.

High reinstatement charges (around 2.5 times from 2005 level).

Narrow corridors, crowded with utilities.

Edge to edge concrete road.


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Overview of MGL

Opportunities



Conclusion

Contents


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Opportune time for PNG business

Facilitation by Government for usage ofcleaner and safer fuels.

Increased source of natural gas bothindigenous and imported.

Available Natural Gas pipeline network is11,000 km, additional 8000 km is plannedin XIth plan.

Regulatory framework is in place fordeveloping market for City GasDistribution.

Increased awareness about environment,

health and safety among the house holds.

Increasing household Income levels Scope for promoting various applicationsof NG is high.


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Domestic PNG Benefits to various Stake holders

Domestic PNG Key Stake Holder

End users Individual, Housing

Societies, Builder, Institution

Company City Gas Distribution,

Transmission Company, E&PCompany, LNG Importer

Government

Benefits to key stake holders

Safe, convenient, continuous,

hassle free and versatile fuel. Value addition to property.

Payment after usage.

Better family safety viz aviz LPG.

Perpetual revenues.

Sustained business growth.

Assured demand quantities.

Energy Security.

Fuel Distribution parity.

Balance of payments.

Employment opportunities.


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Overview of MGL

Opportunities



Conclusion

Contents

D l t f D ti PNG B i Ch ll


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Development of Domestic PNG Business Challenges

PNG relatively new concept when compared to LPG -Safety & Reliability is the major concern of prospectivecustomers.

No subsidy in the Gas price little incentive for acustomer to switch over to PNG.

High upfront cost of domestic PNG connection.

Late entrant amongst utilities - Clear corridor notavailable.

Limitation to reach every household of the city PNGconnection only for permanent structure.

Non transferability (shifting) of Domestic PNGconnections.

D l t f D ti PNG B i Ch ll


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Development of Domestic PNG Business Challenges..

Maintaining high level of customer services standards by projectexecution team.

High maintenance requirements due to static connections andclimatic conditions.

Permissions required from multiple authorities. Time taken is inmonths to years. Crowding of all utilities work in post monsoonperiod.

Limited opportunity for enhancing gas consumption per capitaenergy consumption is less as compared to developed countries.

- Space heating cannot be considered as a component for gas salesenhancement due to sub tropical climate of India.

- Air conditioning in India is still a luxury, confined to small fraction ofhouse holds.

- Approx. 70% of population of India resides in rural areas, where bio mass/cow dunk cakes are still most dominant domestic fuels. CGD infrastructuredevelopment in small towns may not be commercially feasible at this pointof time.

D l t f D ti PNG Ch ll t t


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Development of Domestic PNG Challenges to meetcustomer aspirations

Delivery commitments.

Technology for enhanced customer base.

Value added services.

Latest communication technologies forcustomer delight.

Higher vigilance/ Awareness to curtail

fraudulent activities.

Customization of processes.


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Overview of MGL

Opportunities



Conclusion

Contents

Need for Policy & Regulatory Measures


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Need for Policy & Regulatory Measures

Need to align indigenous gas field production with project execution schedules oftransmission and distribution infrastructure ensure gas reaches to consumers in theshortest possible time.

Priority to be given for domestic PNG in gas utilization policy.

CGD has a low priority as per gas utilization policy but entity to secure gas supply withtop priority for Domestic PNG.

Need to encourage investment in domestic PNG by providing right mix of potential of

domestic, industrial-commercial and transport segment.

Need differential pricing for domestic PNG segment.

Creation of exclusive corridors for gas pipeline.

Grant of essential utility services status to Domestic Piped Natural Gas.

Single window system should be promoted by the Government for all the Statutoryclearances to the entity.

Ways for Developing Domestic PNG Market


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Ways for Developing Domestic PNG Market

CGD network planning needs to be undertaken early on as part of the city developmentplan.

Natural Gas applications (CCHP solutions, gas geysers, gas air conditioners) need to

be promoted since inception stage.

Adoption of optimum gas sourcing strategy.

Effective Marketing Communication for generating interest amongst the customers.

Reticulated system should be promoted to enhance the productivity in Domestic PNGconnections.

Adopting latest technology

ERP Solution IVR solution

Emergency handling system

Network Monitoring system.

C t t


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Overview of MGL

Opportunities



Conclusion

Contents

Conclusion


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Desp i t e a l l t h e ch a l leng es, Dom est i c PNGsegm en t o f Ci t y Gas D ist r i bu t i on r em a ins a l uc ra t i ve bu siness p r ospect , as i t p r ov ides

Su s t a in a b i l i t y a n d Br a n d t o CGD Co m p a n i es.

Dom est i c PNG segm ent act s as a cu sh ion in

secu r in g sup p l i es o f Na t u r a l Gas.

Do m e st i c PN G m a y n o t b r i n g h i g h p r o f i t s m a r g i n s b u t i s a v er y cr i t i ca l se g m e n t d u e t o i t s h u g e

so ci o- p o l i t i ca l i m p a ct s.

Conclusion


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Share of NG in energy basket & corresponding household consumption


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Share of NG in energy basket & corresponding household consumption

NG Share in Energy Basket

7%

50% 50%

55%

9%

25%

0%

10%

20%

30%

40%

50%

60%

Brazil Ukraine Pakistan Russia India US

House hold usage as a percentage of Total NG

usage

2%

22%18%

37%

1%

21%

0%

5%

10%

15%

20%25%

30%

35%

40%

Brazil Ukraine Pakistan Russia India US

domestic fuel retailing challenges

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