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January 16, 2009

The race to pipe gas

Outlook Business has a cover story on how the discovery of new sources of natural gas will have a profound impact on the energy economy of India by 2012 and the rivalry between Reliance Industries and the public sector GAIL to pipe gas into homes.
In July 2008, about 775,000 households in 19 cities across India were receiving piped gas. Those numbers are set to explode in the next five years—about 70 cities and 30 million households. Bids are being invited for distribution of natural gas in cities, and the first award of six cities should happen in March. Every company of any significance in the gas business is interested—biggies like GAIL and Reliance Industries, mid-level players like Gujarat Gas, fringe players like Sabarmati Gas and Haryana Gas. At a minimum investment of Rs 200 crore per city, city gas distribution (CGD) could see an investment of Rs 14,000 crore over the next five years.

...The first piece is a manifold increase in gas output. India has seen a lot of gas finds in the past few years. Reliance Industries, ONGC and Gujarat State Petroleum Corporation (GSPC) have struck gas in the Krishna-Godavari Basin off Andhra Pradesh. ONGC has found some in the Mahanadi Basin adjoining Orissa, in addition to what it is already pumping from Mumbai High and Ankleshwar off the Western Coast. Cairn Energy has fields off Gujarat and Andhra Pradesh.

...PNGRB is targeting CGD bidding in 200 cities by 2012. For most cities, it will be a head to head contest between Reliance and GAIL. Both have bid for all six cities available in phase-I. In the second phase, Reliance has shown interest in 61 cities; GAIL in 30, though it could end up bidding for more.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in