Oil regulator to rationalise gas pipeline tariff by aligning transport cost

Oil regulator PNGRB is seeking to rationalise natural gas pipeline tariff structure so as to increase usage of environment-friendly fuel by aligning charges paid for transporting the fuel with the best global practices.

The Petroleum and Natural Gas Regulatory Board (PNGRB) is seeking bids for the appointment of consultants for the job, saying the government has envisaged ushering into a gas-based economy by increasing the share of the fuel in primary energy mix of the country from current level of about 6 per cent to 15 per cent by 2030.

This is to be done by increasing the availability of natural gas by enhancing domestic gas production, encouraging the import of Liquefied Natural Gas (LNG), completion of national gas pipeline grid (NGG) and speedier roll out of city gas distribution networks, it said.

Presently, the country has a network of 16,981-km of pipelines, with each having a different tariff. The present tariffs policy provides for lower transportation charges in the area closer to the source of gas and this progressively increases that leads to a scenario where the users in hinterland pay extra than those on the coast.

"PNGRB proposes to hire a consultancy firm to provide assistance in analyzing different options for rationalization of natural gas pipeline tariff structure, reviewing international practices adopted on natural gas pipeline tariff design/ determination in USA, Australia, Japan, Russia, UK, and EU nations, and suggest the best-suited tariff mechanism in Indian perspective," the regulator said.

In the tender inviting bids, it said the consultant will also review current regulations and draft of new proposed regulations.

The move by PNGRB follows the government in October seeking a concept paper on rationalization of natural gas pipeline tariff structure and framing new tariff regulations.

The consultant will have to review international practices and identify the challenges present tariff regime in India poses to the growth of pipeline infrastructure.

"A matrix will be created to identify a model best suited for the Indian scenario," it said, adding the tariff structure needs to provide reasonable returns to entities building pipelines and promote the development of the gas infrastructure, while at the same time developing a pan-India gas market.

The public consultation will be done on the tariff structure proposed by the consultant, following which IT-based tools will be developed for implementation of the regulations, it added.

This exercise is in parallel to the mandate PNGRB has given to global consultancy ICF for carrying out an assessment of India's natural gas demand and the infrastructure needed to unleash the country's massive pent-up requirement, its Chairman Dinesh K Sarraf said.

Natural gas -- which has far lower emissions compared to alternate liquid fuels such as petrol and diesel used in automobiles and naphtha and coal burned in factories -- makes up for just 6.2 per cent of all forms of energy consumed in the country. This compares to a global average of 24 per cent.

One reason for the low use of environment-friendly fuel is inadequate domestic gas production and the lack of infrastructure, particularly pipelines to carry the fuel to end-users.

"We have engaged ICF to do a comprehensive assessment of demand and infrastructure needed," Sarraf said, adding the report is expected by mid-2020.

India consumed 166 million standard cubic meters per day of gas during the 2018-19 fiscal year, mostly in western and northern India as east and south were barely connected with the pipeline grid. The consumption does not reflect demand as some demand centres do not have access to gas.

ICF has been asked to study gas demand in different regions as well as the ideal locations for constructing liquefied natural gas (LNG) import terminals, he said, adding the consulting firm would also look at the pipeline network needed to connect the gas source to users.