Authorizing Entities to lay, Authorizing Entities to lay, build, operate and expand build, operate and expand

Natural Gas Pipelines Natural Gas Pipelines regulations, 2008regulations, 2008

Notification date: 6th May 2008Notification date: 6th May 2008

2. 2. DefinitionsDefinitions::

nn “economic life”: twenty five years. extension for ten years “economic life”: twenty five years. extension for ten years depending on satisfactory service obligations depending on satisfactory service obligations

nn “Natural Gas pipeline” : pipeline including spur line , “Natural Gas pipeline” : pipeline including spur line , compressors, storage facilities, metering units etc. compressors, storage facilities, metering units etc. excluding dedicated pipelines and CGD network.excluding dedicated pipelines and CGD network.

nn Tariff zone Tariff zone

(i) length of 300 Km. along route of P/L.(i) length of 300 Km. along route of P/L.

(ii) a corridor upto 10% of total length of the NG p/l (ii) a corridor upto 10% of total length of the NG p/l without including spur lines OR 50 Km. on both sides without including spur lines OR 50 Km. on both sides whichever is lower.whichever is lower.

Tariff to be uniform throughout the zone.Tariff to be uniform throughout the zone.

Each subsequent zone shall be 300Km. last zone is the Each subsequent zone shall be 300Km. last zone is the balance length.balance length.

Tariff zonesTariff zones

NG P/L

300 Km.

Initial point

Zone 1

Zone 2

Zone 3

Zone 4

End Point

Lesser of 50 Km. or 10% of P/LLength ( spur lines not incl.)

Natural Gas Pipeline

300 Km

300Km.

250 Km.

3.3. Applicability:Applicability: to entity (a) which is / proposes laying , to entity (a) which is / proposes laying , building, operating and expanding (b) which proposes building, operating and expanding (b) which proposes or is directed to convert a dedicated pipeline to natural or is directed to convert a dedicated pipeline to natural gas pipeline.gas pipeline.

4.4. Initiation of proposal through expression of Initiation of proposal through expression of interest route or suointerest route or suo--motu by Boardmotu by Board.(.(1)Entity1)Entity--Schedule A with fees. (2) Board may suoSchedule A with fees. (2) Board may suo--motu initiate motu initiate a proposal inviting entities to participate.a proposal inviting entities to participate.

5.5. Criteria for selection of entity for expression of interest route :Criteria for selection of entity for expression of interest route :

(1)(1) EOI fulfills criteria and requirements in schedule A, EOI fulfills criteria and requirements in schedule A, -- open open advertisement , commencement of public consultation period of 30 advertisement , commencement of public consultation period of 30 days.days.

(2) (2) Web hosting of comments Web hosting of comments

(3) (3) Within 45 days after public consultation period Within 45 days after public consultation period

(a) reject EOI (a) reject EOI

(b) not allow if better met by existing pipeline or its expansion (b) not allow if better met by existing pipeline or its expansion

(c) to go ahead with/ without modifications.(c) to go ahead with/ without modifications.

Guiding objectives: Guiding objectives:

(i) promoting competition (i) promoting competition

(ii) avoiding infructuous investment; (ii) avoiding infructuous investment;

(iii) maintaining/ increasing supplies, equitable distribution (iii) maintaining/ increasing supplies, equitable distribution

(iv) Protecting customer interests (iv) Protecting customer interests

(v) incentivizing development of infrastructure.(v) incentivizing development of infrastructure.

(4)(4) Go for Go for TenderingTendering

(6) scrutinize bids if (6) scrutinize bids if

(a)(a) application fees is paid ( Trunk line> 500 Km. = 20 Lacs)application fees is paid ( Trunk line> 500 Km. = 20 Lacs)

(b)(b) technical capability for laying and building (own, JV, technical capability for laying and building (own, JV, PMCPMC-- lump sum, technically qualified personnel)lump sum, technically qualified personnel)

(c)(c) technical capability for O&M technical capability for O&M

(d)(d) agreement to abide by technical / safety regulations agreement to abide by technical / safety regulations

(e)(e) adequate financial strength adequate financial strength

(f)(f) being a registered company (under Companies Act 1956) being a registered company (under Companies Act 1956)

(g)(g) credible plan for utilization of capacity credible plan for utilization of capacity

(h)(h) bid bond determined as per length of pipeline. bid bond determined as per length of pipeline.

(i)(i) should not have been imposed penalty or punished under should not have been imposed penalty or punished under PNGRB Act.PNGRB Act.

Financial StrengthFinancial Strength

Range of estimated P/L Range of estimated P/L length including spur lines length including spur lines (Km.)(Km.)

Min. combined net worth Min. combined net worth available for investment in a available for investment in a single NG p/L (Lakh single NG p/L (Lakh Rupees per Km.)Rupees per Km.)

1751 and above1751 and above 7575

10011001-- 17501750 7070

250 250 -- 10001000 6060

Up to 250Up to 250 5050

(a)(a) extra capacity in NG P/L =25% of total capacity extra capacity in NG P/L =25% of total capacity (33% of entity’s own req.+ firmed up contracted ). (33% of entity’s own req.+ firmed up contracted ).

(7) Bid to be in two parts; Part I: Technical; Part II: (7) Bid to be in two parts; Part I: Technical; Part II: FinancialFinancial

(8) 60 days time period allowed for submission of (8) 60 days time period allowed for submission of application cum bidapplication cum bid

(9) extended by one month in case only single bid(9) extended by one month in case only single bid

Bid BondBid Bond

P/L length including spur P/L length including spur lines (Km.)lines (Km.)

Amount of Bid Bond Amount of Bid Bond (Crore Rupees)(Crore Rupees)

2501 and above2501 and above 2525

17511751-- 25002500 2020

1001 1001 -- 17501750 1515

251251-- 10001000 88

Up to 250Up to 250 22

6.6. Invitation by Board : Invitation by Board : suo motusuo motu

7.7. Bidding criteriaBidding criteria (1) compare all financial bids (1) compare all financial bids (a)(a) lowness of present value of tariff for 1st zone for each year lowness of present value of tariff for 1st zone for each year

of economic life. of economic life. (b)(b) lowness of percentage increase bid for second tariff zone. lowness of percentage increase bid for second tariff zone.

(single number to be bid) (single number to be bid) (c)(c) lowness of percentage increase bid for third tariff zone lowness of percentage increase bid for third tariff zone

(and subsequent tariff zones) single number lower than (and subsequent tariff zones) single number lower than 100% to be bid. 100% to be bid.

(d)(d) (1)Highness of present value of volume (MMSCMD) for (1)Highness of present value of volume (MMSCMD) for each year of economic life.each year of economic life.(2) Present value calculated (2) Present value calculated -- discount rate of 12%.discount rate of 12%.(3) Bids for tariff to be consistent with DFR (3) Bids for tariff to be consistent with DFR (4) Entity with highest composite score (4) Entity with highest composite score --successfulsuccessful

Weights for Tariff based on no. of zones.Weights for Tariff based on no. of zones.

350 Km.

40% 30%

250 Km.

70%

650 Km.

40% 20% 10%

950 Km.

40% 20% 10%

8.8. Performance BondPerformance Bond: 2% of estimated project cost. guarantee the : 2% of estimated project cost. guarantee the timely commissioning (36 months) and meeting service timely commissioning (36 months) and meeting service obligations during operating phase.obligations during operating phase.

9.9. Grant of AuthorizationGrant of Authorization::

(1) (1) within 30 days of last day of submitting bid. within 30 days of last day of submitting bid.

(2)(2) Grant of authorization is subject to entity achieving firm NG tie Grant of authorization is subject to entity achieving firm NG tie up (90 days) and a financial closure (120 days)up (90 days) and a financial closure (120 days)

(3) (3) authorization shall not be renunciated by way of sale, assignment, authorization shall not be renunciated by way of sale, assignment, transfer or surrender to any entity during 3 years. transfer or surrender to any entity during 3 years.

(4) (4) for renunciation after 3 years, proposal to be laid before Board at for renunciation after 3 years, proposal to be laid before Board at least 30 days in advance.least 30 days in advance.

(5) (5) Board if satisfied may accept proposal in full/ with modifications Board if satisfied may accept proposal in full/ with modifications or reject.or reject.

10.10. CapacityCapacity booking,booking, naturalnatural gasgas tietie upup andand financialfinancial closureclosure::

(1)(1) AgreementAgreement forfor atat leastleast 5050%% ofof NGNG P/LP/L volumevolume bidbid forfor eacheach ofof thethefirstfirst 55 yearsyears followingfollowing commissioningcommissioning ofof thethe naturalnatural gasgas P/LP/L..

(2)(2) agreementagreement transparenttransparent andand basedbased onon principleprinciple ofof “at“at armsarms length”length”..

(3)(3) copycopy ofof agreementsagreements submittedsubmitted withinwithin 9090 daysdays ofof datedate ofofauthorizationauthorization..

(4)(4) financialfinancial closureclosure ofof thethe projectproject fromfrom financialfinancial institutioninstitution withinwithin 120120daysdays

(5)(5) forfor internallyinternally financedfinanced projects,projects, approvalapproval fromfrom BoardBoard ofof directorsdirectors --120120 daysdays

(6)(6) FailureFailure toto meetmeet ((11)) toto ((55)) aboveabove shallshall leadlead toto cancellation,cancellation,performanceperformance bondbond enen--cashed,cashed, andand BoardBoard reservesreserves thethe rightright toto rere--awardaward

11.11. Fixation and recovery of Natural Gas pipeline tariffFixation and recovery of Natural Gas pipeline tariff: : (1)(1) Zonal postalized basis as per bid. Zonal postalized basis as per bid. (2)(2) Through an invoice on a nonThrough an invoice on a non--discriminatory basis; without discriminatory basis; without

premium or discount.premium or discount.(3)(3) Operating pressure as mentioned in DFR. Separate Operating pressure as mentioned in DFR. Separate

additional compression charges may be charged towards additional compression charges may be charged towards compression of NG to the extent not included in Pipeline compression of NG to the extent not included in Pipeline tariff.tariff.

12.12. Expansion of capacity in natural gas pipelineExpansion of capacity in natural gas pipeline(1)(1) Entity may expand upto 10% of authorized capacity. No Entity may expand upto 10% of authorized capacity. No

change in tariff post expansion. change in tariff post expansion. (2)(2) Beyond 10%, reduction of tariff by sharing 50% of Beyond 10%, reduction of tariff by sharing 50% of

proposed incremental tariff revenue. (proposed incremental tariff revenue. (For new Pipelines For new Pipelines OnlyOnly-- clarification obtained)clarification obtained)

13.13. Post authorization monitoring of activities (pre Post authorization monitoring of activities (pre commissioning):commissioning):

(1)(1) quarterly progress reportquarterly progress report

(2)(2) compliance to relevant regulations for compliance to relevant regulations for technical and technical and safety standards, through auditssafety standards, through audits. .

(3)(3) Board may allow reroutingBoard may allow rerouting if length does not increase if length does not increase by more than by more than 10%10% and the tariff remains the same. and the tariff remains the same.

(4)(4) progress to be monitored by Boardprogress to be monitored by Board

14.14. Service obligations of authorized entity (post Service obligations of authorized entity (post commissioningcommissioning) )

(1)(1) Annual target of transporting NG Annual target of transporting NG --Otherwise Otherwise encashment of performance bond (a) 25% for 1st encashment of performance bond (a) 25% for 1st default (b) 50% for second default (c) 100% for third default (b) 50% for second default (c) 100% for third default. Entity to make good endefault. Entity to make good en--cashed amount within cashed amount within week. week.

(2)(2) Transport of NG should not be conditional to sourcing Transport of NG should not be conditional to sourcing of the NG from the entity or any other entity.of the NG from the entity or any other entity.

(3)(3) Wide publicity of capacity .Wide publicity of capacity .

(4)(4) Regulations on Access code, declaring NG P/l as Regulations on Access code, declaring NG P/l as common / contract carrier, Affiliate code of conductcommon / contract carrier, Affiliate code of conduct

(5)(5) Technical and safety requirementsTechnical and safety requirements

15.15. Quality of Service standards.:Quality of Service standards.:

(1) (1) schedule Fschedule F

(2)(2) Performance consistently below min.; Performance consistently below min.; regulation 16 below.regulation 16 below.

16.16. Consequences of default and termination of Consequences of default and termination of authorization procedure.:authorization procedure.:

(1)(1) Board issue notice allowing reasonable time. Board issue notice allowing reasonable time.

(a)(a) If remedial actions taken; no further action. If remedial actions taken; no further action.

(b)(b) failure to take remedial actions failure to take remedial actions -- enen--cashing performance cashing performance bond bond

(i) (i) 25% for25% for 1st1st default (ii) default (ii) 50% for 2nd50% for 2nd(iii) (iii) 100% for 3rd100% for 3rd. . default and default and termination of authorizationtermination of authorization..

(c) (c) termination termination -- schedule G.schedule G.

(d) (d) Board may also impose civil penalty under the Act.Board may also impose civil penalty under the Act.

17.17. Entities authorized by the Central Government before Entities authorized by the Central Government before appointed day:appointed day:

(1)(1) Schedule H. Schedule H. (2)(2) Abide by technical and safety standards.Abide by technical and safety standards.(3)(3) Monitoring by board on quarterly basis. In case of delay, Monitoring by board on quarterly basis. In case of delay,

Board reserves right :Board reserves right :--(a) not consider additional costs attributable to time overruns (a) not consider additional costs attributable to time overruns while fixing tariff while fixing tariff

(b) advise central government for cancellation of (b) advise central government for cancellation of authorization and encashment of performance bank authorization and encashment of performance bank guarantee. guarantee.

(4)(4) Board shall approve tariff Board shall approve tariff (5)(5) In case central government has authorized without common In case central government has authorized without common

carrier or contract carrier, Board may intervene and declare carrier or contract carrier, Board may intervene and declare as common carrier or contract carrier.as common carrier or contract carrier.

(6)(6) activity of entity subject to other regulations,activity of entity subject to other regulations,

Authorization of pipelines under regulation 17/ 19Authorization of pipelines under regulation 17/ 19

NINE existing pipelines and networks of GAIL NINE existing pipelines and networks of GAIL ––Submitted on 26.11.2008 under section 17Submitted on 26.11.2008 under section 17

§§ HBJHBJ--DVPL DVPL §§ DUPLDUPL--DPPL DPPL §§ Agartala network Agartala network §§ KG Basin networkKG Basin network§§ AssamAssam§§ MumbaiMumbai§§ Cauvery BasinCauvery Basin§§ Gujarat & RajasthanGujarat & Rajasthan

PProvisional authorization for the above except HVJrovisional authorization for the above except HVJ--DVPL , Gujarat and Rajasthan DVPL , Gujarat and Rajasthan 93 existing pipelines have been submitted as 93 existing pipelines have been submitted as dedicated dedicated ––under section 19. List will be revised.under section 19. List will be revised.

Application for new pipelines under regulation 17, Sch. HApplication for new pipelines under regulation 17, Sch. H

Schedule H for FIVE new pipelines authorized by Central Govt. Schedule H for FIVE new pipelines authorized by Central Govt. have been submitted.have been submitted.

nn ChainsaChainsa--Jhajjhar Jhajjhar --4.12.20084.12.2008nn DadriDadri-- Bawana Bawana –– Nangal PipelinesNangal Pipelines -- 4.12.20084.12.2008nn Jagdishpur Haldia PipelinesJagdishpur Haldia Pipelines -- 4.9.20094.9.2009nn KochiKochi--KanjircodeKanjircode--BangaloreBangalore-- Mangalore Pipelines Mangalore Pipelines --13.8.200913.8.2009nn Dabhol Dabhol –– Bangalore pipelinesBangalore pipelines --13.8.200913.8.2009

PNGRB has regularized the authorization issued by PNGRB has regularized the authorization issued by MOP&NG for MOP&NG for Chainsa Chainsa –– Jhajjar Jhajjar –– HissarHissar pipeline on pipeline on 28.04.200928.04.2009

Quarterly reportsQuarterly reports for Chainsafor Chainsa-- Jhajjhar and DadriJhajjhar and Dadri--Bawana Bawana ––Nangal Pipelines.Nangal Pipelines.

18.18. Entity not authorized by the central Government Entity not authorized by the central Government before appointed daybefore appointed day.: .:

(1)(1) Schedule I. Schedule I. (2)(2) Board may consider : Board may consider : (a)(a) minimum eligibility criteria and statutory clearancesminimum eligibility criteria and statutory clearances(b)(b) registered company as per companies act 1956. registered company as per companies act 1956. (c)(c) physical progress and financial commit. compared DFR. physical progress and financial commit. compared DFR. (d)(d) 25% before app. day 25% before app. day (e)(e) Physical progress and financial commitment certified Physical progress and financial commitment certified (f)(f) Convince on adequacy to meet technical/safety standards. Convince on adequacy to meet technical/safety standards. (e)(e) Assessment of financial position Assessment of financial position (f)(f) capacity booking=at least 50% of (own requirement + capacity booking=at least 50% of (own requirement +

firmed up contracted). firmed up contracted). (g)(g) copies of agreements to be submitted copies of agreements to be submitted (h)(h) any other criteriaany other criteria

18.18. Entity not authorized by the central Government before the Entity not authorized by the central Government before the appointed dayappointed day.: …….contd….: …….contd…

(3) (3) Evaluation of application in terms of (a) to (j)Evaluation of application in terms of (a) to (j)

(4)(4) Board may form primaBoard may form prima--facie view facie view

(5) (5) In consideration, public notice , seek comments within 30 days.In consideration, public notice , seek comments within 30 days.

(6) (6) After comments, Board may accept or reject After comments, Board may accept or reject

(7)(7) Grant of authorization in Schedule D.Grant of authorization in Schedule D.

(8)(8) In case of rejection, Board shall pass a speaking order after giving In case of rejection, Board shall pass a speaking order after giving reasonable opportunity to explain and then proceed to select reasonable opportunity to explain and then proceed to select appropriate entity as per regulation 6 (Suo Motu).appropriate entity as per regulation 6 (Suo Motu).

(9)(9) (a) tariff determination as per regulation; (a) tariff determination as per regulation;

(b) technical and safety standards; (b) technical and safety standards;

(c) monitoring of quarterly progress by Board; (c) monitoring of quarterly progress by Board;

(d) access code regulations; (d) access code regulations;

(e) other provisions under regulation 8,9,13,14,15 and 16 shall apply.(e) other provisions under regulation 8,9,13,14,15 and 16 shall apply.

19.19. Dedicated pipelines for transport of natural gas.Dedicated pipelines for transport of natural gas.

(1)(1) Dedicated pipelines existing before the appointed day: Dedicated pipelines existing before the appointed day:

a)a) Submit details to PNGRB within 30 days of Submit details to PNGRB within 30 days of notification of these regulations; notification of these regulations;

b)b) Board may webhost details seeking comments; Board may webhost details seeking comments;

c)c) Board may based on comments direct entity to convert Board may based on comments direct entity to convert its dedicated pipeline into natural gas pipeline provided its dedicated pipeline into natural gas pipeline provided entity is given opportunity to present its case; entity is given opportunity to present its case;

d)d) The entity may itself also submit proposal to convert its The entity may itself also submit proposal to convert its dedicated pipeline to natural gas P/L.dedicated pipeline to natural gas P/L.

19.19. Dedicated pipelines for transport of natural gas. Contd…Dedicated pipelines for transport of natural gas. Contd…

(2)(2) In respect of dedicated P/L proposed after appointed day: In respect of dedicated P/L proposed after appointed day: (a)(a) Submit details at least 30 days before proposed commencement; Submit details at least 30 days before proposed commencement; (b)(b) Board may web host seeking comments; Board may web host seeking comments; (c)(c) Advise within 30 days from receipt of info from entity,for laying Advise within 30 days from receipt of info from entity,for laying

NG P/L instead of dedicated P/L . NG P/L instead of dedicated P/L . (d)(d) Entity may wish to continue with dedicated p/l inspite of advise, Entity may wish to continue with dedicated p/l inspite of advise,

then Board may suo motu decide to issue EOI. Entity may further then Board may suo motu decide to issue EOI. Entity may further not be allowed to apply for conversion to NG P/L for 5 years from not be allowed to apply for conversion to NG P/L for 5 years from dt. of commissioning.; dt. of commissioning.;

(e)(e) If Board issues no advise, entity may apply for conversion any time;If Board issues no advise, entity may apply for conversion any time;(f)(f) Board may direct entity for conversion to NG P/L as per following Board may direct entity for conversion to NG P/L as per following

procedure: procedure: (i)web hosting(i)web hosting(ii) based on examination of comments, direct entity to convert (ii) based on examination of comments, direct entity to convert provided entity shall be given opportunity to present its case. provided entity shall be given opportunity to present its case.

(3) (3) Regulation 18, sub regulation (9) will apply if P/L is converted Regulation 18, sub regulation (9) will apply if P/L is converted under above.under above.

20.20. Access and inter connectivity to NG P/LAccess and inter connectivity to NG P/L : : entity to allow access code entity to allow access code --relevant relevant regulationsregulations

21.21. Miscellaneous:Miscellaneous: In case of dispute w.r.t In case of dispute w.r.t interpretation, decision of Board shall be final.interpretation, decision of Board shall be final.

nn Schedule A:Schedule A: for submitting EOI by an entity for submitting EOI by an entity

nn Schedule B:Schedule B: ApplicationApplication--cumcum--bid for grant of authorization bid for grant of authorization

nn Schedule C:Schedule C: Illustration showing the basis of determining the highest Illustration showing the basis of determining the highest composite score for ascertaining the successful bid for grant of composite score for ascertaining the successful bid for grant of authorization authorization

nn Schedule D:Schedule D: Grant of authorization Grant of authorization

nn Schedule E:Schedule E: Quarterly submission of data by authorized entityQuarterly submission of data by authorized entity

nn Schedule F:Schedule F: Quality of service standardsQuality of service standards

nn Schedule G:Schedule G: Procedure for the termination of grant of authorization Procedure for the termination of grant of authorization

nn Schedule H:Schedule H: Information to be provided for natural gas pipeline Information to be provided for natural gas pipeline authorized by central government before the appointed day.authorized by central government before the appointed day.

nn Schedule I:Schedule I: Application for grant of authorization for natural Gas Application for grant of authorization for natural Gas Pipeline to entities not authorized by Central Government Pipeline to entities not authorized by Central Government

nn Schedule J:Schedule J: Service Obligation of entityService Obligation of entity

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