Natural Gas Business Line

1

Strategies- NG Business Line

• Consolidation of CNG Marketing through our existing Retail network

• HPCL’s Participation in CGD Network bidding process instituted by PNGRB

• Strengthening of existing CNG business of AGL, BGL and conversion to CGD network in Hyderabad, Vijayawada, Indore and Gwalior

2

CNG Marketing through Retail Network

CNG Sales FY 08-09 (PSU)-IPR

HPCL BPCL IOCL Industry

Vol (TMT) 122 151 100 373

Historical 116 139 81 335

% Growth 5.7 8.6 24.1 11.3

% Mkt Share 32.73 40.44 26.83

Hist 34.48 41.45 24.08

CNG Sales- Mumbai Retail Region FY 08-09

HPCL BPCL IOCL MGL Industry

Vol (TMT) 88 76 41 46 251

Historical 90 76 41 37 243

% Growth -2.1 0 0 24.2 2.9

% Mkt Share 35.1 30.3 16.3 18.3

Hist 37.2 30.4 17.1 15.3 3

CNG Marketing through Retail Network

• In IPR CNG sales for private operators like IGL,MGL,MNGL, GGL, GSPC Gas, AEL etc do not appear.

• Mumbai Retail RO is following the practice of sending MIS report to Retail SBU,HQO highlighting CNG sales for both PSU and private operators.

• Delhi, Ahmedabad, Vadodara, Lucknow, Pune , Hyderabad, Vijayawada Retail ROs to start similar exercise for generating monthly MIS on CNG sales.

4

CNG Marketing through Retail Network

• As of 31/03/09 no of CNG Stations

HPC BPC IOC

101 107 90

• As of 31/05/09 no of CNG Stations

HPC BPC IOC

112 122 91

• Addition of CNG Station for HPCL during April-May 09

Ahmedabad RO 5

Vadodara RO 4 All 10 Nos. with GSPC Gas.

Rajkot RO 1

5

CNG Marketing through Retail Network

• Most of the CGD companies not having retail network infrastructure.

• Dependency of CGD companies on PSU’s retail network.

• Maximize CNG addition at our retail outlets to capitalize revenue earning from other CGD companies.

• CGD companies offer different margin ranging from Rs 1.00/kg to Rs 1.40/kg.

6

MGL GSPC Gas

HPCL Rs 0.57/Kg Rs 0.47/Kg

Dealer Rs 0.83/Kg Rs 0.53/Kg

Total Rs 1.40/Kg Rs 1.00/Kg

CNG Marketing through Retail Network

• In addition CGD companies bear electricity charges for gas compression on actual basis.

• Installation of Compressor, Dispenser, Cascade by CGD companies.

• Civil work for foundations for compressor, dispenser, cascade and tube trench etc by HPCL .

• Depending up on the layout of retail outlet our cost involvement is limited to only Rs 5-8lacs/outlet.

7

CNG Marketing through Retail Network

• HPC to ensure identification of outlet suitable for CNG addition and applying for explosive license.

• Target for CNG addition in FY 09-10 – 100 more outlets

• To achieve 40% market share amongst PSUs.

8

Plan for CGD Network

City Gas Distribution Network (CGD) implies supply of :-

• PNG to domestic sector

• CNG to transportation sector

• PNG to commercial sector

• Industrial gas to Industries

9

Background

• As per GOI notification of Petroleum and Natural Gas Regulatory Board Act, 2006 ( 19 of 2006) PNGRB came into existence w.e.f 01.10.07

• PNGRB authorization is mandatory for any corporate body to

Lay, build, operate or to expand any City Gas Distribution (CGD) Network.

• CGD network shall be designed as per PNGRB technical standard and specifications, safety standards for supplying natural gas on a sustained basis.

10

Background

• Till date Petroleum Natural Gas Regulatory Board (PNGRB) has received approximately 75 EOI s from different entities for 69 geographical locations.

• 6 cities have been awarded in1st round of bidding in March 2009.

 

11

Name of City Successful Bidder

Mathura DSM Infrastructure

Kakinada Bhagyanagar Gas Limited

Kota GAIL Gas Limited

Meerut GAIL Gas Limited

Sonepat GAIL Gas Limited

Dewas GAIL Gas Limited

Road Map for HPCL

HPCL participated in 2nd round of bidding followed by upcoming rounds also.

In 2nd round HPCL has submitted bid for

Chandigarh

Ghaziabad

BGL has submitted bid for

Rajahmundry

12

CGD Scenario in India

• No of CGD Companies : 18

• No of towns : 40

• Volume being handled : 12.93 MMSCMD

or 9.1 TMT/Day

Major Entities : IGL, MGL, Gujarat Gas, GSPC Gas, Adani Energy Limited , BGL , AGL

13

CGD Scenario in IndiaCGD Operator Location CGD Operator Location

Assam Gas Company Ltd Duliajan Bhagyanagar Gas Ltd Vijayada, Kakinada

Tripura Natural Gas Company Agartala Green Gas Ltd, Lucknow

Gujarat Gas Company Ltd Surat Central UP Gas Ltd Kanpur

Baroda Municipal Corporation Ltd

Baroda Avantika Gas Ltd Indore

Charotar Gas Sehkari Mandali Limited

Gujarat Gujarat Gas Co Ltd Gujarat

Great Eastern Energy Corporation Ltd

Asansol Adani Energy Ltd Ahmedabad

Mahanagar Gas Ltd (MGL) Mumbai Sabarmati Gas Ltd Gandhinagr

Maharashtra Natural Gas Company Ltd

Pune Greater Gas Supply Corporation Ltd (Coal Gas)

Kolkata

Indraprastha Gas Ltd (IGL) Delhi Haryana City Gas Limited Gurgaon14

Economics of CGD Project

Economic life of each CGD project : 25 Years

Expenditure for each CGD Project : 100 Cr to 500 Cr depending upon size of city

Expenditure profile : 70% by first 5 years

30% after 5th year

IRR for Project : 14%

15

Challenges in CGD Bidding

• Process is highly confidential & dynamic in nature

• Time bound decision is required.

• Bidding Strategy can vary from city to city.

• Intense competition is expected for high potential cities.

16

Range of Bid Parameters

• Basis of PNGRB evaluation of bid parameters

1. Lowness of NPV of Transmission Tariff (TT) for 25 years

2. Lowness of NPV of Compression Charges (CC)for 25 years

3. Highness of NPV of Inch-Dia Kms of steel pipeline in 1st 5 years

4. Highness of NPV of domestic connection in 1st 5 years

Internal Process for Bid Submission

Identify potential city basis demand assessment

Preparation of DFR and Bid Strategy

Obtain CFD clearance for submission of proposal to Investment Committee for its review of capex , opex and IRR.

To obtain Board approval basis clearance of Investment Committee for capex, opex, IRR and range of bid parameters.

Internal approval of Dir (M), Dir (F) and C&MD for final bids to be submitted to PNGRB

18

CGD bid submission by HPCL

Complying with all internal process,

Technical and Financial Bid submitted for

• Ghaziabad and Chandigarh to PNGRB on 25th Jun 2009

• Technical bids were opened on 25/06/09 itself.

19

CGD Network- Chandigarh• Area : 727 Sq Kms• Population: 10 Lacs

• Spread Area : Chandigarh UT, Mohali(P), Panchkulla (Ha), Solan (Hi)

• Major Domestic area: Chadigarh, Mohali, Panchkula, Zirakpur

• Major Industrial area: Baddi, Barotiwala, Nalagarh, Parwanoo, Mohali, Derabassi, Chandigarh I,II

• CGS: 1 st Dappar, 2nd Bharatgarh . HVJ pipeline extension (Dadri-Bawana-Nangal segment)

• CNG Mother Stn : 2 + 1• Online Stn : 6 + 9• Online Bus Depot : 5• Daughter Booster Stn : 6 + 9• Length of Pipe Line : 151 km (14”, 12”, 10”, 8”, 6”, 4”)• Inch Dia Kms : 1376.42

CGD Network- Ghaziabad• Area : 217 Sq Kms• Population: 10Lacs

• Spread Area: Ghaziabad Town • Major Domestic area: Kaushambi,

Vasundhara, Indirapuram, Rajendranagar

• Major Industrial area: Shahibabad, Mohan Nagar, Kavinagar, Bulandshahar Road

Meerut Road

• CGS : Dasna HVJ pipeline Vijapur-Dadri-Bawana segment

• CNG Mother Stn :2 Online Stn : 10+1 Online Bus Depot : 2 Daughter Booster Stn : 2+4 Pipe Line Length :60Kms

(18”, 12”, 8”, 6”)• Inch Dia Kms : 632

Realizable Demand & Expenditure Profile

22

Realizable Estimated Demand in MMSCMD

Capital Expenditure Profile-Cumu (in Rs Crores)

Operating Expenditure Profile-Cumu (in Rs Crores)

Year 1st 5th 10th 15th 20th 25th

Chandigarh 0.2728 0.9960 1.3597 1.7710 2.3181 3.0487

Ghaziabad 0.2497 1.0809 1.5544 2.0564 2.7311 3.5600

Year 2014 2019 2024 2029 2034

Chandigarh 259.92 346.55 393.02 433.01 466.93

Ghaziabad 169.30 222.01 240.28 275.64 293.71

Year 2014 2019 2024 2029 2034

Chandigarh 80.5 188.16 322.97 477.19 656.00

Ghaziabad 48.01 118.61 211.09 318.79 443.89

Status of 2nd Round CGD Bidding

• 6 bids for Ghaziabad

GAIL, IOC-Adani, HPC, GSPL, IGL & Siti Energy are the eligible bidders

• 4 bids for Chandigarh

GAIL, IOC-Adani, HPC, GSPL are the eligible bidders

• Financial Bid will be opened within 30 days from opening of technical bid.

23

Thanks

24