It is exploring options for entering the city gas distribution business

Seeking to diversify its business portfolio and venture into new and challenging areas, Oil and Natural Gas Corporation (ONGC) has drawn up plans to enter the marketing and re-gasficiation of LNG and into the City Gas Distribution (CGD) business.

The company feels that the share of natural gas in Indian primary energy basket is expected to increase from 11 per cent to 20 per cent by 2025. Although domestic gas production is expected to grow to nearly 200 million metric standard cubic metres per day (mmscmd) by 2015-16, dependence on imported LNG is set to increase substantially, according to an internal appraisal report prepared by ONGC.

The recent drastic reduction in gas production from the KG-D6 block, owned byReliance Industries Limited (RIL), has created acute shortage of gas and resulted in sudden incremental demand for LNG.

Further, it states that LNG imports are likely to increase considering that not only do existing common carrier gas pipelines have unutilised carrying capacity but also new gas pipelines are being commissioned which will also lead to capacity surplus, thereby facilitating more LNG imports. “Considering the growing dependence on LNG imports in the country, there are opportunities for ONGC to enter the LNG space either through re-gasification terminals/FSRU or a stake in LNG marketing,” it states. Similarly, it states that ONGC is firming up plans for developing various offshore and onshore blocks that are expected to produce significant volume of gas over next 3-6 years. With a view to fetching better margins on future gas productions and to ensure a sustainable gas business model, ONGC is exploring options for entering the city gas distribution (CGD) business either on its own or through the setting up of a joint venture. A study by AT Kearney on CGD business environment in India and evaluation of prospects of ONGC's entry into the business has been submitted and an in principle approval to the proposal has been granted. A detailed business plan has been developed by the consultant and road map for entering CGD business it will be put up before the ONGC board for approval shortly.

Keywords: ONGCLNG marketing