British Gas, Mahanagar Gas JV has big plans

An equal joint venture between British Gas (BG) and GAIL, Mahanagar Gas (MGL) provides piped natural gas (PNG) in and around Mumbai.

The company says it is now planning to extend its reach by entering more cities in Maharashtra. Refuting rumours of BG planning an exit from the partnership, MGL Managing Director P K Gupta tells Kalpana Pathak that this is the right time to expand and encash on all the efforts that the parent companies have put in. Excerpts:

What plans do you have for the current year?

We supply gas to domestic, transport, commercial and industrial sectors in Mumbai and its adjoining areas. Sixty-five per cent of our revenue comes from the transport segment and the remaining three segments contribute 10 per cent each. However, with the huge demand in other segments, this mix will change in the coming years.

We will be investing around Rs 350 crore (Rs 3.5 billion) in this financial year. We will also start operations in Navi Mumbai this year. We have laid around 100-km of pipeline in Navi Mumbai. We also plan to convert the entire fleet of BEST (the Brihanmumbai Electric Supply & Transport Undertaking) buses in to compressed natural gas (CNG).

We have entered into an agreement with BEST and devised a partnership where we would be providing them with CNG to convert their buses. We have already converted four depots of BEST and other depots are under conversion. Already 600 BEST buses are plying on CNG. Remaining 500 will be converted this year. Another 600 will come in the next two years.

Are you looking for city gas distribution in other cities of Maharashtra?

The city gas distribution sector is looking up and we plan to take forward our expertise in this segment. At this point we are examining feasibility of getting into other cities like Aurangabad, Nashik and Ahmednagar. Whenever the petroleum and natural gas regulator throws these areas for bidding we would be participating too.

The expansion should occur in a phased manner. So far we have laid 2,600 kilometers of pipeline in Mumbai and the near-by areas. We wish to expand in such a manner that we take convenience of our existing network in the adjoining areas like Kalyan-Dombivli,Ambernath-Badlapur, Tarapur and Panvel.

Where do you plan to buy gas from to support your expansion plan?

MGL started operations with 1.5 million cubic meters per day gas from Oil and Natural Gas Corporation's Mumbai High field. Since that availability was restricted, as the gas supply started diminishing after its peak production, we could not expand, as we wanted to.

But with the New Exploration and Licensing Policy in place, a lot of exploration and production is happening fields are being developed. Additional gas is also emerging from the existing fields. By 2009, the gas deficit scenario in the country will change. The existing availability will double in the next four to five years.

With the fuel prices rising, do you see demand for PNG and CNG increasing?

With petrol costing Rs 55 per litre and diesel costing around Rs 38-40 per litre in Mumbai, CNG comes much cheap at only Rs 22 per kg. In the domestic gas segment, PNG priced at Rs 11.80 paise per standard cubic metre, is around 40 per cent cheaper than the normal LPG.

There is a big economic difference that comes in play. In the next five years we expect to have 1.5 million customers and around 200 CNG stations. Revenue-wise, we would grow to Rs 4,000 crore (Rs 40 billion) from the present Rs 800 crore (Rs 8 billion). We would also look at having a couple of other cities in our folds.