Gas flares burn from pipes aboard an offshore oil platform in Iran. (Photographer: Ali Mohammadi/Bloomberg)

HPCL, IOC Win Maximum Areas In Latest Round Of Gas Auctions

Two state-run retailers and a private consortium won the maximum bids as India completed auctions to allot 50 regions for distribution of natural gas as the world's third biggest oil consumer looks to cut consumption of dirtier fuels.

Hindustan Petroleum Corporation Ltd. and Indian Oil Corporation Ltd. and a consortium comprising private gas retailers AG&P LNG Marketing Pte. Ltd. & Atlantic Gulf & Pacific won bids to retail natural gas in a maximum of nine geographical areas each. Gujarat Gas Ltd. and Gail Gas Ltd. followed with six and four bids, respectively.

Quick Facts About The Latest Round:

  • The Petroleum and Natural Gas Regulatory Board—which conducted the auction—has allotted 50 geographical areas, comprising 124 districts, to 12 entities that took part in the latest round and issued letters of intent to them.
  • More than 225 bids were received with an investment commitment of close to Rs 50,000 crore.
  • City gas distribution would be available in 228 areas comprising 402 districts in 27 states and union territories covering nearly 70 percent of India’s population and 53 percent of its geographical area.

Bids were invited on a large scale to fast-track expansion of city gas distribution network as the government wants to raise the percentage of natural gas in its domestic gas sales mix from 6.2 percent to 15 percent in next few years.

Exposure to city gas distribution will help oil retailers diversify from their cyclical refining and quasi-regulated marketing businesses. It will also help them tap revenue that could have been lost in future as consumers switch to cheaper options such as piped natural gas and compressed natural gas over LPG, petrol and diesel.

Gujarat Gas’ High Strike Rate

The auction appears to be a success for Gujarat Gas which won six out of the seven areas for which it had put in bids. However, the bid it lost was for a large area in Rajasthan.

On the other hand, Adani Gas Ltd. and its joint venture with Indian Oil Corp. secured bids for only three geographical areas despite bidding for 26. Delhi-based Indraprastha Gas Ltd. had bid for 15 areas of which it managed to win three, two of which are adjoining to its current operations thereby increasing potential synergies.

The board also allotted the two areas that were put up for bidding in the last round. It allotted the two areas to Indian Oil Corporation Ltd. and a consortium of Haryana City Gas and Rati Chopra.

Maharashtra-based city gas distributor, Mahanagar Gas Ltd., failed to win even one area. It had placed bids for only two areas. In the last round, the company had placed bids for three areas, winning none.