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Discussion on Regulatory issues in mid stream sector by BS Negi Member

11 th energy Summit Indian oil and gas Sector New Delhi, 17 th October, 2008 organized by ASSOCHEM. Discussion on Regulatory issues in mid stream sector by BS Negi Member Petroleum and natural gas regulatory board, India. Contents. Oil and Gas- mid stream

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Discussion on Regulatory issues in mid stream sector by BS Negi Member

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  1. 11th energy SummitIndian oil and gas SectorNew Delhi, 17th October, 2008organized byASSOCHEM Discussion on Regulatory issues in mid stream sector by BS Negi Member Petroleum and natural gas regulatory board, India

  2. Contents • Oil and Gas- mid stream • Petroleum and Natural Gas Regulatory Board (PNGRB) • Pipeline network in India • Common carrier versus Contract carrier • Role of PNGRB in management of pipelines in the country • Government Policy- Pipeline and City Gas Distribution projects • Regulations related to Pipeline systems

  3. Oil and gas – mid stream • Pipeline transportation • Crude oil pipelines to refineries • Petroleum product pipelines- refineries or ports to terminals • Natural gas transportation pipelines

  4. Petroleum and Natural Gas Regulatory Board (PNGRB) • Created by an Act of the Parliament d on 31st March 2006 • President assent accorded on 3rd April, 2006 • Act was notified on 1st October, 2007 • PNGRB Act excludes Crude oil pipelines and dedicated Petroleum product or natural gas pipelines from its purview

  5. Protect consumer interest by fostering fair trade & competition Perform other functions entrusted by Central Government Register & Authorise entities Declare pipeline as common / contract carrier Lay down technical standards / specifications Functions of the Board Maintain databank of information Regulate access & transportation rate on common / contract carrier / CGD network Monitor prices & prevent restrictive trade practices Enforce retail & marketting service obligation Ensure adequate availability, and equitable distribution PNGRB- FUNCTIONS

  6. Pipeline network in India • Petroleum products pipelines ( as on 1.4.2008) • Length- 11,413 Km. • Capacity-61.77 mmtpa (petroleum products) • Capacity utilization- 73% • Players- IOCL, BPCL, HPCL,PETRONET,GAIL • Natural Gas pipelines( transmission) • Length- 8,673 Km.* • Capacity- 150 mmscmd • Capacity utilization- 65% • Players- GAIL, GSPCL, GGCL, RGTIL * Excludes RGTIL and GAIL P/L under commissioning

  7. Common carrier and Contract carrier • Common carrier • Transportation is provided on as requiredbasis and users are not committed to long term use of system • Transporter to construct additional capacity to meet future demand • Significant demand forecast required • Investment obligations • ROR to be assured

  8. Contract carrier • Contract carrier • Transporter needs to provide additional facilities only where users are willing to sign firm contract for their use • Transporters are obliged to provide transmission services up to the extent of available spare capacity • System development takes place in response to demand from users • Project financing becomes easy • Assignment of capacity or trading helps develop infrastructure but …

  9. PNGRB definition of common carrier and contract carrier • Common Carrier- Any pipeline for transportation of PP&NG by more than one entity on non discriminatory open access basis • Contract Carrier- Any pipeline for transportation of PP&NG by more than one entity pursuant to firm contracts for more than one year* *The access capacity of contract carrier will be treated as common carrier

  10. Common Carrier and Contract Carrier- a thought • Who is responsible for ensuring that desirable development takes place and who bears the cost and commercial risk arising from such developments? • Contract carrier is likely to provide a level of development which is broadly as appropriate and efficient as common carrier with the additional benefit of not requiring the granting of monopoly franchises to compensate for the additional risks

  11. Common Carrier and Contract Carrier- a thought contd… • Where the Govt. or other agencies require socially desirable facilities to be developed, this can still be achieved under the contract carriage, with the relevant agency in effect providing subsidy by taking on the role of the contracting party for all or part of the relevant capacity

  12. Common Carrier and Contract Carrier- Issues • Pipeline and CGD as common carrier – capacity determination • Open access to pipeline and CGD • Access Code – Pipeline capacity allocation, gas quality, grid connectivity • Unbundling • Affiliate code of conduct • Trading – commodity and capacity • as a means to develop infrastructure • to stabilize price

  13. Government Policy- Pipeline and City Gas Distribution projects • Petroleum Products pipeline policy • Upto 300 km not common carrier • 25% extra capacity for common carrier • Crude oil pipeline excluded • Policy for development of Natural Gas Pipelines and City or local Natural Gas distribution networks policy • 33% extra capacity as common carrier • Open access, unbundling and affiliate code • ROU only after authorization by the Board • 100% FDI permitted

  14. Government Policy- Pipeline and City Gas Distribution projects contd… • Gas utilisation policy ( as agreed in EGOM) • Applicable for one year • Priority-1, unmet Fertilizer requirement ( 9.5 mmscmd) • Priority-2, unmet Power plant requirement ( 18 mmscmd) • Priority-3, City Gas requirement( 5 mmscmd) • Priority-4, Refinery fuel • Priority-5, others

  15. Regulations related to Pipeline systems • Petroleum and Natural Gas Regulatory Board( authoring entities to lay, built, operate and expand common carrier or contract carrier) regulations 2008 (Notified in May,2008) • Regulations for Determination of pipeline tariff* • Regulations for declaring a pipeline as common carrier or contract carrier* • Regulations for Access code ( July 2008) • Regulations for Access code ( July, 2008) • Regulations for Technical standard and specification including safety standards* • Regulations for Emergency Response & Disaster Management Plan* *being notified

  16. Regulations for Authoring common carrier and contract carrier • EOI route or Suo motu • Selection through bidding process* • Level playing field • Rules of the game are well defined • Technical qualifying criterion • Financial selection criterion • Capacity of the system • (i) Own use quantity • (ii) Contracted quantity • (iii) common carrier quantity= ( I + ii )/ 3 • Total capacity = ( I + ii + iii ) * flow chart follows

  17. Regulations for Determination of pipeline tariff • Tariff for EOI or Suo motu route authorized pipelines- as per the bid • Tariff for Government authorised pipeline or PNGRB authorised pipeline u/r 18(i) or other pipelines declared as common carrier or contract carrier, computed as per above regulation i.e., • Return on capital employed @ 12% post tax • Capacity to be considered- first year 60%, second year 70%, third year 80%, fourth year 90%, fifth year 100% • Pipeline divided in to zones @ 300 Km. including spurs of 10% of pipe line length or 50 Km. which ever is less • Tariff computed on the basis of fix number in a zone but increasing with successive zones on reducing slope

  18. Regulations for declaring a pipeline as common carrier or contract carrier* • U/s 20 of the Act, PNGRB can declare a pipeline or city or local natural gas distribution net work as a common carrier or contract carrier • In the public interest • For promoting competition • Avoiding infructuous investment • For ensuring adequate availability of P,PP&NG • Entity owning the pipeline an opportunity of hearing • Assess capacity and ensure that extra capacity is available for public utilization

  19. Regulations for Access code • Common carries pipeline by authorization or by declaration • Capacity of pipeline as authorized or as computed with notified software module • Well defined rules for entry point and exit point construction and cost sharing • Gas quality parameters well defined both at entry and exit point • At entry point • Gas heat value band • Impurities level at inlet point in the gas • Hydraulic condition (Pressure, temp. Volume)

  20. Regulations for Access code contd… • At exit point • Gas heat value at exit point to meet consumer requirement • Impurities level to be within consumer acceptable band • Pressure, temp. and volumes to be as per contract between transporter and the shipper • Limits well defined for over drawl, under draw, positive and negative imbalance • Provision for penal action for default • Gas supply to any place from any place for any one at competitive cost is the motto

  21. Regulations for Technical standard and specification including safety standards Function of the Board as per Section 11 (i) of the Act. Applicable to activities relating to construction and operation of pipelines and infrastructure projects in downstream petroleum and natural gas sector Board has constituted a Advisory Committee The Advisory Committee has constituted ten sub-committees to assess the adequacy of existing standards & suggest addition deletion or re-writing of the standards

  22. T4S sub-committees

  23. Regulations for Technical standard and specification including safety standards contd… • Uniform standard for pipeline design, construction, commissioning and operation • Population density classification • Design pressure • Construction standard, safety, record keeping, third party inspection • Commissioning requirement spelt out • Operational requirement • Trained manpower • Safety requirement • Record keeping • Accident prevention, reporting and ERDMP management

  24. T4S Specific to Pipeline Safety • Pipelines spread through out country – prone to affect wider section of society in case of leak, burst, fire etc. • Safety features • Provision of SV and Venting – to contain the effect of leak • Pipeline protection through coating and CP • Intelligent Pigging • Pipeline patrolling– foot patrol, vehicle, helicopter • Pipeline surveillances with GPS based monitoring, CCTV, Satellite based scanning & vibration sensing through optical fiber optic system • Leak detection module • Central Gas Management

  25. Regulations for Emergency Response & Disaster Management Plan • All kind of accidents codified • Accident reporting system standardized • Resource planning standardized • Mutual aid system made mandatory • Involvement of various authorities clarified • ERDMP formats and document standardized for uniform implementation • Skill mapping and training needs stressed • Ensures corporate involvement

  26. Role of PNGRB in Management ofPipeline network in the country • Summary • Develop mid stream infrastructure which is totally inadequate to meet country's requirement • Allow a level playing field to all players • To provide competition with well defined rules • To ensure optimal utilization of infrastructure • Ensure uniform design, operation and safety standards across the country • Provide growth potential to all stake holders- entrepreneurs, manufacturers, suppliers, investors, marketers, academia etc • Ensure that shipper can transport his commodity from any place to any place at reasonable cost

  27. Let us jointly manage the mid stream sector THANKS

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