Challenges and Issues in Natural Gas Distribution Industry

Natural gas is emerging as an eco-friendly alternative to conventional fossil fuels. Why? Because it results in less harmful gas emissions but equal energy production. India has been using natural gas for a long time now and wants to achieve a much bigger target by the end of this decade.

Just like we have observed an increase in its adoption rate, some of its industrial and domestic uses have witnessed a significant drop. Over the last ten years, the number of CNG dispensing stations across India has increased sixfold and PNG connections by fourfold. This significant rise in natural gas consumption comes with some of its setbacks. These challenges in the Natural Gas Distribution Industry are as follows:

Limited access to fuel

Just because a relevant authority holds the license to City Gas Distribution (CGD), doesn’t mean it is catering to the diversified natural gas needs of the entire city. A major part of India has Piped Natural Gas (PNG) and connection but that doesn’t mean they all have access to it.

Low population density

CGD is a network industry that is part of a somewhat monopolistic market where its license holders are assigned exclusive geographic areas where they operate. Leaving the scope of competition out of it, the licensees have to cater to areas with low population density for new CGD connections.

Pipeline infra cost

The total cost of pipeline infrastructure is almost half of the project cost. Whereas the cost of acquiring as well as serving the customer base comes around one-fourth of the total project cost. In that case, the regions and areas that are less populated, have to pay higher prices for the same service.

Cost of natural gas

Did you know that 80 percent of CGD gas supply goes into domestic gas provision? The main reason behind this major incline towards domestic gas is CGD prioritising the allocation of this type. India also imports natural gas to fulfil the common man’s needs. If imported gas gets utilised for CGD, it will result in a price change where people will switch to other fuel alternatives.

Energy transition

It is a long-term challenge for CGD to bring everyone on the same board of electrifying almost everything varying from cooking to transportation. It also reflects the government’s vision of “one nation one gas grid” by the end of this decade.

Conclusion

Challenges in the Natural Gas Distribution industry are not limited to these factors only. It goes way beyond it. To know how the official figures changed over the years, read this article here.