Regulatory issues in mid stream sector

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• Regulatory issues in mid stream sector
• Petroleum and natural gas regulatory board, India

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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

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Oil and gas mid stream

• Pipeline transportation
• Crude oil pipelines to refineries
• Petroleum product pipelines- refineries or ports
  to terminals
• Natural gas transportation pipelines

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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

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• PNGRB- FUNCTIONS

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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

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Common carrier and Contract carrier

• Common carrier
• Transportation is provided on as required basis
  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

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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

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PNGRB definition of common carrier and contract
carrier

• Common Carrier- Any pipeline for transportation
  of PPNG by more than one entity on non
  discriminatory open access basis
• Contract Carrier- Any pipeline for transportation
  of PPNG 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

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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

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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

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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

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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

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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

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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

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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

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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 _at_ 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 _at_ 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

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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,PPNG
• Entity owning the pipeline an opportunity of
  hearing
• Assess capacity and ensure that extra capacity is
  available for public utilization

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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)

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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

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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

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T4S sub-committees
SN Sub-Committee Headed by
1 Cross Country Pipeline IOC
2. CGD IGL
3. Refining, Processing, LNG Terminal RIL
4. LPG Bottling and Storage IOC
5. POL Depot and Terminal HPCL
6. Retail Outlets BPCL
7. Commercial Storage, Crude, POL and NG EIL
8. Access Code GAIL
9. Accreditation Criterion QCI
10. ERDMP Mr. B.C.Bora

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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

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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

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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

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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

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Let us jointly manage the mid stream sector

• THANKS