Que: How has Mahanagar Gas Limited (MGL) strategically positioned itself to mitigate the impact of gas price volatility, considering the current market dynamics?

Ans: The implementation of a new domestic gas pricing policy has brought much-needed relief to the CGD sector. Post submission of Kirit Parikh Committee Report, the Government of India issued revised domestic gas pricing guidelines in April 2023. Under the approved guidelines, the APM gas price will be determined at 10 percent of the monthly average of the Indian crude basket and will be notified on a monthly basis. The guidelines also have a ceiling of USD 6.5 per MMBtu and a floor of USD 4 per MMBtu for the next two years. After that, the floor and ceiling prices will increase by 25 cents every year.

These guidelines played a crucial role in stabilizing prices, mitigating the risk of sudden price hikes, and thereby alleviating inflationary pressures to ensure a more stable price.

The revised guidelines are now linked to crude oil prices, a practice that is currently followed in most industry contracts and more relevant to the country's consumption basket and has deeper liquidity in global trading markets on a real-time basis.

Moreover, there has been a notable decrease in LNG price compared to last year, especially in August-September, where it fluctuated between USD 35 to USD 40 per MMBtu. Presently, prices are at approximately USD 15 to USD 16 per MMBtu. MGL has implemented proactive measures to mitigate the impact of such volatility, maintaining a diversified portfolio of gas sourcing. The company has entered into term contracts with Reliance Industries Ltd and BP Exploration (Alpha) Ltd. for Gas from High Pressure High Temperature (HPHT) fields, and has also entered into contracts with GAIL for Henry Hub indexed pricing.

Consequently, MGL has adopted a strategy to diversify the duration and indices of gas prices.

Que: Could you provide insights into MGL's term contracts with Reliance Gas for High Pressure High Temperature (HPHT) gas and agreements with GAIL for Henry Hub?

Ans: In order to ensure supply security and to mitigate the price volatility risk, MGL signed term gas contracts with Reliance Industries Ltd and BP Exploration (Alpha) Ltd. for 0.6 MMSCMD under HPHT and with GAIL for Henry Hub RLNG 0.78 MMSCMD (Henry Hub) to cater to the demand over and above APM allocation as well as meet its industrial and commercial supplies.

Que: With 90 percent of PNG and CNG being sourced domestically, how is MGL planning to align with national production trends? ¬

Ans: Around 80 percent of the priority segment requirement is met through APM gas and for the balance, as outlined above, we have in place a term contract with RIL as well as with GAIL to meet the requirement of priority segment as well as industrial and commercial segment.

Que: How does MGL view the government's recent policy prioritizing City Gas Distribution (CGD), and what impact does it foresee on meeting the company's needs?

Ans: A major portion of the demand for D-PNG and CNG segment is catered through government-allocated APM gas. Also, the Government’s notification regarding High Pressure High Temperature (HPHT) Gas allocation priority to CGD is another positive step for D-PNG and CNG segment. These guidelines were effective in maintaining price stability and reducing inflationary pressures.

Que: MGL has set a goal of establishing around 50 CNG stations annually. Can you share more details about this expansion plan and its geographical focus?

Ans: MGL has planned to set up 50 CNG stations annually primarily in Mumbai, Thane and Raigad District of which 25 CNG outlets are expected in Mumbai and Thane District and the balance 25 CNG outlets in Raigad district. MGL has issued letters of intent to private plot owners and procured sites from private plot owners and government agencies.

MGL has recently executed an agreement with Reliance BP Mobility Limited which will additionally help MGL expand CNG Outlets in Thane and Raigad Districts.

Que: MGL emphasizes the growth of the CGD sector contributing to India's energy security. How does MGL see its role in achieving the government's goal of increasing gas's contribution from 6 percent to 15 percent?

Ans: MGL believes it can play a pivotal role in GOI’s endeavour to increase the share of natural gas in India’s energy basket from 6 percent to 15 percent. Aligned with the government's ambitious goal of elevating gas contribution from 6 percent to 15 percent, MGL is dedicated to augmenting its core CNG and PNG infrastructure. This involves expanding the network of CNG stations and increasing the customer base in residential, commercial, and industrial establishments.

In a strategic move towards sustainability, MGL is diversifying into alternative green fuels, specifically Compressed Biogas (CBG) and Liquified Natural Gas (LNG). To realize this vision, MGL is setting up one of the largest MSW to CBG plants in Asia in Mumbai. MGL is also rolling out LNG stations to develop the LNG ecosystem enabling the switch from diesel to LNG for long haul transportation. Currently, MGL operates one LNG station at Savroli, Khalapur and has plans to add 6 nos. of stations in Maharashtra through its JV Mahanagar LNG Pvt. Ltd. The primary objective includes enhancing access to clean and affordable natural gas, promoting its utilization across various sectors, and collaborating with stakeholders to facilitate policy initiatives that support this growth.

Through these multifaceted endeavours, MGL aspires to make a substantial contribution towards attaining the national target of increasing the share of natural gas in India's energy mix.

Que: Can you provide more details about MGL's Memorandum of Understanding (MOU) with BMC for the establishment of a Compressed Biogas (CBG) plant in Mumbai?

Ans: MGL signed a Memorandum of Understanding (MOU) with Brihanmumbai Municipal Corporation (BMC) for setting up a Compressed Biogas (CBG) plant in Mumbai.

The CBG plant will have the capacity to process up to 1000 Tonnes Per Day (TPD) of source segregated food and vegetable waste and will be set up on a parcel of land to be provided by BMC. The waste, also known as CBG feedstock, will be collected from hotels, restaurants, banquet halls, large vegetable markets, etc. in the city. The daily supply of required feedstock for the CBG plant will be managed by BMC through dedicated vehicles and will include collection, segregation, and delivery. MGL will design, build, commission and run the CBG plant through a SPV and ensure that almost 1000 tons of municipal solid waste going to landfills every day is eliminated.

Thus, the CBG plant, once completed, will provide a four-in-one solution functioning as a generator of renewable green fuel, elimination of 1000 TPD MSW from going into landfills, prevention of release of methane into the atmosphere and an organic fertilizer production plant.

Que: How does MGL plan to address challenges such as the affordability of CBG and hydrogen, transportation logistics, and water availability in its transition to green energy?

Ans: MGL shall undertake a comprehensive strategy to address challenges related to the affordability of CBG and going forward for hydrogen. This initiative focuses on capitalizing on technological advancements, introducing innovative business models, and cultivating strategic partnerships to reduce production costs and enhance the economic viability of these sustainable energy sources.

Benefiting from existing infrastructure and technical expertise, MGL is well-equipped to manage logistics through its pipeline network and cascades for CBG. Additionally, the incorporation of hydrogen blending (2 percent) with natural gas can be facilitated seamlessly.

In addressing concerns related to water availability, MGL is committed to implementation of water recycling and conservation measures to minimize external water intake.

Que: How is MGL progressing towards its goal of carbon neutrality, especially in terms of transitioning compressors to run on green electricity sources and installing solar panels? Also, could you provide details about MGL's exploration of opportunities within

Ans: MGL has installed solar power plant at its gas-receiving terminals and offices which caters to the electricity requirement of office building to an extent. Presently MGL has installed solar power plants at 12 locations with a total capacity of 180kw. Further MGL is exploring the possibility of sourcing green power through distribution open access for its CNG stations in Mumbai, Thane and Raigad. Energy will be generated at far-off places through solar or wind power plants and will be wheeled through state transmission and distribution grid to MGL CNG stations.

MGL has installed EV charging facility in collaboration with Tata Power at one of its CNG stations at Sion as well as Khopat, Thane. MGL is also planning to set up similar charging facilities at a few more CNG stations in Mumbai and adjoining areas. Additionally, MGL is also evaluating opportunities in EV value chain.

Que: How effective have the initiative with Maruti and Ashok Leyland been in promoting the transition to CNG and what role do subsidies play in this transition?

Ans: ‘MGL CNG Mahotsav’ scheme introduced in September 2023 received a very good response from CNG private cars and commercial vehicle segments. Various OEMs associated with MGL for this scheme. An increase of around 14 percent and 55 percent in monthly bookings of CNG private cars and commercial vehicles, respectively, was observed after the implementation of the scheme. ‘MGL CNG Mahotsav’ is a sales promotion scheme offering a win-win for both customers and MGL and has no ‘subsidy’ element as such.