Petroleum and Natural Gas Regulatory Board
st
1 Floor, World Trade Centre, Babar Road, New Delhi -110001
Tel No: 23457700, Fax No: 23709151
September, 2016
Expression of Interest Document for Suggesting ways and means for
authorizing entities for lay, build, operate or expand any Natural Gas
pipeline as a common carrier or contract carrier or City Gas Distribution
Network within the ambit of PNGRB Act, 2006 and the related notified
Regulations there under
PNGRB has so far conducted six rounds of CGD biddings & eight
biddings for natural gas pipeline. Currently bidding process is a two stage
process consisting of Technical Stage (TS) and Financial Stage (FS). Only the
entity that qualifies the TS can proceed to FS.
Historically, the bidding criteria in natural gas pipeline has not been evolved
much through various biddings but in one of the instance when the successful
bidder has quoted Rs. 0.01/MMBTU for all 25 years but that was only for 1st
Tariff Zone. For all other zones, huge increase in tariffs were quoted because of
no limit prescribed in the then Regulations. PNGRB while awarding
authorization to entity, subsequently amended Regulations to cap the maximum
limit on increase in zonal tariff w.r.t. previous zones. Recently a bidder has
quoted Rs 0.01/MMBTU tariff for all three zones for each of 25 years
The bidding criteria for CGD have evolved over the last 6 bidding rounds
primarily due to bidding practices adopted by various bidding entities. The
chronological evolution of the bidding criteria for CGD is summated as under:
(i) In first two rounds of CGD bidding the bidding criteria were:
(a)
Lowness of the present value of the overall unit network tariff
(weight 40%).
(b) Lowness of the present value of the compression charge for
CNG (Weight 10%)
(c) Highness of present value of Inch km of steel pipeline (Weight
20%).
(d) Highness of present value of the number of domestic customers
proposed to be connected by PNG (Weight 30%).
(ii) In the third round besides the above criteria an additional stage of FR
was introduced where the bidding entity was required to maintain
minimum IRR of 6%.
(iii) From fourth round onwards, FR stage was dropped and the bidding
criteria were again changed to:
(a) Lowness of the present value of the overall unit network tariff
(Weight 70%)
(b) Lowness of the present value of the compression charge for
CNG (Weight 30%)
Additionally, concept of Minimum Work Programme for Inch km of
pipelines and PNG domestic connections were introduced. Initially
PNGRB had decided to cover 15% Household for PNG Domestic
connection after consultation with the stakeholders it was reduced to
5% of Households. Similarly, the Inch-Km. criterion was initially set
to 2.696 Inch-Km. per Square Kilometer, which was rationalised to
0.65%, 0.36% and 0.07% of GA areas of upto 1000 Square Km., 5000
Square Km. and more than 5000 Square Km. respectively. All these
targets are required to be met in five year period and Board may
consider carry forward of targets from one year to another within the
period of five years.
2.
PNGRB has been trying to actively address the issues raised or
confronted while processing of the bids by amending Regulations suitably.
However, the following issues have assumed serious proportions with every bid
submitted:
Natural Gas Pipeline:
(i) Economic viability on standalone basis.
(ii) While tariff numbers being quoted by any bidder is going to be sacrosanct, establishing the veracity of the (a) natural gas volume demand
being quoted as well as (b) CAPEX and (c) OPEX still remain a
challenge.
(iii) In order to arrive at prescribed return on the total capital employed,
the bidders may submit their bid with sharp variation in their Tariff
Bid on year-on-year basis.
CGD Network:
(i) The bidders are continuously quoting Rs. 0.01 each for the bidding
parameters i.e Network Tariff (NT) and Compression Charge (CC)
with only exception being some cases where Single Bids have been
received.
(ii) Issue of NT and CC received under Single Bid i.e whether to accept it
or not?
(iii) Relevance of NT and CC as bidding parameters given that these are
applicable to the third party access and usage only.
(iv) Issue of GA size and its viability, whether to continue with District
concept
(v) Issues relating to Award of contiguous GAs.
(vi) Issues relating to selection of GAs and supply of gas through
pipelines, given that alternative modes are available in the market.
In view of the above, it is being felt that the entire bidding process requires a
thorough review.
3.
Accordingly, PNGRB seeks Expression of Interest from the Consultants
for suggesting ways and means for authorizing entities for lay, build, operate or
expand any Natural Gas pipeline as a common carrier or contract carrier or City
Gas Distribution Network within the ambit of PNGRB Act, 2006 and the related
notified Regulations there under.
SCOPE OF WORK:
Part-I (Natural Gas Pipeline)
(a) Analyse the current system of authorization through bidding based on the
lowness of the present value of the tariff and highness of present value of gas
throughput (volume) applicable to Natural Gas pipelines and the merits and
demerits of the methodology consistent with the relevant provision of the
PNGRB Act, 2006 and objectives & principles laid down therein.
(b)
Study and outline the salient features of the international regulatory
systems and methodologies for determination of transportation/tariff/ rates and
the underlying principles thereon and provide detailed information on at least
two country-specific models:
- One each from the developed and mature gas-exporting and
gas-importing
economies in the work (i.e., OECD Member countries) and from the developing
Asian gas market economies.
(c)
Examine the feasibility of a particular regulatory model or a mix of
others, as identified in (b) above, to the Indian domestic natural gas market.
(d)
Undertake a comparative analysis of the development of Natural Gas
Pipelines in the pre-PNGRB authorization period, i.e., prior to 15.07.2010 when
Section 16 of the Act was notified by the Government, and the post-PNGRB
authorization period and identify issues and constraints involved with each
methodology.
(e)
Evaluate the necessity of changes in the present bidding parameters,
which can meet the objectives and principles laid down in the Act for
development of Natural Gas Pipeline networks in the country and recommend
alternative method(s) of bidding/selection of the entity.
(f) In the specific context of the present methodology of bidding on financial
parameters, examine the rationale and feasibility of ring-fencing such
parameters with conditions, as may be specified in the Regulations /
Application-cum-bid-document, including, but not limited to (i)
Methods of keeping the Capex and Opex within reasonable limits,
such as prescribing project related normative limits/benchmarking
against comparable projects.
(ii)
Determination of a suitable return on capital employed which can
serve as the lower limit (to pre-empt possibility of abnormally low
and near-zero bids)
(iii)
An appropriate method for rationalizing/controlling significant and
unreasonable variations in tariff bids for consecutive years.
(g) Examine the issue of viability of natural gas pipelines on stand-alone basis
(unbundled from marketing and distribution segments) within the ambit of the
PNGRB Act 2006 and recommend appropriate methodology to ensure the same.
(h) Based on the study on the current regulatory systems of authorisation of
natural gas pipelines and determination of transportation tariff, by PNGRB and
the international case studies and analysis as elaborated in (b) above. Prepare a blueprint of regulatory methodology for authorization and
determination of tariff of natural gas pipelines in India.
Part-II (City Gas Distribution Network)
(a)
Analyse the current system of authorization and determination of
Network Tariff (NT) and Compression Charge (CC) applicable to City Gas
Distribution (CGD) networks and the merits and demerits of the methodology
consistent with the relevant provision of the PNGRB Act, 2006 and objectives
and principles therein.
(b)
Study and outline the salient features of the international regulatory
systems and methodologies for determination of transportation / network/tariff
rates and the underlying principles thereon and provide detailed information on
at least two country-specific models:
- One each from the developed and mature gas-exporting and
gas-importing
economies in the work (i.e., OECD Member countries) and from the developing
Asian gas market economies.
(c)
Examine the feasibility of a particular regulatory model or a mix of
others, as identified in (b) above, to the Indian domestic natural gas market.
(d)
Undertake a comparative analysis of the development of CGD networks
in the pre-PNGRB authorization period, i.e., prior to 15.07.2010 when Section
16 of the Act was notified by the Government, and the post-PNGRB
authorization period and identify issues and constraints involved with each
methodology.
(e)
Evaluate the necessity of changes in the present bidding parameters,
which can meet the objectives and principles laid down in the Act for
development of CGD networks in the country and recommendation of an
alternative method of bidding/selection of the entity.
(f)
Evaluate of the strengths / weaknesses of the present District-and-
population-based criteria for identification of Geographical Areas (GAs) in the
context of the pattern of response of entities to the various CGD bidding
rounds as also of the growth of CGD operations in the country and
identification of appropriate criteria for determination of size of a GA, selection
of GAs for bidding. In this regard, the emerging techniques of gas transportation
such as LNG Trucks and other modes in a GA should also be considered.
(g)
Analyse the current statutory provision in the PNGRB Act w.r.t. entity’s
own requirements and the third-party access to the CGD network and the
consistency between the tariff rates fixed by the CGD owning-operating entity
and those approved by the PNGRB applicable to third parties and examine the
need for harmonization of tariff-rates in the same CGD network.
(h)
Examine the effectiveness of “end-user price” of natural gas as a bidding
parameter in the context of the relevant provisions of the Act and the
Judgement of the Supreme Court dated 01.07.2015 on powers of PNGRB to
fix/regulate prices. International experience on the above parameter, if any, may
be outlined.
(i)
Analyse the consistency of single bids received in various round of CGD
bidding in the context of the present authorization scheme and draw lessons
from international experiences as also from other domestic sector regulations
such as power sector.
(j)
Examine the present provision(s) relating to technical valuation of
applications, Minimum Work Programme, fixation of targets for five years,
identify the problems and suggest improvements.
(k)
Analyse the scope and methodology for fixation of the period of
marketing and infrastructure exclusivity granted to the authorized CGD entities
and suggest measures to improve the effectiveness of the regulatory framework.
(l)
Based on the study of the current regulatory systems of authorisation of
CGD networks and determination of network tariff (NT) and compression
charge (CC) by PNGRB and the international case studies and analysis as
elaborated in (b) above. Prepare a blueprint of regulatory methodology for authorization and
determination of NT and CC of CGD networks in India.
4.
Reputed consultancy organizations with expertise in both the functional
area of selection of entities through bidding and possessing the domain
knowledge on issues relating to the energy sector preferably in oil and gas
sector in India and abroad, will qualify for the purpose. Only Institutional
Consultants (as defined in the PNGRB (Appointment of Consultants)
Regulations, 2007) with their registered office in India will be eligible for
applying.
5.
Earnest Money Deposit (EMD):
a. The Consultant is required to furnish the Earnest Money Deposit
(EMD) of Rs 50,000/- in form of Demand Draft in favour of PNGRB payable at
New Delhi, while submitting Expression of Interest.
b. PNGRB shall not be liable to pay any bank charges, commission or
interest etc., on the amount of EMD.
c. Any bid not secured in accordance with above, is liable to be rejected
by the PNGRB.
d. The EMD, without any interest accrued, will be refunded:
(i) In the case of those consultants who are not selected, within two
months (60 days) of the acceptance of tender by PNGRB.
(ii) In case of selected consultant accepting the Order and furnishing
the Performance Bank Guarantee.
e. The EMD shall be forfeited in case of those consultants, shortlisted by
PNGRB to issue Request for proposal of document but they opted not
to submit bid documents.
6.
PNGRB will short list the Consultants who meet all the following
minimum eligibility criteria:
a. Number of years of experience of the firm - Minimum ten years.
b. Past experience of studies/assignments of similar nature in the Energy
Sector - At least four in the last five years.
c. Past experience of studies/assignments carried out for Oil & Gas sector
in India - At least two in the last three years.
d. Number & qualifications of key personnel - Minimum 50; at least 40%
should be post-graduates.( Details to be submitted as per Annexure-I)
e. Relevant experience of key personnel - Minimum 10% should be
involved in study/assignment related to the oil and gas sector in India.
The minimum no of which to be involved in the assignment shall be
decided based on the pre-Expression of interest meeting consultation.
The experienced person should have minimum 5 years of relevant
experience in this field. Experience and qualification of personal
deployed for the assignment is to be provided.
f. Turnover/Revenues in the last three years - Minimum of Rs 50 crore in
each year.
7.
The start of the assignment shall be from the date of award and should be
completed within a period of 90 days thereafter or within such time as may be
mutually agreed. At the conclusion of the assignment, the Consultant would be
required to submit a detailed report on the findings covering inter alia the
methodology followed and bring out all the relevant facts and figures,
assumptions, basis, etc. The Consultant shall also be required to provide
fortnightly progress reports to PNGRB and shall be guided by such instructions
as may be issued in writing by PNGRB from time to time.
8.
The consultant is expected to maintain absolute confidentiality of the data
or any information that may be made available during the exercise. The
consultant shall deal with PNGRB directly and make formal requests to the
PNGRB only for making available the data or explanations/ clarifications as
may be required from stakeholders during the exercise, if any. PNGRB while
taking into consideration the relevance of the requirements and the need to
protect the confidentiality of the data or information may formally provide the
same to the consultant. The decision of PNGRB shall be final with regard to its
decision to either provide in full or in part or not to provide any subsequent data
or information and the consultant shall have the right to use such disclaimers as
he may deem to be fit in the final report.
9.
The following additional terms and conditions will apply:-.
a. Only short listed Consultants will be issued the Request for Proposal
document.
b. PNGRB reserves the right to cancel/re-tender this short listing process
if the necessity so arises.
c. Power of attorney (on stamp paper duly notarized) of the person
submitting the Expression of Interest on behalf of the applicant shall be
attached.
d. Firms/organizations if found to have indulged in any corrupt or
fraudulent practices or wilful misrepresentation of facts will have their
Expression of Interest not taken up for consideration.
e. Expression of Interest submitted after the stipulated last date and time
shall be liable for rejection.
f. Expression of Interest should be accompanied with the following
additional documents/details given below in support of the minimum
eligibility criteria thereof:i. Profile of the organization.
ii. Details of past experience of studies of similar nature in the
Energy Sector and the oil & gas sector in India.
iii. Short CVs (two page maximum) of the key personnel giving
details of their qualifications and relevant experience
specifically highlighting those who are expected to be
deployed in the assignment
iv. Annual Report including audited Balance Sheet and Profit &
Loss Account statement for past three years.
v. A focused write-up (not exceeding 5000 words) on his
understanding of the project on offer.
vi. Capability statement, illustrating the skills and experience of
the firm in providing the services required.
10. A pre-Expression of Interest Meeting will be held on 21st September at
11:30 am at the address given below with all interested parties who have
purchased this document. The Expression of Interest should be submitted in
sealed cover and delivered at the address given below latest by 12 noon on 07th
October 2016 and clearly marked “Short listing of Consultant for Suggesting
ways and means for authorizing entities for lay, build, operate or expand any
Natural Gas pipeline as a common carrier or contract carrier or City Gas
Distribution Networks within the ambit of PNGRB Act, 2006 and the related
notified Regulations there under". The Expression of Interest with supporting
documents would be submitted at the following address:
Secretary,
Petroleum and Natural Gas Regulatory Board,
1st Floor, World Trade Centre,
Babar Road, New Delhi 110001
Contact Tel: 23709142, Fax: 23709151
********
Annexure-1
Details of Qualifications & Experience of the personnel to be deployed for the
job:
S. No.
Name &
Designation
Qualification
Experience
Special
Achievement
We Confirm that the above mentioned official shall be working for the
assignment for which the bid is being submitted at the office of PNGRB or as
decided by PNGRB.
Yours faithfully,
Signature...........................................
Name & Designation..........................
For & on behalf of.............................