Determination of Natural Gas Pipeline Tariff Amendment Regulation R1

Petroleum and Natural Gas Regulatory Board (Determination of Natural Gas Pipeline Tariff) Second Amendment Regulations, 2020at a glance

Date | Version January 18, 2021 | 1.0
Keywords ‘PNGRB’, ‘Natural Gas Pipeline’, ‘Pipeline Tariff’, ‘Unified Tariff’, ‘National Gas Grid System’
List of Legislation Referred i. Petroleum and Natural Gas Regulatory Board Act, 2006

ii. Petroleum and Natural Gas Regulatory Board (Determination of Natural Gas Pipeline Tariff) Regulations, 2008

iii. Petroleum and Natural Gas Regulatory Board (Determination of Natural Gas Pipeline Tariff) Second Amendment Regulations, 2020 (‘AmendmentRegulation’)

Jurisdiction India
  1. In a nutshell:
    1. Shipper pays Invoicing Entity on the basis of Unified Tariff for total volumes of gas delivered (including quantities of ship or pay) through pipelines forming part of the National Gas Grid System.
    2. Invoicing Entity continues to be entitled to revenue on the basis of Approved Tariff.
  • Since collection by Invoicing Entity from shippers is on Unified Tariff basis and entitlement is on Approved Tariff basis, Settlement amongst pipeline entities on periodic basis is envisaged in the Amendment Regulation. Pipeline entities are obligated to furnish information and estimates to the Petroleum and Natural Gas Regulatory Board (‘Board’) on periodic basis.
  1. Unified Tariff
    1. Invoicing entity(ies) are required to raise invoice and collect the unified tariff for the quantity of gas delivered to the shipper by the transporter at the unified exit point (of the National Gas Grid) and the ship or pay quantity instead of the approved tariff from the shipper.
    2. Determination of Unified Tariff:
  2. Unified tariff shall be determined by the Board in respect of the national gas grid system for each financial year.
  3. In terms of a formula, unified ariff shall be determined as provided in the following table, namely-

UFT = {(((AT1*EEV1) + (AT2*EEV2) + (AT3*EEV3)……+ (ATn*EEVn)) + Adj) / ((EEV1 + EEV2 + EEV3……+ EEVn) - EDVn)}

Where:

  1. UFT = unified tariff
  2. AT1……ATn = approved tariff in respect of pipelines 1 to n applicable on the date of determination
  3. EEV1…EEVn = Quantity of natural gas estimated to be transported plus estimated ship or pay quantity for pipelines 1 to n during the financial year for which unified tariff is being determined
  4. Adj-Impact of the difference, if any, between the estimated quantities considered by the Board and the actual quantities during the previous determination of the unified tariff
  5. EDVn = Quantities of natural gas estimated to be transported plus estimated ship or pay quantities through more than one pipelines during the financial year for which unified tariff is being determined

  1. Invoicing Entity
    1. ‘Invoicing Entity’ means the authorised entity laying, building, operating or expanding natural gas pipeline, where natural gas is evacuated by the shipper at unified exit point, or which is part of national gas grid system.
    2. Extended applicability of the Regulation- The applicability of the Regulations have been extended to included entities authorized by the Board pursuant to: (i) a policy directive issued by the Central Government or (ii) under regulation 9 of the Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand Natural Gas Pipelines) Regulations, 2008 and whose tariff is fixed under regulation 11 of the Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand Natural Gas Pipelines) Regulations, 2008, for the limited applicability of unified tariff in accordance with regulation 5A.
  1. Natural Gas Grid System.
    1. ‘National Gas Grid System’ means network of all such natural gas pipelines within India which are fully interconnected with each other (including those which are partly commissioned and so interconnected) and as enlisted in Schedule C to these regulations and the Board may, by order, amend the said Schedule C from time to time.
  1. Settlement
    1. Revenue entitlement of the Invoicing Entities (entities laying, building, operating or expanding natural gas pipelines which are part of the national gas grid system under unified tariff system), shall be the revenue with reference to approved tariff for such natural gas pipelines.
    2. Settlement of difference in the revenue entitlement and amount charged (on the basis of unified tariff) between various entities shall be carried out by such entities.
  • In terms of a formula, entity-wise revenue entitlement and revenue charged by way of unified tariff shall be worked out as provided in the table below, namely-
  1. RE = (EEV1*AT1 + EEV2*AT2 +……...+ EEVn*ATn)

Where:

  1. RE = Revenue entitlement of the entity as per the approved tariff
  2. EEV1…..EEVn = Actual quantities of natural gas transported and the quantity of ship or pay during the period by pipeline 1 to n
  3. AT1……ATn = approved tariff in respect of pipelines 1 to n for the period
  1. RU = ∑AVn * UFT

Where:

  1. RU = Tariff charged by the invoicing entity for quantities of gas evacuated at unified exit point including ship or pay quantities for the unified contractual path
  2. AV1 ........AVn = Actual quantities transported and the quantity of ship or pay during the period based on the unified exit points falling on the unified contractual path irrespective of number of natural gas pipelines falling on contractual path
  3. UFT = unified tariff determined for the respective period.
  1. Obligations of pipeline entity:
    1. provide to the Board monthly zone-wise information of:
  2. approved tariff,
  3. actual volume and quantity of gas transported and the quantity of ship or pay (expressed in terms of standard cubic meters (SCM) and MMBTU and the calorific value of such gas)

for each such natural gas pipeline forming part of the national gas grid system within a period of thirty days from the date of the commencement of the Amendment Regulations for immediately preceding twelve calendar months and month-wise estimates of these data-points for a period of next twelve calendar months, from the end of that month.

  1. continue to provide to the Board information described in point (i) for each calendar month within fifteen days from the end of that month;
  • provide to the Board estimates of the data-points described in point (i) (other than estimates for the ship or pay quantities) including the data on unified zone-wise volumes and quantities of gas after the commencement of Second Amendment Regulations for the next twelve months from the end of each calendar month, on a rolling basis, within fifteen days from the end of that month.
  1. provide every month reasons for variation (either positive or negative exceeding five per cent) between estimates and actuals of previous month; and
  2. submit such other one-time or periodic regular information as may be required by the Board from time to time.
  1. Concluding Thoughts
    1. In consonance with the Government of India’s plans for increasing share of gas in Indian economy’s energy basket from 6% to 15% by 2030, a move towards a ‘National Gas Grid’ concept with a unified tariff payable for shipping of gas has long been deliberated.
    2. By enacting the Amendment Regulation, PNGRB has taken a major stepto allow for greater transparency in the pipeline charges and availability of capacity. Such a move along with other steps including the establishment of Indian Gas Exchange (‘IGX’) as India’s first automated national level Gas Exchange under the regulatory framework of PNGRBin December 2020 should further enable: (i) efficient and competitive discovery of gas prices; and (ii) promote and sustain an efficient and robust gas market and foster gas trading in the country.

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