Mumbai: State-run Hindustan Petroleum Corp. Ltd (HPCL) and exploration and production company Oil India Ltd will shortly form a city gas distribution joint venture (JV), said two people aware of the development.

HPCL and Oil India won licences for gas distribution in Ambala and Kurukshetra districts in Haryana and Kolhapur district in Maharashtra in the eighth round of city gas bidding.

“The name of the joint venture is in the finalization stage," said Oil India in an emailed reply. An email sent on Tuesday to HPCL had not elicited a reply till press time.

Hindustan Petroleum has three existing city gas distribution joint ventures—Aavantika Gas Ltd, Bhagyanagar Gas Ltd and Godavari Gas Ltd.

Aavantika Gas is HPCL’s joint venture with GAIL (India) Ltd in Madhya Pradesh for supply of piped natural gas to consumers in domestic, industrial and commercial sectors and compressed natural gas for automobiles in Indore, Ujjain and Gwalior.

Bhagyanagar Gas is a joint venture with GAIL for supply of natural gas in Andhra Pradesh. It plans to connect 100,000 new households in Hyderabad to its piped natural gas network within the next two years and more than 250,000 by 2021.

“Aavantika and Bhagyanagar will see investment of more than 400 crore to build infrastructure and network in industrial as well as commercial sector," said one of the two people cited earlier, both of whom spoke on condition of anonymity.

Godavari Gas, a joint venture with the Andhra Pradesh Gas Development Corp. (a joint venture between GAIL and the state government) is setting up a city gas distribution network in East Godavari and West Godavari districts, for which the company has received the Petroleum and Natural Gas Regulatory Board’s nod.

The company plans to invest more than 1,000 crore in its city gas ventures.

To meet the growth strategies, Oil India too has plans to expand in segments other than exploration and production.

“Oil India plans to diversify in city gas distribution, liquefied natural gas and refineries segments in order to balance its existing portfolios," said the second person mentioned before.

Natural gas is touted to be the fuel of the future because of its clean-burning properties. This has made many companies bullish on the segment and venture into city gas distribution.

India plans to increase its gas usage in the energy mix to 15% from the current 6.5%. The world average of gas use in the total energy consumption is 24%.

India imports 20-30% of gas through spot markets and the rest through long-term contracts.