IOC set to enter gas pipeline business
New Delhi   16-Jul-2010

Cash-short oil marketing companies (OMCs) of the government are now looking at newer ways of revenue generation, with IndianOil deciding to join the race for the trunk gas pipeline business. This segment of business has so far been dominated by a purely gas marketing and transportation company, GAIL India, and Reliance Industries Ltd, now the biggest producer of natural gas in the country.

The Petroleum and Natural Gas Regulatory Board (PNGRB) opened the technical bids today for the Mallavaram (near Kakinada in Andhra Pradesh)-Bhopal-Bhilwara (Rajasthan)-Vijaipur (near Guna in Madhya Pradesh) pipeline. GSPL, a subsidiary of Gujarat State Petroleum Corporation Ltd (GSPCL), which has struck gas in the Krishna-Godavari (K-G) Basin, had originally proposed this pipeline to the board to transport its gas.

IOC, biggest of the OMCs, put in a bid with Gujarat State Petronet Ltd (GSPC) for this project, the bidding for which closed today. The only other bid was from GAIL India.

IndianOil chairman B M Bansal had earlier told Business Standard, the company was planning to bid for all three trunk pipelines for which bids were being invited. The company has a crude and product pipeline network of 10,000 km.

"We will evaluate the technical bids first and then decide on the financial bids. The winner will be declared after three weeks," said a senior Board official. Companies such as GAIL, Gujarat State Petronet, L&T, GMR and Engineers India had participated in the pre-bid conference. However, only GAIL and Gujarat State Petronet finally bid for the first of the three trunk pipelines.

The Board had earlier invited bids for two more trunk pipelines, Mehsana (Gujarat)-Bhatinda (Punjab) and Bhatinda-Jammu & Kashmir. However, it was forced to extend the dates for these pipelines due to non-notification of Section 16 of the PNGRB Act and a judgement of the Delhi High Court which asked the Board not to proceed with city gas or pipeline authorisation since Section 16 was not notified. The section was notified with effect from today. The section authorises the regulator to lay, build, operate or expand a city or local natural gas distribution network. The last date of bids for the Mehsana-Bhatinda pipeline is July 23.

The Board has been mandated by the government to rapidly expand the domestic gas pipeline network. At present, the bulk of gas consumption is accounted for by the western and northern states, while the eastern and southern states are lagging due to low pipeline density. The government is keen to expand the network to bring down the considerable inter-state disparity in gas consumption.

With the recent natural gas find in the eastern offshore K-G basin, indigenous production is set to double and natural gas to emerge as an important source of energy. LNG infrastructure in the country is also being expanded. Current domestic gas production is estimated at about 160 million standard cubic metres a day (mscmd) and is set to increase, with a production ramp-up by Reliance Industries' KG-D6 block from 62 mscmd at present to 80 mscmd later.