IOC admits lobbying against H-Energy pipeline

Vol 19, PW 23 (28 Jul 16) Midstream & Downstream

IndianOil says it lobbied with gas regulator PNGRB to scrap an eastern India gas pipeline proposed by Hiranandani Group company H-Energy.

On July 15 the gas regulator published a terse notice confirming it has decided to "annul the entire bid process" and invite fresh bids to lay a 750-km pipeline from Contai in West Bengal to Paradip in Orissa passing through Duttapulia in West Bengal and Jajpur, Dhamra and Cuttack in Orissa. An IndianOil source confirms it wrote to the PNGRB "a couple of weeks after" price bids were opened on May 12 demanding rejection of H-Energy's bid and project award to IOC.

Lowest bidder H-Energy shocked everybody by quoting an implausibly low Rs0.09/mmbtu transmission tariff for 25 years - effectively allowing companies to ship gas through the pipeline at little or no cost. "The kind of numbers it (H-Energy) quoted were not realistic," says IOC.

"It was not possible to justify commercial viability." Our source adds that assuming 100% capacity utilisation from day-one total transmission tariff revenue for 25 years would be around Rs34cr ($5m) for a project that cost at least Rs3000cr ($446m) and where operating expenses for the first year would be Rs120cr ($17.8m). IOC quoted Rs92.93/mmbtu ($0.40) for the 300-km Zone 1 with marginal increases for two other zones.