GAIL condemns IndianOil LPG pipeline plans

Vol 15, PW 17 (08 Mar 12) Midstream & Downstream

GAIL is angry at IndianOil’s proposal to lay a 1400-km pipeline to carry 4.5m t/y LPG from Kandla in Gujarat to Panipat in Haryana.

IOC’s proposed Rs2200cr ($440m) pipeline threatens to compete with GAIL’s existing LPG pipeline, running 1270-km from Jamnagar in Gujarat to Loni in Uttar Pradesh. GAIL’s largest LPG customer for this pipeline is none other than IOC.

But that will change if IOC can transport LPG directly to its markets in Gujarat, Rajasthan and Haryana through its own pipeline. Incensed, GAIL has written several letters to the ministry since December 2011, objecting to IOC’s project.

GAIL says it was the first Indian company to enter the LPG pipeline business, not IOC. “How is it in the nation’s interests for different companies to operate separate LPG pipelines along the same route” questions GAIL.

“Why does IOC want to lay a separate pipeline Our pipeline runs on a ‘common carrier’ model. It’s cheaper if we supply LPG to (state-owned) oil marketing companies.

They will find it costly to source and supply LPG themselves.” Yet, IOC asserts it can save at least Rs400cr ($79.8m) by laying the Kandla to Panipat pipeline to meet local LPG demand, which is rising 9% annually.

“With our own pipeline we could target bulk customers in the proposed Delhi-Mumbai Industrial Corridor (a $90bn infrastructure project being set up with Japanese backing),” says a senior IOC official. “If we don’t lay a pipeline, then GAIL will anyway lay its own additional pipeline and we’ll be forced to pay them!” Tensions between the two state-owned companies are rising fast but oil ministry officials want to avoid getting involved.

“Only the PNGRB (Petroleum & Natural Gas Regulatory Board) can decide whether or not to authorise IOC’s pipeline, once it receives the proposal,” says a ministry official.

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