Bhagyanagar Gas is a possible investment target

Vol 9, PW 4 (01 Jun 05) Midstream & Downstream

Bhagyanagar Gas in Andhra Pradesh is emerging as a potential investment target for companies that want to get a foothold in the southern Indian gas distribution market.

Market whispers indicate the Hyderabad city gas distribution and LPG joint venture between GAIL and Hindustan Petroleum is ready to part with 20% to 25% of its equity to a strategic investor. Already, there are signs that companies from Britain might be interested.

In December this year a delegation from the Society of British Gas Industries is expected make a visit to Hyderabad to meet with Bhagyanagar Gas following meetings in Gujarat and Mumbai, where SBGI member companies have ongoing discussions with BG-controlled Gujarat Gas and Mahanagar Gas, a joint venture between GAIL and BG. Southern India is a new opportunity for city gas distribution after Gujarat and Mumbai, reveals a source.

British companies want to make investments in Andhra Pradesh but dont want to start afresh. Bhagyanagar Gas is an obvious candidate because it already has a structure in place.

One obvious contender is British Gas, which is considering southern India as an area of expansion. However, BG is not the company in question and has so far held no discussions with Bhagyanagar Gas even though it has not yet crossed it off the list as a possible investment target.

Its still too early to start talking about investments in southern India, we learn. Until BG can see where the gas is coming from it cant do anything.

Lack of clarity surrounding Reliances plans for its KG gas and uncertainty about several LNG projects is prompting BG to temper its enthusiasm for Andhra Pradesh until the market develops. If GAIL doesnt even know where the gas is going to come from no-one does, we hear.

No one with experience will make an investment until the gas sourcing situation becomes clearer.