Laying a gas or crude pipeline is a confusing business

Vol 10, PW 7 (27 Jul 06) Midstream & Downstream

Oil and gas pipelines are the vital arteries of any national economy.

Realising this, the Indian oil ministry back in 2004 published a draft pipeline policy to break the monopoly of state-owned GAIL and throw open the sector to private competition. Since then, little has moved.

On 2nd June the oil ministry held a meeting with oil companies to discuss the policy and the word is out that it plans yet another committee to fine-tune the policy before it becomes law. In the meantime, companies that want to lay a pipeline sit frustrated.

How do they go about it In India, the newly enacted Petroleum and Natural Gas Regulatory Board Bill 2006, passed in March this year, sets the legal framework for any pipeline project. Alongside this is the draft pipeline policy, of which there are five versions.

The first was published in July 2004 and the latest in October 2005. Which version should you follow Any rational individual would assume the latest version from October 2005.

Sadly, this is not the case. If you follow the October 2005 version, you would miss a critical element of the pipeline policy - only available in the July 2005 version.

This is the two-page application form for permission to build a natural gas common or contract carrier transmission pipelines or city or local natural gas distribution network. Forms for this are mentioned in the October 2005 version, but only available in the July 2005 version! Worse, its not clear if the application form is valid, because the document where it came from is still only a draft policy with no legal sanctity.

Read any of the five drafts to see a mass of contradictions. Take the question of contract or common carrier.

In the October 2005 policy, pipeline companies must build 25% extra capacity into any new pipeline. So, if you build a dedicated pipeline, with 25% extra capacity on an open access basis, do you categorise it as common or contract carrier Next, is it the companys responsibility or the ministrys to announce the pipelines construction through newspaper adverts Should the advert be placed after government approval or before