GAIL laying gas pipelines for no customers

Vol 16, PW 10 (29 Nov 12) Midstream & Downstream

Spend millions of dollars to lay gas pipelines when have no customers for gas.

That’s what GAIL has done by sinking Rs4000cr ($800m) into a 20m cm/d capacity 700-km gas pipeline from Dadri in Uttar Pradesh to Nangal in Punjab, passing through Bawana in Delhi. The pipeline has been sitting idle since Prime Minister Manmohan Singh inaugurated it on March 23.

Worse, it was sitting idle for 18 months before the inauguration. “Not a single molecule of gas is flowing through the pipeline,” admits a GAIL source.

“It is wasted.” Blame high R-LNG prices of more than $10/mmbtu for the poor offtake.

GAIL originally wanted to source R-LNG for this pipeline through the 600-km Dahej to Vijaipur pipeline or DVPL-2 and its 600-km pipeline from Vijaipur to Dadri. But only a single customer has signed up so far: state-owned National Fertilisers, which wants 1m cm/d for each of its two urea factories: a 483,000 t/y facility at Bhatinda and a 504,000 t/y facility at Nangal.

Another 1m cm/d is needed for its 500,000 t/y facility at Panipat but this is likely to come from IndianOil through its 132-km Dadri to Panipat pipeline. GAIL sources tell us the cost of Right of User (RoU) permission to lay the Dadri to Nangal pipeline far exceeded the Rs46cr ($9m) forecast in the DFR, rising to nearly Rs500cr ($100m).

“GAIL spent nearly Rs1400cr ($280m) installing 51m cm/d capacity compressors at Kailaras in Madhya Pradesh and Chainsa in Haryana,” we hear. “But it hasn’t even arranged gas to test these compressors.