Forget all-India product pipeline network plans

Vol 8, PW 26 (06 Apr 05) Midstream & Downstream

Reliance and Essar have run out of their initial enthusiasm to crisscross the country with a network of product pipelines.

A well-placed oil ministry source tells this report that no private company has submitted pipeline proposals following the publication of supplementary guidelines for the construction of product pipelines in October last year. Private players seem to have lost interest, reveals a source.

They tell us they have no plans as of now. Reliance and Essar announced plans to lay six and seven pipelines respectively soon after the oil ministry laid down the first set of guidelines to open up the sector in November 2002.

Both companies invited expressions of interest from other companies interested in booking 25% common carrier capacity, in line with ministry guidelines. But neither company received an expression of interest.

Nevertheless, both companies were free to go ahead with their plans but subsequently reined themselves in. Hindustan Petroleum too did not receive any expression of interest for spare capacity in its proposed Mundra to Delhi pipeline.

But HPCL is going ahead and has already submitted the bank guarantee and is completing other legal formalities required by the oil ministrys October 2004 supplementary guidelines. Officials believe Reliance and Essar have developed cold feet because the supplementary guidelines require each of them to submit an irrevocable bank guarantee equal to Rs2 lakh ($4444) per kilometre of pipeline to ensure that the project is completed within 36 months of approval.

The bank guarantee will be returned if the project is completed on schedule. They (private players) accused the government of being too slow in drawing up the guidelines, we are told.

We spent time and effort in drawing up these guidelines and now they are not coming forward.