IndianOil fights GAIL over LPG pipeline rights

Vol 17, PW 15 (13 Mar 14) Midstream & Downstream

IndianOil and GAIL are embroiled in a bitter dispute over who can lay a second LPG pipeline from Jamnagar in Gujarat to Loni in Uttar Pradesh.

IOC today uses 50% of GAIL's 2.5m t/y pipeline, running 1240-km from Jamnagar to Loni. GAIL wants to add a second 2m t/y pipeline but IOC feels that isn't enough for its needs and wants to cut out GAIL and lay its own 3.7m t/y pipeline along the route with an extension to Panipat in Haryana.

Now it’s up to the PNGRB to decide which project goes ahead. “We wrote to the oil ministry in February asking what pipeline capacity GAIL was granted in 1998,” says a PNGRB source.

“If it was 2.5m t/y and GAIL has used up its capacity, we can invite bids from other companies but if GAIL was authorised 4.5m t/y we'll allow only GAIL to lay the pipeline." IOC is presently forced to transport 1m t/y of LPG by road at a cost of Rs600cr ($97m).

Sales are likely to increase further as its market share grows 8% annually. “We have the largest market share in northern India and want our own pipeline to transport our gas,” confirms a senior IOC officer.

IOC first approached the PNGRB in December 2011, proposing its Rs2200cr ($357m) pipeline, and then made a detailed presentation in May 2012. GAIL proposed its project around the same time.