GAIL postpones work on $3.4bn proposed pipelines

Vol 17, PW 22 (19 Jun 14) Midstream & Downstream

GAIL's board decided last month (May) to postpone work on two pipelines worth Rs20,000cr ($3.4bn) until 2015 amid fears they won’t be used.

Hit by the decision is GAIL’s proposed 2050-km gas pipeline from Jagdishpur in Uttar Pradesh to Haldia in West Bengal and a 1550-km gas pipeline from Surat in Gujarat to Paradip in Orissa. A senior GAIL source says its biggest challenge is to arrange affordable gas for both projects and to find gas customers.

"Where's the gas" he asks. "Where are the customers Many of our pipelines are only used at 50% capacity.

" GAIL hopes Prime Minister Narendra Modi's government will implement policies to make "expensive" R-LNG affordable. "A clearer picture will emerge only in late 2015," he says.

"Till then it's wait and watch." GAIL is worried as each pipeline can cost up to Rs8000cr ($1.4bn) and cost overruns could take the total cost of both projects to Rs20,000cr.

"We might have to take loans," says GAIL. "Servicing a loan that size if the pipelines are underutilised will strain our balance sheet.

" GAIL won PNGRB authorisation for the Surat to Paradip pipeline on April 24, 2012 and was meant to lay and commission the pipeline by April 24, 2015, a deadline it is certain to miss. GAIL now plans to approach the Board for more time beyond 2015 to lay the pipeline.

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