Growing gas pipeline rivalry between IOC and GAIL

Vol 8, PW 17 (17 Nov 04) Midstream & Downstream

This time dispute centres over plans to construct a 114-km gas transmission pipeline from a tap-off point on the HBJ pipeline at Dadri in Uttar Pradesh to the site of IOCs 6m t/y refinery at Panipat in Haryana.

IOC claims it can lay the pipeline at half the cost proposed by GAIL. IOC estimates the project cost at Rs180cr ($39m); GAIL estimates it would cost Rs350cr ($76m).

GAIL says it can bring down the cost to Rs250cr ($54m), IOC tells this report. But we think it is still on the higher side.

IOC is ready to implement the project on its own and company directors have already authorised preparation of a detailed feasibility report. This is expected to be ready for IOCs project evaluation committee by the end of November.

Fearing the worst, GAIL wants a high-level meeting with IOC to resolve the issue. A meeting between directors of the two companies is expected anytime now, we learn.

GAILs biggest fear in IOC implementing the gas pipeline project is not the loss of this business but the fact that it will trigger a trend. In recent months IOC has been increasingly looking at the gas transportation business.

The crude and product pipeline business is shrinking, IOC tells us. Its the age of gas transportation.

IOC is fully equipped to implement medium-size gas pipelines and can challenge GAIL. IOCs confidence stems from the 103-km gas transmission pipeline from Baroda to Kalol through Ahmedabad that it built for Gujarat State Petronet.

It also has experience over four decades in constructing crude and product pipelines and was the first company to carry out a feasibility study for a gas pipeline from Kakinada to Ahmedabad.