No firm customers to justify Dahej to Uran pipeline

Vol 8, PW 13 (22 Sep 04) People & Policy

Criticism of GAILs proposed Dahej to Uran gas pipeline is not restricted to its failure to secure firm sources of natural gas or LNG.

Failure to secure firm sales contracts with end industrial users in Maharashtra is another area of acute ministry concern. GAILs argument that it has secured Term Sheet Agreements (TSA) with customers for the sale of 6.8m cm/d and that it expects to secure TSA for another 6m cm/d within a month are examined in detail and systematically demolished.

It would appear from the TSA that GAIL has quoted Petronet-LNGs price, we learn. It is difficult to understand how one could sign with downstream consumers without knowing the terms of the agreement for the gas source.

Citing several Conditions Precedent that need to be met, but havent, the paper continues: The Term Sheet in its present form is no improvement on a Heads of Agreement or MoU which indicates only the intention of the parties. It does not give any comfort as to the utilisation of the pipeline once laid.

Luckily for GAIL, the ministry recognises that Reliance is responsible for much of the doubts that have emerged over the viability of the Dahej to Uran pipeline. Market conditions are dynamic and things change with time.

It is true that the Uran market was ready for LNG before the discovery of gas in the KG basin. But with the price bid of Reliance for the NTPC tender ($2.97 per mmbtu) that is known to everyone, things have changed and the expectations of the market have also changed.

As if that wasnt enough, the ministry goes on to warn: In such a scenario there appears to be a danger that this pipeline may remain highly under-utilised and that without proper tie-ups it might become a non-performing asset similar to GAILs Vizag to Secunderabad pipeline.