City gas opportunity in UP from IOC deal with GAIL

Vol 8, PW 4 (19 May 04) Midstream & Downstream

Indian Oil has formally entered the City Gas Distribution business by teaming up with GAIL for three cities: Agra, Bareilly and Lucknow.

On 3rd May, IOC and GAIL signed a MOU in Delhi to set up a joint venture to oversee the execution of natural gas and LPG distribution projects in these three cities, widely believed to be the most polluted in Uttar Pradesh. The oil ministry directive says the JV should follow the Indraprastha Gas model, a GAIL source tells PETROWATCH.

The ministry wants oil companies to diversify into city gas distribution and has directed each of them to form a joint venture with GAIL. IOCs joint venture with GAIL will be executed in two phases.

The first phase will cover Agra and Lucknow. In the second phase the pipeline will be extended to Bareilly and then hopefully reach Allahabad at a later stage.

IOC and GAIL will jointly invest Rs112cr ($24.6m) for development of the project - Rs50cr ($11m) for Agra, Rs49cr ($10.8m) for Lucknow and Rs13cr ($3m) for Bareilly. GAIL tells this report the gas will be sourced from the HBJ, which is transporting regassified LNG from Petronet-LNGs Dahej terminal.

A branch pipeline will be laid from Jagdishpur to Phulpur for supply to Agra, Lucknow and Bareilly, adds GAIL. The JV will be formed in two to three months.

We will begin executing the project before the end of this year. GAILs agreement with IOC also envisages the supply of LPG for vehicles, unlike its existing JV companies Indraprastha Gas and Mahanagar Gas, which focus on natural gas and CNG only.

Our entire requirement of LPG will be supplied by IOC through its LPG terminals or the Mathura refinery. CNG stations will be set up in existing IOC petrol pumps in these three cities.

According to a detailed feasibility report on Agra, Lucknow and Bareilly, GAIL estimates 1,000 domestic piped natural gas consumers and demand for 100 CNG stations. GAIL has set aside 100,000 cm/d for Agra, 50,000 cm/d for Bareilly, and 100,000 cm/d for Lucknow.