Up for sale - 4700-km IOC and HPCL pipelines

Vol 24, PW 15 (17 Jun 21) Midstream, Downstream, Renewables

Sworn to secrecy, the oil ministry has told IndianOil, Hindustan Petroleum and GAIL to identify some of their pipelines for private investors as the government scrambles to meet its Rs175,000cr ($23.89bn) disinvestment target for 2021-22.

This report learns NITI Aayog (formerly the Planning Commission) submitted a bulky report to the oil ministry last month (May 2021) with details of the planned privatisation of a selection of IOC, HPCL and GAIL pipelines. At this stage, the proposal is restricted to these three companies, not to ONGC, Oil India or Bharat Petroleum.

"There are strict instructions to keep it secret," says a source. "To ensure secrecy, the ministry sent this proposal to the chairman's office only."

He adds the ministry has informally asked for "positive comments" on the proposal. IOC and HPCL must together identify 4700-km of product pipelines that the government can sell off.

Of the 4700-km, IOC must identify pipeline assets totalling 3500-km, and HPCL must identify assets of approximately 1200-km. Across India, IOC operates a cross-country pipelines network of approximately 14,600-km; its crude oil pipeline network covers 5301-km, including the 2660-km pipeline from Salaya in Gujarat to Mathura in Uttar Pradesh, a 1447-km pipeline from Paradip in Orissa to Barauni in Bihar and a 194-km pipeline from Mundra in Gujarat to Panipat in Haryana.

IOC also operates an 8775-km product pipeline network and 500-km of gas pipelines; HPCL operates a much smaller network of 3775-km product pipelines. Our source adds the ministry is adamant that IOC and HPCL must identify pipelines at 100% capacity.

"If the company doesn't have a pipeline at 100% capacity, the ministry wants them to identify pipelines with at least 90-95% capacity," we learn. In the proposal, the oil ministry wants IOC and HPCL to identify 700-km of LPG pipelines from the total 4700-km; the remaining will be 4000-km of product pipelines.