GSPL's Mallavaram headache
With little option, Gujarat State Petronet (GSPL) has reluctantly agreed to develop the remaining part of its much-delayed 1881-km Mallavaram to Vijaipur cross-country pipeline.
But with one crucial condition attached. On September 14 (2023), GSPL India Transco (GITL) provided an update on the pipeline at its AGM.
"GSPL will develop the remainder of the pipeline," confirms a company source. "But it depends on gas demand improving."
Until this happens, GSPL has requested the PNGRB to keep the pipeline in "suspension." GITL only completed and commissioned a 363-km stretch in October 2019 to supply 2m cm/d of ONGC gas to the Ramagundam Fertilisers and Chemicals (RFC) plant in Telangana.
In 2022-23, GITL transported 586m cubic metres of gas to RFC, earning a gas transmission income of Rs78.82cr ($9.5m), excluding taxes. "GSPL should have carried out a thorough gas demand survey along the pipeline route," says a source at rival GAIL.
"Why cry about the lack of gas demand now?" In April (2021), GSPL approached the PNGRB to give up its majority 52% stake to consortium partner IndianOil in the estimated Rs8086cr ($973m) project for which it won authorisation on July 7 (2011). IndianOil appointed SBI Caps on May 10 (2021) to carry out due diligence and provide transaction advisory services; law firm Shardul Amarchand Mangaldas was appointed to carry out legal due diligence.
However, IndianOil was advised against taking over GSPL’s stake. "Advisors must have told IndianOil the pipeline has a bleak future," adds a source.
"IndianOil’s refusal has left GSPL with little option." In August (2022), oil minister Hardeep Puri asked IndianOil to reconsider the proposal, but to no avail.
GITL shareholders are GSPL holding 52%; IndianOil holds 26% while BPCL and HPCL hold 11% each. If and when completed, the pipeline will pass through Andhra Pradesh, Telangana, Maharashtra, Madhya Pradesh, Gujarat and Rajasthan.