Petronet-India angry at Kandla-Bhatinda conversion

Vol 6, PW 2 (27 Mar 02) Midstream & Downstream

PETRONET-INDIA IS angry at IOC's decision to convert the Kandla-Bhatinda pipeline into a crude only pipeline.

Understandably so, because its first completed project - the 100 km Vadinar-Kandla pipeline - becomes irrelevant once the Kandla-Bhatinda pipeline starts transporting crude. IOC told Petronet VK Ltd about its decision in early March.

"The letter came as a great shock for us," a source tells us. "We feel cheated.

This pipeline was laid on the assumption that the Kandla-Bhatinda pipeline will be available for products. Investors put in money in this project.

Now our pipeline is as good as dead." We learn the Petronet-India board of directors discussed the issue on 14th March and decided to respond strongly with a letter to IOC. A letter is being carefully drafted and a copy will soon be sent to the oil ministry.

IOC is one of the promoters of the Vadinar-Kandla pipeline but refused to sign a take-or-pay agreement. This hit Petronet VK's plans to get long-term loans for the project, which was funded, with more expensive short-term loans.

A solution was being worked out with banks when IOC's March letter upset all calculations. "We will find it difficult to raise money for other projects." For instance the (proposed) 520-km Chennai-Trichy-Madurai products pipeline.

IOC wrote to Petronet-India last month saying it would neither sign a take-or-pay agreement nor support any of ICICI's financial structures for the project. "IOC is playing dirty here too," he adds.

"It wants us give up the project so that they can take it over. This is part of their grand plan to fight Reliance."

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