Reliance to bid hard for Central India Pipeline

Vol 5, PW 25 (13 Feb 02) Midstream & Downstream

EXPECT AGGRESSIVE BIDDING by Reliance to Build Own Operate and Transfer (BOOT) the Petronet India-sponsored Central India Pipeline.

With IBP out of reach and a post-APM marketing agreement with IOC unlikely, this pipeline is Reliance's only hope to transport products from its 27m t/y refinery at Jamnagar. Luckily, it needn't worry too much about competition.

Only Larsen & Toubro and the Sun Securities-OAO Stroytransgaz-Gazprom consortium submitted technical bids alongside Reliance by the 19th December deadline. Ten others, including IOC, pulled out.

IOC and Reliance were the only real competitors for this project, which will transport products from western to central India. Why the sudden lack of interest "Project economics do not make it viable as a stand-alone project," reveals a source.

"It is only viable for Reliance for strategic reasons." Explain When the project was conceived, the pipeline was to carry 7m t/y of products beyond Rajkot, but now with economic slowdown, it's down to 5m t/y. Originally, the pipeline was to bring in revenue of Rs500cr ($104m) in the first year of operations.

This figure has now been slashed to Rs320cr. The project shows a cash loss for the initial five to seven years and this pushes up the total cost.

"When IOC saw these numbers they lost interest and did not find it worthwhile to invest Rs3,000cr ($625m)," he adds. "If someone else puts up the pipeline Indian Oil can use it anyway."