Reliance pays bank guarantee for Jamnagar pipeline

Vol 9, PW 25 (06 Apr 06) Midstream & Downstream

Nearly three years after Reliance first proposed laying six cross-country petroleum pipelines to transport products from its 33m-t/y refinery at Jamnagar we can report some progress.

In the second week of March, Reliance became the first private sector seller of oil products in India to submit a bank guarantee to the government ahead of pipeline construction when it handed over Rs8cr for its proposed 410-km pipeline from Jamnagar in Gujarat to Abu Road in Rajasthan. PETROWATCH learns the bank guarantee was issued in the name of Reliance Gas Pipeline Ltd - the new name of the former Gas Transportation and Infrastructure Company Ltd. In October 2003, the oil ministry issued new guidelines governing the construction of product pipelines by making it mandatory to submit a bank guarantee.

At the time, many believed the new directive would kill future attempts to construct new product pipelines. Reliance has proved otherwise.

It now has 36 months from the date of the bank guarantee to complete the pipeline. Oil ministry officials are happy and believe their decision to demand bank guarantees was right.

Submission of a bank guarantee shows a company is serious, says a source. Otherwise companies would have obtained RoU (Right of User) permission and just sat on it.

Reliances pipeline from Jamnagar to Abu Road is the first section of a more ambitious plan to build a 1580-km pipeline to Patiala in Punjab. Reliance is unwilling to provide a bank guarantee for the entire stretch at one time.

Instead, it will give the bank guarantee in stages. Once the Jamnagar to Abu Road stretch is complete, Reliance will get the bank guarantee released and use it for the next stretch and so on.

Reliances pipeline from Jamnagar to Patiala through Abu Road is one of six product pipelines for which the oil ministry invited Expressions of Interest in July 2003 on behalf of Reliance to book 25% common carrier capacity. No one responded, as most companies prefer full control of their product transportation infrastructure.

Despite the lack of interest, Reliance will reserve 25% excess capacity for third parties as directed by the government.