Imminent decision on Central India Pipeline

Vol 4, PW 13 (02 Aug 00) Midstream & Downstream

A longstanding dispute over implementation of the Central India Pipeline could soon be drawing to a close.

On August 8th, directors of Petronet-India are scheduled to meet to resolve differences holding up construction. A source in Mumbai tells Petrowatch this is the first meeting where the vexed issue will be aired under Petronet-India's new managing director and former IOC official KK Sinha.

Disagreement centres on two competing proposals for the pipeline, originally planned to run for 2,290km across Gujarat, Rajasthan, Madhya Pradesh and Andhra Pradesh. Reliance Industries and IOC have joined forces to push for construction on a Build Own Operate and Transfer basis (BOOT) through a 'BOOT Concessionaire' company, which will transfer ownership back to Petronet-India after 25-30 years.

Others favour the ' Joint Venture' model, where construction is carried out through a joint venture including all the shareholders. This model is used in all of Petronet-India's other pipeline projects.

Other outstanding issues concern the equity breakdown of the Central India Pipeline. "It is still under negotiation," a source tells Petrowatch, "All the promoters want veto powers and this is holding it up." The following breakdown has been tentatively agreed: Petronet-India: 26% Reliance: 26% Essar Oil: 11% Indian Oil Corporation: 26% Bharat Petroleum Corporation: 11% Another item on the 8th August agenda is a proposal to abandon construction of the Nagpur-Hyderabad spur.

If agreed this would reduce project cost from approximately $950m to $815m.