Vol 3, PW 8 (12 May 99) Midstream & Downstream

In the early days, GAILs LNG strategy was to spearhead Petronet-LNG.

In recent months however, GAIL has been edged out of managerial control of Petronet-LNG, and replaced by National Thermal Power Corporation (NTPC) and Indian Oil Corporation (IOC). Suresh Mathur, Chairman, Petronet-LNG is a former IOC Director Finance.

It is believed he relies heavily on advice from former IOC colleagues, despite the latters imminent removal from the Petronet-LNG holding company. GAIL, however, remains indispensable due to its control of the Hazira-Bijaipur-Jagdishpur (HBJ) pipeline, Indias gas artery.

Control of the HBJ imparts a unique competitive advantage. By using the HBJ, Petronet-LNG can tap demand in Uttar Pradesh and Madhya Pradesh with minimal overheads.

No other project in India has this advantage. For its part, GAIL has not hesitated to look to greener pastures.

It is currently in talks with the Tata-Total consortiums LNG project at Trombay. It remains unclear if GAIL will allow Tata-Total access to the HBJ.

In lobbying ability, GAIL is weaker than all the other Indian state oil companies, save IBP. For this reason, it seems unlikely, the oil ministry will allow GAIL to offer "strategic infrastructure" such as the HBJ pipeline to "foreign interests".

In India, with its socialist past, the term "foreign interests" still carries an image of imperialism and implies an unequal partnership. Finally, the lack of lobbying power diminishes another key advantage enjoyed by other PSU's: the ability to provide sovereign guarantees to financiers.

GAIL does not have the power to get the oil ministry to provide that.