Vol 3, PW 4 (17 Mar 99) Midstream & Downstream

What is behind GAILs lethargy Answer: LNG.

Petrowatch learns GAIL does have plans to increase the capacity of its southern gas pipeline network but is not prepared to be rushed and refuses to be drawn on a precise time-table for its implementation. The reason for this lies in the wider issue of LNG imports into India.

A source at GAIL tells this report the company is gearing up for large scale imports of LNG and that any decision to expand the capacity of its southern gas pipeline network will be linked to the construction of an LNG terminal at Kakinada, not ONGCs timetable for development of gas wells in the Krishna Godavari. GAIL first wants to ensure it has customers for its LNG in Andhra Pradesh and a firm basis on which to begin constructing a terminal before applying its mind to expanding the pipeline network.

Quite simply GAILs argument is that, although impressive, the potential of ONGCs gas from the Krishna Godavari is negligible compared to the level of LNG imports planned for India. Ironic indeed, that Indias most promising gas basin, the Krishna Godavari, lies in the same state, Andhra Pradesh, which has sanctioned the highest number of future LNG projects after Gujarat.

No less than five companies/consortia have applied to set up LNG terminals at Kakinada. Consortia:- 1) CMS Energy/Unocal/GVK Industries 2) Ispat Energy 3) Hardy/Nagarjuna/HOEC 4) BHP/Tractabel 5) Petronas/GAIL Even if all but one of the above fail to materialise, the amount of LNG planned for Andhra Pradesh will dwarf any production from ONGCs gas wells in the Krishna Godavari.