BPCL signs gas MoU with GSPC for Gujarat CGD

Vol 9, PW 13 (06 Oct 05) Midstream & Downstream

Bharat Petroleum is taking significant steps to grow its nascent city gas distribution business in Gujarat.

On 29th September, BPCL, Indias 3rd largest refiner after Indian Oil and Hindustan Petroleum, signed a MoU to purchase gas from Gujarat Petroleum to supply its emerging CGD business in Gandhinagar, Sabarkantha and Mehsana. Ultimately, the MoU will become a contract, but PETROWATCH learns GSPC has already started supplying 50, 000 cm/d gas to BPCL for Gandhinagar.

This quantity will be scaled up to 500,000 cm/d and by 2010 will reach 1.3m cm/d for the three regions together. Gujarat sources tell this report GSPC will supply gas to BPCL at the city gates for 15 years.

BPCL will take delivery at the city gates and sell the gas to industrial and domestic consumers and also as CNG. BPCLs focus will be on Gandhinagar, the state capital, where it has four medium-sized industrial customers.

By December 2005, BPCL plans to invest about Rs20cr in Gandhinagar and also start selling CNG. Next in line will be Sabarkantha, followed by Mehsana.

In both areas, BPCL plans to target small to medium-sized industrial consumers and also to set up CNG outlets. Says our source: BPCL first plans to tie up customers in each of these two circles, set up distribution infrastructure and then get the gas.

Dont expect this to happen before 2008. By 2013 BPCL plan to invest a total Rs335cr in these three regions, we are told.

Not all the money will be put in by BPCL. Theyll also reinvest the revenues they earn from these circles.

Gujarat sources tell us the MoU is the umbrella agreement for future co-operation in the states gas industry. GSPC is an aggregator of gas in Gujarat and BPCL needs gas in Gujarat, we are told.

On its own BPCL is also an importer of gas (through Petronet-LNG) but its build-up is slower compared to GSPCs, which can access multiple sources. BPCL also wants some of the gas that GSPC will land from its KG basin field.