Jindal pipe delivery delay spoils GAIL party

Vol 14, PW 11 (18 Nov 10) Midstream & Downstream

Delayed pipe deliveries run the risk of wrecking GAIL’s plans to commission its proposed 1389-km Dabhol to Bangalore gas pipeline by June 2012.

GAIL hired Jindal Saw Pipe on August 17 this year to supply 120,000-tonnes of steel pipe or approximately 50% of the total needed for the project. Of this, 60,000-tonnes must be X-70 grade pipe and 60,000-tonnes must be high quality X-80 grade pipe.

“Jindal is meant to begin pipe deliveries this month (November),” says an industry source. “But it hasn’t even chosen a steel supplier yet (for X-80 grade pipe)! Jindal should have also deposited Rs50cr ($11m) as a 'performance bank guarantee' within 15 days of winning the contract, but it hasn’t.

” Jindal, he adds, is now finding it hard to procure X-80 grade steel at the price it originally quoted during GAIL’s ‘reverse auction’ tender. As Jindal has deposited only Rs13cr ($2.9m) as a bid bond with GAIL, it could easily wriggle out of the contract.

He also accuses GAIL of having a “soft spot” for Jindal and trying to downplay the problem. When contacted, a Jindal source confirms its pipe deliveries will be delayed and admits Jindal hasn’t secured X-80 grade steel supplies.

“There are certain problems,” he adds, without explaining. Jindal will begin supplying X-70 grade pipe to GAIL in February next year (2011) and X-80 grade pipe after March 2011.

“Some delays are normal,” echoes a GAIL source. “But we’re confident Jindal will meet its contractual obligations.

I cannot believe they (Jindal) told you they have yet to tie-up steel supplies!” GAIL refused to comment on speculation it is favouring Jindal. But observers say GAIL should be cautious with experiments like the reverse auction process under which Jindal won its pipe-supply contract.

“GAIL should have stuck to its conventional bidding system,” we hear. “Jindal kept reducing its price to win and is now having second thoughts.