GAIL's proposed mega-petrochem JV with RIL on back burner

State-run gas firm GAIL India has put on the back-burner plans to set up a mega petrochemical plant overseas in a joint venture with Reliance Industries (RIL) and has instead decided to invest Rs 8,200 crore on doubling the capacity of its chemical unit in Uttar Pradesh.

"The board (of GAIL) today approved doubling of capacity of the Pata petrochemical plant to 900,000 tonnes per annum at an investment of Rs 8,200 crore," GAIL Chairman and Managing Director B C Tripathi told reporters here.

The expansion will take 42 months to complete, but GAIL will endeavour to commission the unit in 36 months, he said.

Asked about GAIL's plans for setting up a mega gas-based petrochem unit in a joint venture with RIL, Tripathi said: "We had plans and had even short-listed a few countries. But looking at global situation, we have decided not go ahead with the project for the time being. The project has been put on the back burner."

RIL and GAIL had on December 4, 2007, signed an MoU to jointly set up a mega gas-based petrochemical plant. They had initially identified 10 countries -- Qatar, Abu Dhabi, Bahrain, Vietnam, Australia, South Africa, Angola, Mexico, Russia and the former Soviet Union -- for exploring the possibility of setting up a 1.9-million tonne chemical plant.

Later, they had zeroed in on Qatar, Iran, Algeria, Nigeria and Russia for the unit.

The two entities were to float a special purpose vehicle with equal stakes to set up the overseas petrochemical plant. However, the global economic slowdown has seen petrochemical demand drop.

RIL and GAIL had set themselves a three-year deadline for identifying and commencing work on the mega-petrochemical complex, but that has now been put on the back burner.

The agreement with Reliance was part of GAIL's strategy to expand aggressively in the petrochemical business. The state-owned utility wanted to set up one mega-petrochemical unit in India and another abroad.

The Indian unit was being planned at Vizag, in Andhra Pradesh, in a five-way joint venture with Total of France, Hindustan Petroleum Corp, Mittal Energy, Oil India and GAIL.

The five were exploring possibilities of setting up a 14-million-tonne-a-year export-oriented refinery together with a one-million-tonne petrochemical plant at Vizag before Mittal walked out of the project, triggering an exodus.

GAIL had also shown interest in setting up a petrochemical unit in Iran, but the plans have not progressed.