OIL may form JV for pipeline projects

Oil India Ltd (OIL) is talking to other domestic companies for a joint venture to bid for pipeline projects for transport of oil, LPG and natural gas in both the domestic and international markets.

At some stage, it was likely to float a new subsidiary to look after such projects, said N K Agarwal, group general manager (audit), and N K Bharali, general manager (HR & BD). They spoke to Business Standard on the sidelines of the company's IPO roadshow.

They said the company offered pipeline construction and related services to third parties. In 2008-09, the company earned Rs 200 crore from the transportation business. In the coming years, it wanted to increase the revenue “substantially”,” said Bharali. He declined to detail the target.

The business offered huge potential for the company, he added. It has an agreement with ONGC Videsh Ltd to form a joint venture for construction of a product pipeline in Sudan, under a contract from the Sudanese government.

According to a study by Associated Chambers of Commerce and Industry and Ernst and Young, while globally 75 per cent of oil is transported through pipelines, it is only 25 per cent in India, the rest goes by rail and road. The study also noted India was expected to attract investments worth $455 billion in gasoline networks alone in the next five years.

“We certainly want to give more thrust to this business,” said Agarwal. To tap the market, he said, the company was looking for a joint venture to bid for projects in India and abroad.

“As the volume of the business grows, we will think about launching a new subsidiary company to take care of the transportation business,” added Bharali.

In 2005, he said, the company signed an agreement with Indian Oil Tanking Ltd to strengthen the pipeline business. The consortium was awarded a contract for laying a 115-km pipeline between Numaligrah and Siliguri.

The company has also put in an optical fibre cable along its trunk crude oil pipeline of 1,157 km and this has been leased to various telecom companies.