OMCs, GSPC may form pipeline joint venture

In race for the Mallavaram-Vijaipur pipeline

The state-owned oil marketing companies (OMCs) — Indian Oil (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) — have joined hands with Gujarat State Petroleum Corp (GSPC) to form a joint venture (JV) for trunk gas pipelines.

The four companies have signed a memorandum of understanding (MoU) for jointly bidding for pipeline projects of Petroleum and Natural Gas Regulatory Board (PNGRB).

The consortium is in race for the Mallavaram (near Kakinada in Andhra Pradesh)-Bhopal-Bhilwara (Rajasthan)-Vijaipur (near Guna in Madhya Pradesh) pipeline.

Gujarat State Petronet (GSPL), a subsidiary of GSPC, which has struck gas in the Krishna-Godavari (K-G) Basin, had originally proposed this pipeline to the downstream regulator to transport its gas. Last month, PNGRB had invited bids for this pipeline. GAIL India, a leading player in pipeline business, has also bid for the project.

A formal JV would be formed once the consortium succeeds in getting authorisation for a pipeline project. “The oil marketing companies have signed an MoU with GSPC where GSPC is the lead company to bid for gas pipeline. In case, we win the bid, we will set up a formal JV,” HPCL Chairman and Managing Director S Roy Choudhury told Business Standard.

For the three OMCs, which recorded a combined loss of Rs 6,990 crore in the June quarter, gas marketing and transportation is one of the emerging segments in the energy business.

HPCL is also planning to venture into city gas distribution (CGD), but Roy Choudhury said that would be either done independently or in partnership with some other company. “This JV will be for only cross-country pipelines which require massive investment,” he said.

Explaining the rationale behind eyeing CGD business, the HPCL chairman said being a petroleum retailing company, their petrol and diesel market was in direct competition with compressed natural gas (CNG). “If we do not get into CNG business, our dealers will lose business.”

Besides, the company has a vast network of retail outlets, which can easily offer CNG dispensing facility after getting required clearance from the fire department. Roy Choudhury said about 50 per cent of the CNG outlets in Mumbai were already operating in their retail outlets. HPCL is also looking at piped natural gas (PNG). Depending upon the availability of gas, he said the company would supply PNG to commercial and industrial users.

With the recent natural gas find in the K-G basin, indigenous production is set to double and natural gas emerge as an important source of energy. LNG infrastructure in the country is also being expanded.

Current domestic gas production, estimated at about 160 million standard cubic metres a day (mscmd), is set to increase, as Reliance Industries plans to increase production from its KG-D6 block to 80 mscmd, from 62 mscmd, later this year.