Nepal and India to prepare DFR for oil pipeline construction

Nepal and India have decided to prepare a Detailed Feasibility Report (DFR) to construct a 41 km long oil pipeline to smoothen the supply of petroleum products from Raxaul to Amlekhgunj, leading to reduction of transportation cost by at least 40 per cent.      

The decision was made in a two-day meeting between a team of Indian Oil Corporation (IOC) led by R K Sharma and Nepal Oil Corporation (NOC) team led by Suresh Aggrawal in Kathmandu on Thursday.      

"We have agreed to prepare the DFR on constructing and operating a petroleum pipeline system between Amlekhgunj and Raxaul by mid-July 2009 if every thing goes all right," Aggrawal said.      

NOC currently imports around 100,000 kilolitre of various petroleum products from IOC.      

If implemented, the project is expected to reduce fuel transportation cost by 40 per cent. Besides, it can generate additional revenue, reduce loss, theft and road deterioration, while making the supplies cleaner and cheaper.      

Fuel shortages that hit Nepali markets frequently, are also likely to come to an end with the pipeline construction.      

To implement the project, the two sides have agreed to set up a joint venture, which will have majority equity share of Nepal and a minority share of India, the NOC official said.

The two sides will take steps to register the company and implement the project, the official said.      

The construction of the pipeline will begin soon if NOC and IOC made the joint venture agreement in time as it will include technical details, operation modality and business plan of the pipeline system.      

Both NOC and IOC concluded that delay in implementing the project, which was first proposed by IOC in 1995, will hinder bilateral fuel trade and obstruct Nepal from delivering quality services and products.      

"Both sides have decided to accord high priority to the project," Aggrawal said.      

An eight-point memorandum of understanding (MoU) was also signed between the two sides, according to which Nepal will hire technical expertise from IOC for feasibility study and physical survey of the project.      

NOC has agreed to pay IOC for its assistance now, but has sought permission to include the cost in its equity investment later.      

Pre-feasibility and technical studies of the pipeline project were done in 2004 and 2006. They estimated the cost of the project around NRs two billion.