Japan Bank Loan For Gail Project

The Export-Import Bank of Japan signed an agreement on Friday to make an untied loan totalling 10.1 billion yen to Gas Authority of India Ltd (GAIL), the bank said yesterday. GAIL will use the loan, co-financed by Asian Development Bank, to increase the capacity of the natural gas pipeline linking Gujarat, Madhya Pradesh and Uttar Pradesh to 33 million cubic metres per day from the current 18 million cubic metres, the bank said in a statement.

The robust economic growth in India since economic liberalisation in 1991 has created soaring demand for crude oil and other oil products, resulting in a corresponding shortage of supply, the bank said.

 

This gap between supply and demand has resulted in an increase in imports, adversely affecting Indias balance of payments, the bank said.

The project is expected to help alleviate the energy shortage in India, the bank said.

Japans Export-Import Bank and the World Bank are currently financing a flare gas reduction project by the Oil & Natural Gas Corporation Ltd. This project is designed to exploit wasted flare gas, a by-product of crude oil production, in the Bombay High oil fields.

The new untied loan will help boost pipeline capacity for natural gas, production of which is expected to increase as wasted flare gas is exploited, the statement said.

Flare gas reduction and an increase in natural gas consumption that replaces oil and coal use will have a positive effect on environment, the bank said.

The bank said there are also plans to build a power plant, fertilizer plant and petrochemical plant utilising natural gas transported by this pipeline.