In early December, GAIL announced a deal with Reliance Industries (RIL)—the two are planning a petrochemicals plant overseas. And it’s also teaming up with Reliance Gas Transportation Infrastructure to move gas from RIL’s fields in the Krishna-Godavari basin. The company’s motto now appears to be to ‘co-operate, collaborate and then compete. Aw per the CMD Mr. Choubey, GAIL’s targeting a three-fold growth in its turnover in just four years. "We should be a Rs 50,000 crore irm by 2011 and the target is realistic," says Choubey.

"We expect better supplies of more gas from next year. Besides, GAIL’s transmission tariffs for most of its networks have been reduced over the years and are unlikely to be reduced further.The partnership with Reliance will allow GAIL to access gas for better utilisation of its networks.

GAIL’s strength lies in its presence across the value chain – from exploration and production to transportation and marketing to petrochemicals.Now it will look to build on these strengths. For instance, it proposes to add 5,500 km, at a cost of Rs 18,000 crore, of pipelines by 2012 to the 6,500 km that it currently has. It transports 140 million cubic metres per day(mcmd) of gas. "Once the pipelines are completed our transmission volumes will more than double to 300 mcmd," observes Choubey.

Choubey says petrochemicals, which contributes 35 per cent to turnover, will be a key focus area. Apart from RIL, GAIL is working with Hindustan Petroleum, Total, LN Mittal’s Mittal Investment and Oil India to study the feasibility of a 15 million tpa refinery at Vishakapatnam and an integrated petrochemical complex. That will make GAIL a major player in the petrochemical space.

The country’s flagship natural gas company GAIL India said it has plans to lay a pipeline from Dabhol to Bangalore at an estimated cost of Rs 1,200 crore and covering a distance of about 780 kilometers, a top official of the company said. The company also has plans to lay pipelines covering nearly 6,000 kilometers, at an expected project cost of Rs 20,000 crore.

The Dabhol to Bangalore project is expected to start by January, GAIL Chairman and Managing Director U D Choubey told. Ratnagiri Gas & Power, a joint venture between GAIL and power generating utility NTPC owns the Dabhol power plant. The central government has already given the nod for the project, he added. Over the next five years, GAIL has plans to lay pipelines covering nearly 6,000 kilometers, at an expected project cost of Rs 20,000 crore, he said.

That apart, the company has also entered into a Memorandum of Understanding (MoU) with the Rashtriya Chemicals and Fertilisers to set up a gas-based fertiliser plant at Talchar in Orissa, he said, adding "the project is expected to cost about Rs 6,000 crore." Choubey also said the cities of Nasik and Pune, will soon be provided CNG, for use in industry and transport.

GAIL Chairman and Managing Director UD Choubey said recently that pipelines would be laid by individual companies according to demand and supply. Reliance Industries (RIL) and Gujarat State Petroleum Corporation (GSPC) are also laying cross-country gas pipelines to transport their gas from the east coast. "Just because the regulator has now been installed does not mean that the study cannot go ahead. US companies have the technical capability of laying pipelines and we are looking to harness that," justified a senior official in the petroleum ministry, adding the technical assistance from the US would also involve working out transportation tariffs for gas, besides natural gas storage facilities.

In a peculiar case of time over-run, US consultants have been invited to study and provide technical assistance for setting up a national gas grid — a network of cross-country gas pipelines linked to each other — while the competent body to rule on the issue is the recently-constituted Petroleum and Natural Gas Regulatory Board (PNGRB).

The proposal for commissioning a US company for the gas grid was floated a couple of years ago by the petroleum ministry. Since then, the PNGRB has been set up, which is mandated to regulate the gas sector, including natural gas pipelines. The bid documents have been hosted by the United States Trade and Development Agency (USTDA) on its website.

The contract for conceptualising the national gas grid is $920,000, which comprises a USTDA grant of $690,000 and a contribution of $230,000 by the Petroleum Planning and Analysis Cell (PPAC) under the petroleum ministry. The documents call for bids "from US companies and individuals only" As per Mr. Negi Gas pipelines would be laid wherever there was demand, and the pipeline was economically feasible. Moreover, the grid itself was to be laid by the government-owned gas utility GAIL, which now accepts that the gas grid will not be laid as it was planned.

The decision of India’s ministry of petroleum and natural gas to allow the country’s largest marketer and transporter of natural gas, GAIL India Ltd, to serve as the sole marketer for natural gas from Panna Mukta Tapti (PMT) gas basin from 1 April 2008 has left gas consumers in Gujarat worried because the state-owned gas company could choose to sell the gas elsewhere.

A GAIL gas terminal at Hazira in GujaratGujarat consumes about 39 million standard cubic metres per day (mscmd) of natural gas and about 20% of this is sourced from PMT gas basin which is run by a consortium of Oil & Natural Gas Corp. Ltd (ONGC), Reliance Industries Ltd (RIL) and BG Group Plc. The gas is sourced and sold by Gujarat State Petroleum Corp. Ltd (GSPC) and Gujarat Gas Co. Ltd (GGCL).

"Gujarat may end up losing 8-9mscmd, its share of PMT natural gas, and this is not good news for small and medium industrial units as GSPC and GGCL will find it difficult to find additional source of gas at this stage," said D.M. Desai, an energy analyst.

GGCL supplies gas to more than 150,000 households, 900 small and medium industries and 55,000 CNG vehicle owners in the industrial belt of Ankleshwar and Surat in south Gujarat.GSPC serves around 300 small and medium enterprises, 25,000 residences and 12,000 CNG vehicles. Both firms service these customers using their share of PMT gas.The two companies have served notices to their consumers saying they might face difficulties with the regular gas supply operations.

Unless there is a revision, the sudden change in Centre’s policies in handing over the marketing rights of Panna-Mukta- Tapti gas to GAIL (India) may emerge as the centrepoint of a wider controversy.

According to GSPC sources, if the outcome of the series of meetings conducted by the Union Ministry of Petroleum and Natural Gas between October 26 and November 11, 2007 "regarding gas supplies from PMT" are of any consequence, GSPC’s existing long term contract of 1.3 mmscmd may also be scrapped once it comes up for renewal in March 2008.

In other words, PMT supplies to GSPC, already halved from 3.4 mmscmd to approximately 1.7 mmscmd, is subjected to further reduction. The company is also struck by the fact that long-term LNG supplies from Petronet have also dropped - – within the agreed terms and conditions - from 3.2 mmscmd to 2.8 mmscmd.

Apart from GGCL and GSPC, Indian Petrochemicals Corp. Ltd and RIL’s petrochemical complex at Hazira, too, are PMT customers.Arvind Kapadia, president, South Gujarat Chamber of Commerce and Industry, said that most of the small and medium enterprises (SMEs) that get PMT gas are in businesses such as textiles, pharmaceutical and chemicals and together employ over 200,000. "The SMEs would have to put in huge capital to equip their machinery for using alternative fuel. Some of them may find it unviable and shut shops, rendering thousands of workers jobless," Kapadia added.

GAIL, however, said the interest of the end consumer was foremost to it and that it would take all necessary steps to uphold the interest of the direct end consumers of the PMT gas in all regions, including Gujarat. "PMT gas would be supplied by GAIL in accordance with the gas utilization policy and the interests of city gas consumers and users of gas for feedstock like fertilizer, power and petrochemical would continue to receive priority attention. In view of the importance of city gas projects, these would continue to be given high priority," a GAIL release said last week.

GAIL (India) Ltd and ONGC are working out a commercial arrangement to market gas from the latter’s marginal field in Mumbai offshore. GAIL expects to get an additional 3-4 million standard cubic metre per day (mmscmd) of gas at a market-related price.

A senior ONGC official told, "Discussions are on with GAIL for marketing 3.2 mmscmd of gas from C-series field. The gas will be made available to GAIL at a market-related price."

The market price normally depends on demand, industry sources said, adding that at present the market-related price was around $4.75 per mBtu. The market price is at least 40-45 per cent higher than the administered price decided by the Government.

"This gas from ONGC would help GAIL partially meet the deficit in demand and enhance the revenue of GAIL," Mr U.D. Choubey, GAIL Chairman and Managing Director, said. At present, gas demand in the country is about 150-160 mmscmd, while supply is about 96-100 mmscmd.

GAIL (India) and Oil India Limited (OIL) have signed a memorandum of understanding (MoU) for joint cooperation in various business areas. The agreement was signed by GAIL Chairman and Managing Director U. D. Choubey and OIL Chairman and Managing Director M. R. Pasrija. Various areas of mutual interests identified in the MoU include exploration and production, natural gas marketing and transmission, city gas distribution, coal bed methane (CBM), petrochemicals and technology and knowledge sharing.

Both companies will explore opportunities for cooperation in greater details so that the respective resources could be pooled on the basis of mutuality and reciprocity. As part of the agreement, the two companies will jointly participate in the potential blocks, mainly onshore and offshore blocks in the forthcoming NELP VII bidding round.

GAIL (India) Ltd may bid for operating stake in small onshore and shallow water blocks in NELP-VII. For the rest of the blocks on offer, especially those in deepwater, GAIL will bid for participatory stake in the consortium.

"We may bid for operating stake for the small blocks especially on-shore," U.D. Choubey, Chairman and Managing Director, told newspersons here. GAIL has stakes in 29 oil and gas blocks in the country, out of which "six has proven reserves". On the company’s petrochemical facility at Pata in Uttar Pradesh, he said that GAIL had recently completed capacity expansion of the facility from 3,10,000 tonnes per annum (tpa) to 4,40,000 tpa through de-bottlenecking. "We are now planning further expansion of the capacity to 5,00,000 tpa through some modifications at an estimated investment of Rs 100 crore," Choubey said.

GAIL India is all set to foray into the Chinese market with a series of investments in the natural gas sector. The proposals include a coal-based petrochemical plant in Yulin, a compressed natural gas (CNG) project in Beijing and a coal-bed methane (CBM) project in Mongolia. The company is expected to sign a joint venture (JV) with China Gas in March 2008 to execute these projects.

"It would be a 50:50 JV and incorporated in either Hong Kong or Bermuda," a company official said. GAIL is exploring the option of investing in the JV through its overseas arm, GAIL Global Singapore. The companies may rope in Arrow Energy of Australia for evaluation of CBM project.

China Gas Holdings is listed on the Hong Kong stock exchange and GAIL has around 6.5% stake in the company. Asian Development Bank, Sinopec and Oman Oil too hold stakes in China Gas. "GAIL and China Gas have agreed to pursue the three projects under a JV. A team (drawn up from both the sides) would prepare the business plan by the month-end. After preparation of preliminary documents, the team shall meet in China and finalise the business plan," the official said.

"GAIL’s expertise in mid-stream and downstream gas sector and China Gas’ record in securing contracts and rapid expansion shall be leveraged to make the JV a success," said a company executive.

Besides CNG and CBM projects, the two partners see tremendous value in coal-based petrochemicals. The technology is credited for development of China’s PVC industry. There are around a dozen projects in China to produce petrochemicals from coal. Sources said Sinopec is planning a coal-to-chemicals project at Erdos. Dow and Shenhua group are also exploring the feasibility of an olefins project near Yulin.

The Gas Authority of India Ltd (Gail) and Engineers India Limited (EIL) have jointly made an expression of interest (EoI) to the Oman Gas Company for setting up a processing plant in Oman for the extraction of LPG. According to sources, both the Companies are also looking at opportunities to participate in pipeline transportation, marketing of LPG and other liquid hydrocarbons in Oman, and other countries, including India. However, even after having given the EoI in September 2007, the Companies have not yet recieved any response from the Oman Gas Company .

Gail is also interested in gas-based petrochemical projects in Oman depending on the availability of feedstock, added sources. UD Choubey, chairman and MD Gail, had earlier said, "Our company is looking at Middle Eastern and African countries for gas-based projects. We are evaluating Oman as a major prospective country for our business." Gail and EIL have an existing MoU for overseas projects.

At present, in India Gail has a tie-up with Petrogas of Oman. In Nelp VI round, Gail and Petrogas, along with other partners, were awarded 3 blocks for E&P. According to industry sources, Gail had approached Oman in 2006 too for sourcing LNG for the Ratnagiri power project. In response, Oman informed that the available supplies had been committed and Gail’s request could be considered only after new gas discoveries are made or fresh reserves are allotted towards LNG projects.

In the year 2006, Gail and its partners signed an exploration and production sharing agreement with the government of Oman for Block 56 in Muscat. The consortium consisting of Gail, Oilex Australia, Videocon, Hindustan Petroleum Corp Ltd and Bharat Petroleum Corp Ltd was awarded Block No 56 in Oman for exploration and production of hydrocarbons.

Similarly, EIL, at present, is engaged in carrying out the feasibility study and preparation of front-end design for bitumen production facility at Sohar Refinery Company, Oman. The company expects its completion next month.