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GAIL: The national gas grid - Views on News from Equitymaster
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  • Sep 1, 2008

    GAIL: The national gas grid

    The government initiated a discussion on a new gas pipeline policy in 2004. Around this time, the development and construction of a national gas grid (NGG) of around 8,000 kms was also conceptualized on the lines of the power grid, so as to bring the entire country under a single and common transmission and distribution network. It would consist of the primary high pressure inter state gas pipeline networks and would provide gas to all parts of the country by linking sources and supply of natural gas to end consumers. In this article, we shall study the status of the project and its implications.

    The plan
    GAIL was nominated as the single agency for construction of the NGG in accordance with international practices. The company planned the project in 3 phases.

    The proposed network
    Phase I
    Sector Kms Completion Rs bn
    Dahej-Vijaipur 610 2003 -
    Dahej-Uran-Pune 520 2005 -
    Kakinada-Hyderabad-Pune 1,250 2006 -
    Kakinada-Kolkata 1,150 2007 -
    Kakinada-Chennai 580 2006 -
    Chennai-Bangalore 500 2007 -
    Dabhol-Bangalore-Coimbatore-Kochi 900 2008 -
    Kolkata-Jagdishpur 980 2007
    Subtotal 6,490 - 180
    Phase II & III (Associated spur lines)
    Chennai-Tuticorin - - -
    Dahej-Jamnagar - - -
    Myanmar-Mizoram- Assam-Bihar - - -
    Vijaipur-Hyderabad - - -
    Subtotal 1,400 - 22
    Total 7,890 - 202
    Source: GAIL

    The implementation
    GAIL has tried to implement the NGG plan, but has met with only moderate success. The company's annual reports indicate that the commissioning of many pipelines has been delayed. The proposed pipelines from Kakinada and the spur lines have not taken off.

    Sector Year Sector Year
    Dahej-Vijaipur 2004 Kakinada-Chennai* No
    Dahej-Uran-Pune 2006 Chennai-Bangalore* No
    Dabhol-Bangalore-Coimbatore-Kochi 2011E Chennai-Tuticorin* No
    Kolkata-Jagdishpur 2011E Dahej-Jamnagar No
    Kakinada-Hyderabad-Pune* No Myanmar-Mizoram- Assam-Bihar No
    Kakinada-Kolkata* No Vijaipur-Hyderabad No
    * Reliance is eyeing these pipelines

    It may be noted that Reliance Gas Transportation Infrastructure, a Reliance Industries associate has secured approvals for a network of smaller lines originating from the 1,400 km Kakinada-Ahmedabad (East-West) pipeline. Once the lines are in place, the company will be able to cover most of the markets enroute. Moreover, the company is said to have received approvals for Kakinada-Chennai pipeline. This line could be extended to Tuticorin and Bangalore. Reliance has also plans to submit an expression for interest for laying a pipeline from Kakinada to Howrah.

    What to expect?
    Reliance's interests lie in establishing the pipeline network emanating from Kakinada (this is where the famous D6 block of the KG basin is located). It may be noted that once the approvals are in place, there is little chance of duplication in pipelines as it leads to underutilsation of capacity.

    GAIL would have achieved very large incremental volumes going forward, if it managed to secure the entire NGG for itself. To the extent that Reliance is able to take away the pipelines, it dampens GAIL's monopoly position. However, GAIL will still achieve volumes growth from the remaining sectors and higher capacity utilisation in its existing pipelines.

  • Also read - GAIL: What determines its tariffs?



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