BPCL plans natural gas distribution foray

The state-owned oil major Bharat Petroleum Corporation (BPCL) intends to play a major role in the growing natural gas market in India.

It has now decided to tap gas distribution market in Maharashtra, Gujarat and Uttar Pradesh. The proposed total investment in these projects is estimated at Rs 1,200 crore and BPCL's exposure would be to the extent of the share of its equity in these projects.

The corporation intends to develop gas distribution projects in Gandhinagar, Mehsana and Sabarkantha districts in Gujarat and is currently carrying out a detailed feasibility study.

It has already obtained a no-objection certificate from the Gujarat government for development of gas distribution in these districts, according to BPCL's annual report for 2003-04.

Gas distribution in these districts is expected to commence in 2005. Estimated to cost Rs 300 crore, the project is expected to generate an internal rate of return of 15 per cent.

In 2003-04, BPCL has joined hands with GAIL (India) for gas distribution in Pune in Maharashtra and in Kanpur (Uttar Pradesh).

The project not only envisages gas distribution to domestic, commercial and industrial customers but also compressed natural gas (CNG) for transport sector by 2005. BPCL is expected to invest close to Rs 50 crore in the project this year which is estimated to cost Rs 900 crore.

In Delhi, Indraprastha Gas, a joint venture between BPCL and GAIL, is supplying gas to households and CNG to automobiles. BPCL has invested Rs 31.5 crore in IGL which amounts to 22.5 per cent of its equity.

Meanwhile, BPCL has included liquefied natural gas (LNG) in the bouquet of industrial products offered to its customers. It is currently looking at marketing LNG in the western and southern part, particularly at Mangalore and Kochi. It already has a 10 per cent share of the LNG brought in by Petronet LNG.

BPCL has sold the first year's availability of 0.84 million cubic metres of gas per day to Essar Steel and Gujarat State Petroleum Corporation (GSPC) by signing a gas sale agreement.

"Agreements with customers are being tied up for the balance quantity of 0.91 mmscmd, which will be available from the second quarter onwards," the annual report has stated.