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GAIL disputes ONGC's Dahej extraction plant

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Rakteem Katakey New Delhi
Last Updated : Feb 05 2013 | 12:21 AM IST
A dispute is brewing between the country's largest oil and gas players - upstream giant Oil and Natural Gas Corporation (ONGC) and gas transportation major GAIL India Ltd.
 
The bone of contention is ONGC's upcoming methane-propane (C2-C3) extraction plant at Dahej, which GAIL wants to be "reviewed". C2-C3 is used as feedstock for gas cracker plants and for LPG production.
 
GAIL - the owner and operator of the country's largest gas transmission network, 5,470 km of pipeline - is of the view that the ONGC unit would starve its gas processing plants along the 2,800 km long Hazira-Vijaipur-Jagdishpur (HVJ) pipeline of "rich" gas, making them non-performing assets in the long-term. GAIL has spent Rs 4,000 crore on the projects.
 
"If ONGC sets up the C2-C3 extraction unit at Dahej, the lack of rich gas will force closure of our processing plants along the HVJ pipeline," said a GAIL official.
 
ONGC Chairman and Managing Director R S Sharma said work on the Dahej plant was almost 50 per cent complete and it was too late to pull out. He added ONGC had already conveyed the message to both the ministry and GAIL. "GAIL should've decided on sources of feedstock before they set up their plants," he said.
 
On an appeal from GAIL, the oil ministry is believed to have approached ONGC on the matter, though it had earlier given the go-ahead for the project to ONGC. Officials in the ministry were however unavailable for comment.
 
ONGC's C2-C3 extraction project at Dahej is expected to go onstream in 2009.
 
The gas is originally imported from Qatar's Ras Gas as Liquefied natural gas (LNG) and regassified at Dahej at a plant operated by Petronet LNG, which is jointly promoted by GAIL, ONGC, Indian Oil Corporation and Bharat Petroleum Corporation.
 
The regassified gas, rich in C2 and C3, is currently pumped into the Dahej-Vijaipur pipeline which feeds the processing and petrochemical plants along the HVJ pipeline. The Dahej-Vijaipur pipeline connects with the HVJ line at Vijaipur.
 
When the issue came up before the Parliamentary Committee on Public Undertakings, the oil ministry defended its decision to allow ONGC to set up the C2-C3 extraction unit at Dahej by saying the upstream major was the only promoter which did not have marketing rights for the gas from Petronet's Dahej plant.
 
The ministry further said ONGC would also pay 15 cents per million British thermal unit (mmBtu) as royalty.
 
The government plans to split the LNG sourced by Petronet for use by ONGC and GAIL, with first preference for ONGC. "This separation of LNG at Dahej between ONGC and GAIL may not be technically easy," the GAIL official said. Moreover, additional gas supply would need to be tied up to adequately feed both the companies.

 
 

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First Published: Jan 02 2007 | 12:00 AM IST

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