GAIL faces threat of lower volumes

GAIL India Ltd, the principal transporter of gas in the country, is faced with a situation where volumes handled by it would shrink unless it pushes its own gas through its pipeline network.

Under the new exploration and licensing policy (NELP), an operator of oil and gas blocks has the freedom to market gas or crude oil directly and create his own marketing facilities.

"There could be serious inadequacy of projects in GAIL's area of competence," said a company note submitted to the Parliamentary committee of public undertakings.

Though the petroleum ministry has designated GAIL as the nodal agency for transporting the government's share in profit gas and transmitting it to gas-starved areas, there are murmurs of protest from private players such as Reliance for paying profit gas from its Krishna Godvari discovery in kind.

Article 16.4 of the model production sharing contract for NELP gives the government the option "to take profit petroleum (gas) either in cash or in kind" but petroleum minister Mani Shankar Aiyar has recently indicated a relook at the ministry's decision to take gas Proshanto Banerjee in kind.

According to GAIL chairman and managing director Proshanto Banerjee, expansion of the existing network rather than creation of parallel pipeline infrastructure would give tremendous cost benefit to consumers. 7

GAIL is also facing the threat of Reliance, British Gas and even public sector Oil and Natural Gas Corporation, the partners in Mukta-Panna and Tapti fields, selling their share of gas on their own. ONGC and BG have offers from the Gujarat State Petronet Corporation to sell gas from the fields to it.

The threat has even put a question mark on the fate of GAIL's Hazira Vijaipur Jagdishpur pipeline since about 37 million standard cubic metre per day (mmscmd) gas is received at Hazira out of which on an average 11 mmscmd gas is sourced from Panna-Mukta-Tapti and the balance volume is coming from ONGC's fields.

"Gas supplies from the existing fields are projected to decline. There will be no significant opportunities for new gas processing as well as gas pipelines for GAIL unless new producers of gas decide to give gas to GAIL," said an official, adding that self supply, natural gas from transnational pipelines and regassified LNG would be crucial for Gail's business.

GAIL has participation in 11 domestic blocks and two blocks in Myanmar.

"The company has focused on relatively gas prone blocks with clear understanding in few cases that in case of commercial discovery gas marketing will be undertaken by GAIL," said an official.