Petronet's pipeline in jeopardy

Competition among oil companies for laying pipelines is intensifying to the disadvantage of the existing pipelines.

A case in point is the Indian Oil Corporation's (IOC) plans to convert the Kandla-Panipat product pipeline into a crude pipeline. This has put a question mark on the viability of the Vadinar-Kandla pipeline of the Petronet India Ltd (PIL).

Senior officials told Business Standard that Petronet VK Ltd, the PIL's joint venture for managing the 117-Km Vadinar-Kandla pipeline, has sought the petroleum ministry's intervention in the matter.

The ministry, so far, has not taken any view on this but officials said the policy of not stopping companies from laying pipelines would be followed.

The VKPL pipeline was designed to evacuate products from the Reliance refinery at Jamnagar and that of Essar Oil at Vadinar. Currently, a pipeline has been laid from the Reliance refinery to the IOC installation in Kandla. This pipeline is hooked up with the existing Kandla-Bhatinda pipelines of the IOC, and is evacuating the products of the Reliance refinery.

The IOC is planning to use the Kandla-Panipat section of the Kandla-Bhatinda product pipeline for transporting crude to meet the requirements of its Panipat refinery, which is under expansion. This would mean the further link for the Vadinar-Kandla pipeline would go missing.

The government policy of encouraging all oil companies to lay pipelines in keeping with consumer interest may end up creating non-performing assets, said a senior official.

The IOC plans are threatening the existence of the Petronet VK Ltd, of which it is a co-promoter along with the PIL, officials said. The two have a 26 per cent stake each in the company while Reliance Petroleum Ltd and Essar Oil hold 13 per cent each.

The Kandla Port Trust, The State Bank of India, the IL&FS and the Gujarat Industrial Investment Corporation hold 5 per cent each. A nominal 2 per cent is held by the Canara Bank.