GAIL to oppose merger with peers

GAIL India will advocate to maintain its individual identity and resist merger with the other state-owned oil companies.

GAIL chairman and managing director Proshanto Banerjee is scheduled to make a presentation on March 10, before the government-appointed 'synergy for energy' committee headed by former Steel Authority of India chairman V Krishnamurthy.

On the company's future strategy, Banerjee said: "Gas business should be looked separately and differently. It should not be clubbed with oil. An independent thought is required to be given to it".

The government is examining options of synergising the oil sector and creating two behemoths to take the competition from multinationals head on.

Besides, the government is keen that Indian oil companies come on the international radar while pitching for oil equity abroad.

One proposal is to merge with Oil and Natural Gas Corporation (ONGC), oil refining companies like Hindustan Petroleum (HPCL), Bharat Petroleum (BPCL)and GAIL India. The other behemoth will be led by Indian Oil Corporation with Oil India Ltd merged with it.

Banerjee's view which will be translated into the presentation urges the government to take a holistic view keeping in mind the international business practices for gas companies.

He pointed out that there were different aspects to the gas business which involves not only transmission and distribution but value added activities like gas processing (LPG, propane and other liquid hydrocarbons) and petrochemicals (HDPE and LLDPE).

GAIL is also into city gas distribution (it has a domestic as well as international presence). It has participated in 12 exploration and production blocks as a consortium member. Of these, gas discovery has been made in Myanmar.

It has recently picked up close to 10 per cent equity in China Gas Holdings, China's gas distribution company. It has also signed a deal with Spectra International, Bangladesh, to develop CNG infrastructure & gas retail markets. GAIL is participating in three retail gas companies in Egypt "" Fayum Gas Company, Shell CNG, Egypt and Natgas.

Moreover, considering that over the next 5-10 years, the quantum of gas available in the country will increase manifold due to domestic gas finds, gas coming from Iran and Myanmar and increase in LNG availability, Banerjee is of the opinion that GAIL's independent existence will be "vital for the arterial energy flow" within the country.

Unless infrastructure is in place to carry gas from Kochi to Kohima on open access basis economic development is not possible. This could only happen with an independent gas company without it being roped or merged with any oil companies.

To buy 9% in China Gas

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GAIL India Ltd will acquire 9 per cent stake in Hong-Kong-based gas distributor China Gas Holdings for a consideration of $31.2 million. GAIL will subscribe to 210 million new shares of China Gas, the company said.

China Gas would ensure that GAIL's stake is not diluted to less than 6 per cent by any future issue of shares. GAIL has also agreed not to sell the shares for two years.