RIL and GAIL to lay pipeline for Krishna Godavari gas

Mukesh Ambani promoted Reliance Industries Ltd. (RIL) and state-run gas marketer GAIL India are gearing up to start the second phase of construction of the pipeline to transport gas from the Krishna-Godavari basin to the southern parts of the country. The pipeline would be complete by 2012 with a total investment of over Rs 11,300 crore, including an estimated Rs 2,300 crore from RIL and Rs 9,000 crore from GAIL India. Both RIL and GAIL India secured authorisation from the Ministry of Petroleum and Natural Gas in 2007 to lay these pipelines.
"RIL is planning the final route of the pipeline," said a company spokesperson.

A senior official from the ministry said RIL's group company, Reliance Gas Transportation Infrastructure, was authorised to lay over 1,140 km of pipeline -- 470 km of the Vijaywada-Nellore-Chennai section and 670 km of the Chennai-Tuticorin section. GAIL India says it would lay over 700 km of pipeline from Dabhol to Bangalore and Bangalore to Mangalore with an investment of Rs 9,000 crore.
"We are authorised to lay these pipelines and we would complete them by 2012. We are also linking a pipeline from Kochi to Bangalore," said a senior official from GAIL.

RGTIL has already laid around 1,400 km of the East-West pipeline from Kakinada in Andhra Pradesh to Bharuch in Gujarat. The East-West pipeline connects with GAIL's Hazira-Vijaipur-Jagdishpur and Dahej-Vijaipur pipeline network at Ankot in Gujarat, Dahej-Uran and Dabhol-Panvel pipeline network at Mashkal in Maharashtra and Krishna-Godavari (KG) basin pipeline network at Oduru in Andhra Pradesh.
GAIL India and RIL had signed a gas transmission agreement (GTA) in 2007 to share each other's pipelines for transmission of natural gas from the KG basin fields. The GTA provides for transportation of natural gas from the exploration block located in the KG basin in the east coast through GAIL's network, and also for booking of capacity by GAIL in RGTIL's East-West pipeline through execution of capacity tranche agreements.

The utilisation of the pipeline asset will be increased by this arrangement, says GAIL India. It currently has a network of natural gas trunk pipelines covering a length of around 7,000 km. with a capacity to carry 148 mm cm gas per day. GAIL holds 70 % market share in gas marketing in India.
Analysts say that refineries -- Mangalore Refinery and Petrochemicals, Chennai Petroleum Corporation, Essar, Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation -- located in the vicinity of these pipelines would benefit as they would be able to substitute costly fuel oil by cheaper gas which could improve their gross refining margins by over $ 1 per barrel.