Indian Oil Corporation’s gas pipelines to be part of proposed GAIL arm

The government is likely to carve out a separate gas transportation company that will hold the existing natural gas pipelines of both GAIL India and Indian Oil Corporation (IOC). The newly formed company will be a fully-owned subsidiary of GAIL.

The Ministry of Petroleum and Natural Gas has already floated a Cabinet note for inter-ministerial consultation on the creation of a new gas transmission operator. “According to the plan, GAIL will have to pay the book value for the existing natural gas pipelines of IOC. This will be integrated with the newly formed subsidiary,” said an official, who is close to the development.

The official clarified that IOC’s petroleum product pipelines will not be part of the proposed GAIL arm. The Union Cabinet is likely to take a call on this proposal soon.

According to industry experts, the construction cost of natural gas pipeline would be around Rs 3-3.5 crore a kilometre. This would mean that GAIL will have to pay around Rs 500-600 crore to buy IOC’s natural gas pipelines.

At present, the country has 16,981 km of natural gas pipeline with a capacity of 387 million metric standard cubic meters per day. Of this, GAIL owns 12,160 km, while IOC has around 162 km.

In February, GAIL Chairman and Managing Director Manoj Jain said the government was working on a proposal to set up a 100 per cent subsidiary of GAIL to comply with regulations that require transportation and marketing of gas to be a separate business. The new entity will be formed within a year “once the Cabinet nod is in place”. The proposed arm is expected to have around 15 per cent share of GAIL’s revenue.

IOC owns and operates 140-km long Dadri-Panipat Natural Gas Pipeline (DPPL). This pipeline, commissioned in 2010, is also interconnected with GAIL’s Hazira-Vijaipur-Jagdishpur Pipeline (HVJPL) and Dahej-Vijaipur Pipeline (DVPL) network at Dadri.

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