State-run gas utility GAIL (India) Limited has signed a memorandum of understanding (MoU) with Reliance Industries (RIL) on Tuesday for joint cooperation in petrochemicals. The two companies plan to set up a multi-billion dollar petrochemical plant in the gas-rich West Asia, Central Asia or Russia.
Under the agreement, GAIL and RIL would explore opportunities for setting up petrochemical complexes abroad in feedstock rich countries. “Identified opportunities will be examined by a working group, consisting of representatives from both the companies. GAIL and RIL would set up a special purpose vehicle (SPV) for setting up petrochemical complexes abroad,” an official statement said.
The working group is examining opportunities in the Middle East, Russia and Central Asia, besides exploring the possibility of mutual cooperation in the domestic market. Both companies already have an agreement for cooperation in the gas sector. The areas of joint cooperation include natural-gas pipeline transmission and marketing, coal-bed methane gas opportunities, city gas distribution, maintenance services, exploration and production.
Natural gas or naphtha are likely to be the feedstock for the plant and the two companies, if allocated a gas field in target countries, would look at jointly developing it and converting the gas into petrochemicals.
The memorandum of understanding was signed by RIL executive director Nikhil R. Meswani and GAIL director (business development) AK Purwaha and the agreement was exchanged by GAIL Chairman and Managing Director UD Choubey and RIL Chairman and Managing Director Mukesh Ambani.
Choubey said, “The MoU is an extension of the concept of working together… It is the beginning of cooperation in the area of petrochemicals. The agreement with Reliance is part of GAIL's strategy to expand its petrochemical business." The petrochemicals business is one of the three core areas identified by Choubey as a focus area after he took over as the head of India's largest gas transmission and marketing company earlier this year.
Ambani said, “The decision will enable us to look for opportunities globally on a competitive scale for the petrochemical business which will further strengthen India’s position on the global map."