GAIL, HPCL ink deal on gas distribution

Updated on May 18, 2007 03:00 AM IST
The joint venture company will take compressed natural gas (CNG) and piped natural gas (PNG) to cities of Rajasthan, reports Deepak Joshi.
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None | ByDeepak Joshi, New Delhi

The Gas Authority of India Ltd (GAIL) and Hindustan Petroleum Corporation Ltd (HPCL) signed a joint venture agreement on Thursday for city gas distribution projects in Rajasthan.

The joint venture company will take compressed natural gas (CNG) and piped natural gas (PNG) to cities of Rajasthan for use in vehicles and homes.

Its operations will start with Kota for which a detailed feasibility report (DFR) has already been prepared by GAIL. GAIL’s Vijaipur – Kota pipeline is already operational and the Kota city gas project will source its gas though this pipeline.

The new joint venture will have 22.5 per cent equity holding each by GAIL and HPCL, five per cent by the State Government or its nominee and 50 per cent by strategic investors, financial institutions and the public.

This is GAIL's ninth joint venture and its third with HPCL for city gas distribution in India. The two companies had earlier set up the Bhagyanagar Gas Limited and Avantika Gas Limited for city gas distribution projects in Andhra Pradesh and Madhya Pradesh respectively.

Announcing the agreement, UD Choubey, GAIL chairman and managing director, said city gas distribution will be the next high growth area in the gas markets. He recalled the success story of Bhagyanagar Gas Limited, and hoped that the JV company for Rajasthan would blaze a similar trail of success.

Arun Balakrishnan, HPCL chairman and managing director said GAIL and HPCL already have experience of working together in
joint ventures and this agreement will provide another opportunity for the two companies to work together. He reiterated the importance of creating necessary infrastructure to enable the joint venture to exploit the first mover advantage. Both companies, he said, had enough talent and resources, which could be suitably pooled in to ensure that the joint venture was capable to put all necessary physical and organizational infrastructure in place.

GAIL has already formed joint venture companies for the cities of Delhi, Mumbai, Kanpur, Lucknow, Agra, and Pune and the states of Madhya Pradesh, Andhra Pradesh and Tripura. It has identified 28 more cities for city gas distribution. GAIL has also signed MoUs with oil marketing companies for Kerala, Karnataka and West Bengal.

Globally GAIL has established its CNG and City Gas presence in Egypt through equity participation in Fayum Gas, Shell CNG and Natgas, Egypt. It has also acquired stake in China Gas Holdings for CNG opportunities in mainland China.

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