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RIL, Gail in pact to set up mega plant

December 04, 2007 18:21 IST

Reliance Industries, India's most valuable company, and state-run gas firm GAIL India on Tuesday joined hands to set up a multi-billion-dollar petrochemical plant in gas-rich Middle-East, Central Asia or Russia.

"It will be a mega petrochemical plant with a capacity of 1.9-2 million tons," GAIL chairman and managing director U D Choubey said from Mumbai after his firm signed an agreement with Reliance for exploring possibility of setting up the petrochemical complex.

Reliance, the nation's largest petrochemical maker, and GAIL will jointly study opportunities in Russia, Qatar, Saudi Arabia, the United Arab Emirates, Algeria, Nigeria and former Soviet republics for the petrochemical complex, he said while indicating that the two firms were in all likelihood forge an equal partnership.

"We have formed a joint working group to select sites in three countries by March," Choubey said. "We may also jointly take up integrated project involving production of feedstock and then converting it into value added products."

Natural gas or naphtha are likely to be the feedstock for the plant and the two companies, if allocated a gas field in the target countries, will look at jointly developing it and converting the gas into petrochemicals.

A memorandum of understanding was signed by RIL executive director Nikhil R Meswani and GAIL director (business development) A K Purwaha. The agreement was exchanged by Choubey and RIL chairman and managing director Mukesh Ambani.

Choubey said project details, cost, financing and equity will be decided once sites are selected and feasibility report commissioned. "All I can tell you is that it will be a mega petrochemical plant, potentially costing billions of dollars."

The two entities are likely to float special purpose vehicles having equal stake for the petrochemical project.

The agreement with Reliance is part of GAIL's strategy to expand its petrochemical business. Petrochemical is one of the three core areas identified by Choubey after he took over as the head of India's largest gas transmission and marketing company earlier this year. The other focus areas being gas transmission and distribution and city gas distribution.

Reliance and GAIL already have an agreement for cooperation in the gas sector. The areas of joint cooperation identified include natural gas pipeline transmission and marketing, CBM gas opportunities, city gas distribution, maintenance services, exploration and production.

Under the MoU, Reliance and GAIL are discussing co-operation in the development of a gas grid and examining opportunities that may be available for optimal utilisation, sharing and inter-connectivity of their respective, existing and planned transmission and distribution networks.

The core teams of the two entities are already in discussions on pipeline projects, particularly interconnectivity in Andhra Pradesh, Maharashtra and Gujarat.

Technical parameters are also under discussion. Choubey has over the past couple of months initiated dialogues with companies in Russia, Qatar, Nigeria and Algeria for setting up of petrochemical plants. GAIL has opened dialogue with LukOil of Russia and Qatar Petroleum and these may be expanded to include Reliance Industries.

"It is in line with our strategy to set up a petrochemical project overseas where feedstock is available," Choubey said.

He said he had traveled to both Russia and Qatar in October/November and held discussions with company officials. In Russia, talks were also held with petrochemical major Sibur.

Choubey said the plant could be located in either Saudi Arabia, Qatar or Russia depending on feedstock availability.

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