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Shell objects to Gail executing national gas grid

Source: PTI
November 17, 2003 14:19 IST

The world's third largest oil firm Royal Dutch/Shell has objected to state-run Gail India Ltd being made the sole agency to build the Rs 20,000 crore (Rs 200 billion) National Gas Pipeline Grid saying infrastructure would grow rapidly if left open for all players.

"We don't see the need to restrict it (building of 7,900-km National Gas Grid) to one player. Construction of infrastructure should be left to market forces... let players decide on what, when and where they want to lay pipelines," Shell India LNG head Marc de Hartog told PTI in New Delhi.

Government has, in its draft gas pipeline policy, named Gail as the sole executing agency for all inter-state lines including the 7,900-km cris-crossing grid that will be the only vehicle for all public and private sector firms to move fuel from producing fields and import locations on east and west coast to inland demand centres.

Infrastructure will grow more rapidly if left open for all, he said while rubbishing arguments of duplication in case all companies were allowed to lay their own pipelines.

With future pipelines being build on common carrier principle (having capacity to carry gas from all suppliers in the region), players will prefer to pool resources, he said.

"Industry will take care of it (duplication). Players will pool resources to attain economies of scale," he said pointing out nowhere in the world have two pipelines been built next to each other.

Petroleum secretary B K Chaturvedi, on the other hand, countered Shell saying the logic behind Gail executing the gas grid was to separate gas producers/importers and transporters.

Shell, in its comments on the gas pipeline policy, has told government not to restrict construction of inter-state lines to any single company.

"We are laying a small pipeline segment to carry Hazira LNG. We will lay pipeline when we need to... if other people are willing to do, we are happy," Hartog said while pointing out that Shell India was in talks with Gujarat's GSPCL and Gail for transporting gas from its Hazira LNG terminal to the customers.

The company plans to bring in 2.5 million tonnes of LNG by the end of 2004.

Prior to Shell, steel pipe maker PSL Ltd too had opposed Gail laying the gas grid as it felt the state-run firm's pipe procurement cost is 60 per cent more than similar projects being implemented worldwide, which would be reflected in the pipeline tariff.

Gail's pipe procurement cost, according to PSL, is $930 per tonne as compared to $580 per tonne cost of pipes in the gigantic West-East pipeline project in China.

PSL suggested, "Selection of the agency for construction of the proposed gas pipeline network, should be awarded on the basis of benchmarking both on cost and quality of the most recent pipeline projects, undertaken by two or three agencies such as Gail, IOC or GSPL.

"The most cost-efficient agency should then be selected for appointment as the nodal agency for construction."
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