Rs455bn investment likely in gas pipelines by 2012: ASSOCHAM-E&Y

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) and Ernst & Young anticipate that a total investment of Rs455bn is likely to be poured in the development of laying gas pipeline network in the next five years in view of the intensity with which petroleum sector is in for expansion of pipeline infrastructure.In a paper 'Indian Oil & Gas Sector: Rising Business Opportunities' jointly brought out by ASSOCHAM and E&Y, it is pointed out that currently India has a gas pipeline network of more than 10,000 kilometers. GAIL India's share in it is 55% and the remaining 45% is in the joint sector, including private players particularly in the downstream sector. Releasing the Paper, the ASSOCHAM President, Sajjan Jindal said that significant expansion of gas pipeline network is expected over the next few years as India gears up to create a cross country integrated pipeline network for promoting gas utilization.The Paper says that the GAIL is already implementing the National Grid Project under which it plans to develop about 8000 kilometer of pipeline network across 15 Indian states.Reliance Industries Ltd., (RIL) is also implementing its own pipeline network project which includes the development of 1440 km Kakinada-Ahmedabad East –West Pipeline and a Southern India Pipeline network.Regional pipeline network exists in Gujarat, Andhra Pradesh, Assam and Tripura. Gujarat State Petronet Ltd., (GSPL) is developing a 1200 km Gujarat gas grid, while Andhra Pradesh is also enhancing its gas distribution network.In all these gas pipeline projects, it is anticipated that a total investment of Rs.455 billion will be undertaking in the development of gas pipeline network by 2012. Thereafter, the Chamber anticipates that additional pipeline network would be laid both product and process in view of recent discoveries of hydrocarbons in the recent past which would be effectively transported through pipeline network.The Paper has, therefore, projected that additional Rs. 800 billion investment would also be needed by 2015 as gas pipeline network is becoming a priority in the Indian petroleum sector which is going to take a policy decision for equally sharing this infrastructure for transportation of gas to end users and the ASSOCHAM expects that most of gas pipeline network will be commissioned in the joint sector. On emerging scenario in Indian oil and gas sector, the Paper points out that while coal would continue to contribute the majority of India’s primary commercial energy requirements, oil and gas is expected to become increasingly import in the energy mix. The share of oil and gas in the primary commercial energy mix is expected to grow significantly from the existing level of 36% to 41% in a decade or so.In order to meet the increasing requirement of oil and gas, the government has rightly initiated various measures in order to promote the development of this sector and increase availability of oil and gas.The Paper also highlights that in order to give more fillip to exploration of oil and gas, the tax incentives under new Exploration and Licensing Policy (NELP) brought out by the government needs to broad based and widened to lure investors in domestic exploration business.This has become absolutely necessary as on account of global slowdown, the petroleum sector would be adversely affected because it needs investments in extremely higher volumes and current global financial crisis would discourage borrowings towards Indian petroleum sector. The Paper has also recommended that in view of scarcity of oil and gas particularly the gas, the government should permit its judicious allocation as an input for fertilizer, automobile and cooking purpose. As far as power generation through gas should be avoided as coal should be made the preferential input for power generation as fertilizer and automobile sector cannot do without allocation of gas quota.