MUMBAI, February 4: Six massive pipeline networks are being proposed to be created by Petronet India for which detailed feasibility reports (DFRs) are already underway for four of them. The total investment for these projects is expected to be well over Rs 2,000 crore.Petronet India was formed in May last year as a joint venture of IOC, BPCL, HPCL and IBP. While the three refining companies hold 16 per cent each of the equity, IBP's portion is 2 per cent. The balance 50 per cent is held by the Infrastructure Leasing & Financial Services (IL&FS) which will gradually be brought down to 10 per cent through offloading to other Indian financial institutions and multilateral lending agencies like the Asian Development Bank.
The four pipeline projects for which the DFRs are underway are: Bina-Jhansi-Kanpur-Lucknow; Chennai-Tiruchi-Madurai; Koyali-Ratlam; and Paradip-Jamshedpur-Ranchi. The fifth, under consideration by the board, is an exhaustive pipeline linking Numaligarh, Jorhat, Guwahati, Bongaigaon, NewJalpaiguri and Barauni. "This is a complex network and a lot of spadework needs to be done before even considering preparation of a DFR," top sources told The Financial Express.
Petronet India is also considering the feasibility of a sixth pipeline which will stretch from Bhatinda to Udhampur with links at Jalandhar, Pathankot and Jammu. This will go hand in hand with HPCL's nine million tonne refinery being planned at Bhatinda as a 26:26 joint venture with Saudi Aramco.
Petronet India will hold 26 per cent equity in all these pipeline projects with the operating refining company holding a like percentage. For instance, the pipeline linking Bina to Lucknow via Jhansi and Kanpur is for the Bharat Oman Refinery (BORL, the 26:26 venture between BPCL and the Oman Oil company) where Petronet India, BPCL and BORL will hold 26 per cent each with the balance to be offered to financial institutions.
As for the Chennai-Tiruchi-Madurai pipeline, Petronet and IOC will hold 26 per cent each while MadrasRefineries will have the option of going up to 23 per cent. The Koyali-Ratlam pipeline from IOC's refinery will have 26 per cent equity each from Petronet and IOC. As for the network linking Paradip and Ranchi via Jamshedpur for IOC's nine million tonne refinery in Paradip, IOC, Petronet and the joint venture refining company of IOC and Kuwait Petroleum Corporation will hold 26 per cent each.
The huge northeast pipeline which could be even 1,000 kilometres long will cater to the three million tonne Numaligarh Refinery and also IOC's refinery at Barauni and the Bongaigaon Refinery. Hence, equity participation will be open to IOC, BPCL (the major promoter of Numaligarh refinery or NRL), NRL, BRPL and, of course, Petronet India. And if Oil India decides to pick up a stake in NRL, the company could hold a stake in the pipeline too. Three other pipelines have already got the go-ahead from the board of Petronet India.
One is the 110 km Vadinar-Kandla pipeline scheduled to be commissioned during the thirdquarter of 1999. Essar Oil and Reliance Petroleum will hold 13 per cent equity each, IOC and Petronet India 26 per cent apiece and IL&FS 5 per cent.
The second project to get the board's approval is the 308 km long Kochi-Karur pipeline, with an intermediate tap point at Coimbatore, and expected to be commissioned by the third quarter of the year 2000. Petronet India and BPCL will hold 26 per cent each while Cochin Refineries (CRL) will be given the option of picking up to 23 per cent in the project. IL&FS will have a 5 per cent stake.
The third project is the Mangalore-Bangalore pipeline. The 365 km long pipeline, to be commissioned by the third quarter of 2000, is estimated to cost Rs 475 crore. HPCL, Mangalore Refinery & Petrochemicals and Petronet India will hold 26 per cent each in the equity and IL&FS 5 per cent.
Interestingly, some EPC (engineering, procurement and construction) contractors like Larsen & Toubro are also exploring the possibility of picking up a stake in one of the pipelineprojects. However, no decision has been finalised on this issue.
Petronet India's main objective is to assure free access of pipelines to all users at an uniform tariff. It will hold 26 per cent equity in each of these projects with the operating company, be it BPCL, HPCL or IOC, holding a similar percentage.
Refineries to benefit
The setting up of Petronet has helped speed up the process of setting up of pipeline network for the refinery sector. The speed had been hampered earlier because individually the refineries have been finding it difficult to fund the vast amount of resources required to fund the pipeline projects.
The pipeline network will not only help the refineries in smooth and cheap transportation of products and raw materials, but will also benefit companies manufacturing capital goods and engaged in manufacturing pipes to a large extent. This, however, will have an adverse impact on the heavy vehicle segment as well as on the revenues of the railways, in the short-run.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
