ICICI has also agreed to sanction Rs 100 crore debt for the Rs 535 crore Cochin-Karur pipeline also being commissioned under the Petronet umbrella. The balance amount of around Rs 300 crore will be syndicated to other financial institutions and banks. This pipeline is being commissioned by Petronet CCK, a joint venture of Petronet India, Bharat Petroleum Corporation and Cochin Refineries.

ICICI has, incidentally, agreed to pick up a 10 per cent stake in Petronet India and sources say that the institutions growing interest in the oil and gas sector is clearly evident from its acknowledgment of pipelines as the most ideal form of transport for petroo-products. As experts indicate, pipelines offer tremendousadvantages over alternative modes of transportation. Their requirement of energy is the lowest compared to alternative modes.

Pipelines are environment-friendly, offer enhanced safety and have low transit losses. They are capable of multi-product handling with possible expansion at minimum possible investments. Pipelines, experts add, also provide flexibility for capacity changes at short notice which helps in maintaining supplies in case of any exigency or unplanned shutdown in the refineries.

The Vadinar-Kandla project envisages setting up a 113 kilometer pipeline with an initial capacity to move 11.5 million tonnes of petroleum products from Sikka and Vadinar near Jamnagar to Kandla. Current estimates indicate that the Rs 400 crore pipeline will be commissioned by October 1999. Like all the other projects planned by Petronet India, it will be financed at a debt-equity ratio of 3:1.

The Rs 535 crore Cochin-Karur pipeline is expected to be commissioned by November 2000. While Petronet India and BharatPetroleum Corporation will hold 26 per cent each in the project, Cochin Refineries will have the option of taking up to 23 per cent. The debt component for the project is estimated to be around Rs 400 crore.

Detailed projections show that Petronet India would primarily earn revenues from dividends declared by the joint venture companies during the operating life. Petronet would also charge a management fee of 1.5 per cent of the core capital expenditure during the construction of the pipeline. These revenues would help the company incur expenditure towards its day-to-day operations and preparation of detailed feasibility reports/preliminary project formulation reports for future plans.

The cost estimate for the Vadinar-Kandla pipeline includes the expenditure to be incurred on survey and field engineering, land acquisition, crop compensation, mainline pipes and materials, mainline construction, construction of pump stations and telecommunication. Phasing of capital cost is based on a construction scheduleof 24 months for the project beginning October 1997.

Various activities of the pipeline project design and execution have been considered while phasing capital cost. It is estimated that 32 per cent of the funds would be needed in the first 12 months of the construction and the balance in the second year. The pipeline will act as an input to IOCs Kandla-Bhatinda pipeline whose achievable capacity is 11.5 million tonnes.

The Cochin-Karur pipeline envisages laying a 308 km multi-product pipeline from BPCL's existing Irimpanam installation at Kerala to the proposed receiving station at Karur, Tamil Nadu with intermediate tap off points at Shoranur and Coimbatore. The project includes pumping and despatch facilities at Irimpanam, product tapping facilities at Shoranur and Coimbatore and a full-fledged terminal at Karur with rail/road loading facilities.

The design thruput of the pipeline is envisaged at four million tonnes. At Cochin, a suitable plot is believed to have been earmarked in BPCL's Irimpanaminstallation for locating despatch facilities relevant for pipeline operations such as a pump house, corrosion inhibitor system, metering system and scrapper launching facility.

Petronet India has been co-promoted by IOC, HPCL and BPCL with a combined equity holding of 50 per cent. The balance will be picked up by the Infrastructure Leasing & Financial Services, ICICI and the State Bank of India with ten per cent each. Only 20 per cent of the equity component now needs to be sewn up.

The equity shareholding of the oil companies has been restricted to 50 per cent and the balance is meant for financial investors whose individual contribution will not exceed ten per cent.

INSIGHT
ICICI to benefit from venture

With hardly any investment opportunities available, ICICI is trying to get as much returns as it can from the Petronet venture. The pipeline venture is bound to deliver good returns as operational costs are minimum. Also, considering the huge requirement for pipeline infrastructure,it can be safely assumed that the pipeline will be running at full capacity. Thus, returns from the project are assured, and the only hitch is that the time required for laying the pipeline and commissioning is long.