BPCL is the lead company for the Rs 535 crore Cochin-Karur (Petronet-CCK) pipeline where it will hold 26 per cent along with Petronet India. CRL will subscribe up to 23 per cent while the balance will be taken up by other strategic investors. Similarly, IOC is the promoter of the Chennai-Madurai pipeline via Tiruchi (Petronet-CTM) where CPC will take up to 23 per cent.

While Petronet-CCK will cater to evacuation of products from CRL's 10.5 million tonnes refinery, the CTM network has been planned to meet a similar objective for CPC. This, however, could change with the commissioning of Nagarjuna Oil's six million tonnes refinery in Cuddalore, Tamil Nadu.

"In effect, there will be two pipelines to meet demand for products in the south. Instead of competing with each other, BPCL and IOC believe that it makes more sense to enter into agreements to lift products from each other," sources say. This will ensure that two giants consolidate their positions in the south instead of fighting it out needlessly.

Interestingly, a proposal under review involves construction of a pipeline from Chennai to Sangareddi in Andhra Pradesh which will pass through Cuddapah and Raichur. The products from the 9.5 million tonnes CPC could be pumped both through this network and Petronet-CTM as there will be surplus capacity once Nagarjuna Oil is all set for commissioning.

"IOC and BPCL will have a strong presence in the south and the alliance will be the best cost-effective option. The two navratnas can hold their own once the oil sector is set for deregulation in 2002," experts say. The current thinking is that IOC can finalise take-or-pay agreements with BPCL in the north where it has an exceptionally strong marketing presence.

The two oil majors, it may be recalled, have already started a round of informal discussions on joint efforts in crude imports and creation of LNG (liquefied natural gas) infrastructure. IOC is the sole canalising agency to import crude and could continue with this task for BPCL to be able to save on costs. LNG has already been acknowledged as the fuel of the future and there is every possibility of the duo joining hands to invest in infrastructure.

"The key lies in saving costs as this will become a vital factor in an era of market-determined pricing. Further, PSUs will be able to hold their own once stronger multinationals enter the fray," experts say. The base for this lies in forging alliances on the lines of IOC and the Oil and Natural Gas Corporation where the two propose to work together in key petro-related activities like refining, exploration, power, petrochemicals and consultancy services. Likewise, BPCL and Hindustan Petroleum Corporation are exploring the possibilities of sharing infrastructure like terminals, depots, pipelines and information technology. There have been talks of an eventual merger between the two oil companies though this seems a far-fetched idea at the moment.

IOC, incidentally, has entered into strategic tie-ups with Larsen & Toubro and Bharat Heavy Electricals and may follow suit with Essar Oil at a later date. The company is also in the fray to take over Indian Petrochemicals Corporation as part of an exercise to consolidate its position in the petro value-added chain.