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Gas in the Krishna-Godavari basin,offshore from Andhra Pradesh,around India’s Southeast coast. Newreserves from this find are estimatedat about 5 Tcf. Cairn Energy alsoreported finds in late 2002 offshoreAndhra Pradesh as well as Gujarat,which contains reserves estimatedat nearly 2 Tcf. State owned ONGC,which was originally engaged in thegas production from the Bombay-High offshore fields, has furtheradded to gas discoveries onIndia’s East coast as well.Shell has signed a Memo-randum of Understandingwith the State Governmentof Uttar Pradesh in NorthernIndia for the developmentof a Natural Gas distribu-tion infrastructure. In addi-tion, there are regional gasgrids of varying sizes inGujarat (Cambay Basin),Andhra Pradesh (Krishna-Godavari Basin), Assam(Assam-Arakan Basin),Maharashtra (Ex-Uran Ter-minal) , Rajashthan (JaisalmerBasin), Tamilnadu (CauveryBasin), and Tripura (ArakanBasin). Meanwhile, GSPL(Gujarat State Petronet Ltd)is implementing a 1600 kmlong gas grid in the state of Gujarat. GSPL was incorpo-rated as a special purposevehicle by the Gujarat StatePetroleum Corporation inDecember 1998, especiallyto implement the gas grid for the trans-mission of LNG from import terminalsto demand centres across the state.
On September 29, 2003 the GOIannounced the draft pipeline gaspolicy which envisaged the laying of 7,000 km of pipeline network for gastransportation at a cost of around MMUS$ 3902.86 in the next 5-6 years.As a part of this policy, GOI pro-poses a National Gas Grid on thepattern of the National Power Grid tomanage the distribution effectively.While individuals will be permittedto lay pipelines for distribution pur-poses, say up to 100 km, but if thelength is beyond the prescribed limitthe construction would be carriedout in accordance with the ‘CommonCarrier Principle’ to avoid duplica-tion and wasteful expenditure.The main objective of the draftpolicy, presently undergoing finali-sation with the GOI, is to put inplace a distribution system for car-rying gas, the availability of whichis likely to improve considerably, ithaving been struck at several places,as mentioned above, with arrange-ments for the movement of lique-fied Natural Gas (LNG) having beentied up indefinitely.Under the proposed policy, alltrunk pipelines covering more thanone state or operating at a pressuremore than the notified level will bebuild or managed by a company tobe decided by the GOI but, until itis notified, by GAIL India Ltd. Seiz-ing the opportunity, GAIL has un-veiled a MM US$ 4336.51 plan tobuild a 7,890 km gas grid as shown inFigure 2, along with a completionschedule. The rationale: gas grids inseveral countries like Italy, France,Turkey and also in China and Koreahave been built by the NOCs, becauseof issues of safety and security.The policy envisages ap-pointment of a Regulator un-der the Petroleum RegulatoryBoard Bill 2002 for regulat-ing transmission, distribu-tion, supply and storagesystems for Natural Gas/ LNG and to promote devel-opment of the sector. TheRegulator will ensure accessto gas pipelines on non-dis-criminatory common carrierprinciple for all users. Andthe tariff for the transmissionpipelines and distributionpipelines would be approvedby the Regulator.Pipelines in India have tra-ditionally operated at 100%capacity (since these arecaptive pipelines of oilcompanies). However, wherepipelines are operated undera common carrier principleas mooted in the draft pipe-line policy, they may in real-ity be faced with uncertaintyin utilisation, arising from de-mand-supply dynamics. Since theseare long life projects, high capacityutilisation over long periods becomesa pre-requisite for financial viability.Probably the key issue that requiresresolution is the demand by the finan-cial institutions that the proposed pipe-line projects enter into long term ‘Takeor Pay’ contracts. According to some,this demand would largely violate thecommon carrier principle, which at-tempts to ensure equitable access toall users. The key concern is price.