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Petroleum and Gas Pipeline India

Petroleum and Gas Pipeline India

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14
SEPTEMBER 2004
Visit our website at www.safan.com 
India’s pipelinesIndia’s pipelines
 
Report
Petroleum and gas pipelinesin India
In view of the strategic importance of the oil & gas industry and oil security, andrecognising the increasing demand for energy, to fuel economic growth, theGovernment of India (GOI) has developed the ‘India Hydrocarbon Vision 2025’ for the oil & gas industry. This vision statement creates a road map that guidesthe Indian policy on oil & gas up to the period 2025, forms the backbone and laysthe framework for the policy initiated for the hydrocarbon sector; comprising thedifferent segments including pipelines (both national and transnational) in astructured and organised manner. Details below present, in brief, the currentstatus of the pipelines systems in India - for crude oil, products pipelines and gas.
P
ipelines occupy a key positionin any petroleum and gassector’s logistics. Both publicsector units and private sectorplayers tried to ensure control overthis safe and economical mode of transportation in India. Initially eachof these players had plans of layingtheir own pipelines, but the GOIwanted to ensure systematic growth,thus leading to the creation of PetronetIndia Ltd (PIL), a financial holdingcompany, in 1998, with the objectiveof constructing a refined petroleumproduct pipeline infrastructure in thecountry. PIL is a joint venture organi-sation of India’s state owned refiner-ies, financial institutions and privatesector players on a ‘common career’basis. It is presently building pipelinesthat are expected to add 500,000 b/dto India’s current 325,000 b/d of pipe-line capacity for the transportation of refined petroleum products.Presently, a total of eight pipelineprojects are being handled by PILstage. India transports just over 45%of its petroleum products via pipe-lines. A map of India’s Oil productpipelines is shown in Figure 1.
Crude oil & petroleumproduct pipelines
Indian Oil Corporation Ltd.(IOCL) operates the largest net-work of crude and productpipelines and transports petro-leum products to the variousmajor demand centres of thisgeographically vast countryand feed four major inland re-fineries. The pipeline divisionof IOCL has in-house capa-bilities of executing pipelineprojects from concept tocommissioning without anyexternal support, whatsoever.Proven project techniques andtools are used in project man-agement to ensure a high levelof quality, productivity, timescheduling and cost control.some of which are already in opera-tion while some others are eitherunder execution or in the planning
 
SEPTEMBER 2004
15
A summary of IOC pipelines, asexisted at the end of last year isgiven below:Oil India Ltd. transports all crude oilproduced in North-East India to refin-eries via a 1,157 km pipeline. The Oil& Natural Gas Corporation (ONGC),India’s single largest crude producer,has a 7900 km onshore pipeline net-work while its offshore activities in-clude a 3500 km pipeline network.Bharat Petroleum Corporation Ltd(BPCL) and Hindustan Petroleum Cor-poration Ltd (HPCL) also have product(over 250 km) and crude and productpipelines (over 750 km) respectivelyin operation as well, in addition tohaving partnerships with PIL in thiseconomic mode of transport.The CIPL (Central India PipelineProject), originally intended to beexecuted by PIL, has now been ap-proved for award by the PIL Board tothe joint venture of IOCL and Reli-ance Industries Ltd (RIL) - previouslycalled Reliance Petroleum Ltd (RPL) -on a build–own–transfer–operatebasis. In their proposal for CIPL, IOCand RPL have estimated a cost of about US$0.32 billion by strippingthe spur lines, planned for Bhopal,Indore and Chittorgarh.Under the policy for the develop-ment of petroleum product pipelines‘Common User Principle’, six pipe-lines to be put up by RIL have beenapproved. These include:Pipelines between refineries andmajor urban centres are replacing railas the main mode of transportation.Some of the other pipeline projects forcrudes and products under considera-tion/ implementation are:Vadinar- Bina (crude)Mundra-Bhatinda (crude)Bina –KanpurParadip-RourkelaBhatinda-Pathankot
Gas pipelines
The Gas Authority of India Ltd(GAIL) – now called GAIL India Ltd– a leading public sector enter-prise, is the largest gas transmis-sion and marketing company inIndia. Today GAIL owns over 4000km of pipeline and has about 95%market share in the Natural Gasbusiness in India. Also, more thanhalf of the total urea production inIndia is gas-based, out of whichGAIL contributes more than 90%,thus making a significant contribu-tion to India’s agricultural sectoralso. The company also completedthe world’s longest (1200 km) andIndia’s first cross country LPG pipe-line from Jamnagar to Loni, nearDelhi. There exists a total of 3331km of LPG pipelines in the country,with a throughput capacity of 8304MMtpa, work on some of which isstill in progress.GAIL is now in the process of dou-bling the throughput capacity of itsmain Hazira–Bijaipur- Jagdishpur(HBJ) pipeline. Work on the capac-ity expansion began in 2002 andwill eventually raise the capacity of the pipeline from about 1.1 Bcf/d to2.1 Bcf/d. GAIL also plans a newdistribution network in West Bengaland a pipeline which could connectKolkata with Chennai.India is investing heavily in theinfrastructure required to support in-creased use of Natural Gas. This hasbecome even more so with the ma-jor development in December 2002when Reliance announced its dis-covery of large volumes of Natural
Route Length (km) US$ MM
 Jamnagar-Patiala 1580 355.59 Jamnagar-Kanpur 2540 385.94Goa-Heydrabad 660 99.73Chennai-Bangalore 540 70.46Kakinanda-Vijaywada 200 23.85Haldia-Ranchi 375 56.38
IOC Pipelines Length Capacity (Km) (MMtpa)
Product 4591 28.35Crude 2813 28.50Total 7404 56.85
 
16
SEPTEMBER 2004
Visit our website at www.safan.com 
India’s pipelines
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.
Pipeline policy
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.

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