The Hindu Business Line : GAIL, ONGC may join hands for marketing

Getting together
ONGC's gas from Krishna Godavari, Mahanadi basins will be sourced and marketed.
With the proposed tie-up, GAIL will be able to better utilise its existing network of pipelines.

New Delhi March 11 GAIL (India) Ltd has reached an understanding with ONGC for sourcing and marketing the latter's gas from Krishna-Godavari and Mahanadi basins. A joint venture between ONGC and GAIL could be in the offing for purchase of gas from new sources to be developed by ONGC in the two assets.

Confirming the development, a senior GAIL official told Business Line that a broad understanding had been reached on marketing, and the quantum of gas and pricing would be worked out subsequently, depending on the development plans of ONGC. A formal agreement will be inked at a later date, he said.

Currently, KG basin is being looked at as a major source of gas with exploration companies such as ONGC and Reliance Industries Ltd striking gold there. The recent exploratory efforts by ONGC have led to the discovery of gas in the ultra-deep waters of KG offshore, though the quantum of gas is yet to be ascertained and production would depend on commercial exploitation of the discoveries, and their subsequent development plans.

Advantage GAIL

With the proposed tie-up, GAIL would not only have access to new source of gas, but will also be able to better utilise its existing network of pipelines as well as expand its infrastructure.

In fact, GAIL's existing network remains under-utilised, particularly in Andhra Pradesh, mainly because of limited production of natural gas in the area. While gas production from ONGC's existing fields in Rajahmundry has increased by 0.57 million standard cubic metres per day (mmscmd), this has been offset by the natural decline in production from wells of other existing fields.

It is now expected that gas from G-1/GS-15 projects of ONGC is likely to be available from middle of 2008. With recent discoveries made in the KG offshore fields, the expectation is that the overall gas availability in the east coast would increase and is projected to be around 130-140 mmscmd by 2011-12.

Additional sourcing of gas would also help GAIL conceptualise new networks in the markets of Andhra Pradesh and neighbouring States. Also the joint venture approach would help GAIL limit its capital risk for any large-scale infrastructure projects it undertakes.

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