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Richa Mishra

New Delhi, Oct. 25 GAIL (India) Ltd is considering diversifying into gas pipeline construction business. The move is expected to create increased synergy in its core area of activity — gas transmission and marketing.

GAIL, which has rolled out ambitious plans to expand its existing pipeline network, currently outsources this activity. “Now there is a thinking within GAIL to form a joint venture with a company which has a sound footing in the pipeline construction business, expertise as well as international exposure,” sources told Business Line. GAIL has a market share of 78 per cent in natural gas transmission and 70 per cent in natural gas marketing in the country.

For GAIL this would not be its first diversification as the company already has a telecom venture and has forayed into the power and petrochemicals sectors, thus creating a vertical integration within its business. Some of the major players in pipeline construction include Saw Pipes, Man Industries, and PSL. The total required pipeline infrastructure in the country is approximately 15,000 km.

GAIL is expanding the pipeline infrastructure, which would double the company’s existing trunk pipeline network to 12,000 km, costing about Rs 20,000 crore by 2011-12. The company’s existing carrying capacity will increase from 140 million standard cubic metre a day (mmscmd) to 300 mmscmd, which will also boost its revenues from the transportation business.

It plans to complete eight new gas pipelines in two phases targeting 100 per cent completion by 2011. These will form part of an integrated gas grid in the country spread over more than 5,000 km.

As regards unbundling of the company’s gas transmission and marketing business, sources said the company is prepared for it. “Whenever the Petroleum and Natural Gas Regulator Board (P&NGRB) directive comes it is ready to meet the requirement,” they said.

“The company has considered a few options for unbundling the business including that of a pyramid structure, where there would be one holding company followed by subsidiaries. The unbundling will not affect the company’s profitability,” sources said.

More Stories on : Diversification | Petroleum | Infrastructure | GAIL (India) Ltd

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