Mumbai: Before proceeding with the construction of gas pipelines awarded to it by the government, Reliance Gas Transportation India Ltd (RGTIL) wants to assess the demand for natural gas in the country, according to a person familiar with the matter.
Relogistics Infrastructure Ltd, a group firm that will construct the pipelines, issued an advertisement in The Telegraph newspaper on Tuesday inviting expressions of interest (EoI) from gas producers and consumers interested in using the pipelines.
RGTIL is promoted by Reliance Industries Ltd (RIL) chairman Mukesh Ambani.
The firm wants to assess the demand for gas to decide if the project will be viable before it commits to investing an estimated Rs 20,000 crore, said the person familiar with the matter, declining to be identified.
An email sent to RIL on Tuesday did not elicit any response.
The pipelines will connect Kakinada-Haldia, Kakinada-Chennai, Chennai-Tuticorin and Chennai-Bangalore-Mangalore. Collectively, these have an envisaged capacity of 80 million standard cu. m a day (mscmd), and will connect Andhra Pradesh, Karnataka, Tamil Nadu and West Bengal.
The pipelines were to be commissioned by 2012 but there has been little progress.
RGTIL is still securing a so-called right of user for the land on which the pipeline will come up, said the unnamed person mentioned above.
“RGTIL may have floated this EoI to establish the possible utilization level of its pipeline capacity,” said an official with a power company that is entitled to gas from RIL’s D6 reservoir in the Krishna-Godavari basin. “If it is proven there aren’t enough buyers, it may go back to the ministry and ask for a reassessment of the feasibility of the project.”
He did not want his company or himself to be identified.
An oil and gas sector consultant with an international audit and consulting firm said the EoI will help RGTIL calculate potential return on investment.
He, too, declined to be identified as he is not authorized to speak on specific firms.
RGTIL won the contract in 2007.
In December 2010, L. Mansingh, then chairman of the Petroleum and Natural Gas Regulatory Board (PNGRB), was quoted in a Business Standard report as saying that RIL was of the view that unless there was additional gas available, laying the pipeline would not make sense. But PNGRB believed that unless the infrastructure was ready more gas could not be evacuated.
The board’s present officials could not be reached immediately on Tuesday.
One of main sources of gas that was to feed the pipeline network was RIL’s D6 reservoir, which has witnessed declining production the past few quarters. In the first half of fiscal 2012, gas output from D6 averaged 46.6 mscmd, whereas it should have reached at least 60 mscmd by now.
The power company official said the response to RGTIL’s call for EoI was likely to be tepid since not enough gas was available domestically and imported liquefied natural gas was too expensive.
“A power plant can only be viable if gas can be made available at $6-8 per million British thermal unit (mmBtu),” the official said. “At $19-20 per mmBtu of imported LNG, power can cost Rs 9-10 per unit and that is unviable.”
The consultant cited earlier said the timing of the call for EoI was confusing since there was no clarity on when the pipelines will be ready.