GAIL India may take a stake in the $1.95 billion gas pipeline that China is building for ferrying natural gas found off the Myanmar coast.
China National Petroleum Corp (CNPC) is laying an 870km pipeline in Myanmar to transport gas found in blocks A-1 and A-3 to mainland China.
CNPC has offered a 49.9% stake to the consortium developing gas fields in blocks A-1 and A-3. South Korea’s Daewoo Corp holds a 51% stake each in block A-1 and A-3, while ONGC Videsh Ltd (OVL) has a 17% interest; GAIL and Korea Gas Corp have 8.5% each, while Myanmar’s state-run Myanma Oil and Gas Enterprise (MOGE) holds the remaining 15%.
If all the consortium members decide to participate, the shareholding in the pipeline project would be CNPC - 50.9%, MOGE - 7.37%, Daewoo - 25.04%, OVL – 8.35%, and GAIL and KOGAS - 4.17% each.
The gas from A-1 and A-3 will be sold to China for $7.72 per mmbtu at the landfall point in Myanmar, which includes $6.71 per mmbtu for the gas, plus an offshore pipeline tariff of US $1.02 per mmbtu.
The 30-year sale contract is indexed to US inflation. Work on the pipeline is likely to begin sometime next year. It is said that Daewoo-OVL-GAIL-KOGAS may invest US $936.26mn in laying an under-sea pipeline to take the gas to the shore.
The first gas is anticipated in first quarter of 2013. Gas reserves of 4.532 Trillion cubic feet (TCF) in Blocks A-1 and A-3 have been certified.
However, so far, the commercial viability of the natural gas discovery in both the blocks has not been declared. We continue to remain NEUTRAL on GAIL.