New Delhi: In a first of its kind, GAIL (India) Ltd, the country’s leading gas pipeline infrastructure company, has signed a memorandum of understanding (MoU) with Reliance Industries Ltd (RIL) for cooperation in the petrochemical sector.
GAIL’s move is part of an attempt to expand its presence overseas. It is has been scouting for opportunities to set up a 1 million tonne per annum petrochemical complex at an investment of Rs6,000 crore.
Mukesh D. Ambani, chairman and managing director, RIL, said in a press statement: “GAIL and RIL are India’s leading companies in the energy and infrastructure sector. The decision will enable us to look for opportunities globally on a competitive scale for the petrochemical business which will further strengthen India’s position on the global map.”
Ravi Mahajan, a partner at audit and consulting firm Ernst & Young, said: “Given the recent situation in Iraq, it probably makes sense for such an arrangement for RIL as relying on government-to-government contacts helps in risk minimization. It is a good move on the part of GAIL as RIL has the technical expertise in the petrochem business.”
Iraq recently warned that it may ban RIL from future oil blocks contracts after the Indian company signed a deal with the Kurdish government for two blocks without the Iraqi government’s approval.
As per the arrangement, the two companies will explore opportunities for setting up petrochemical complexes outside of India in feedstock-rich countries through a special purpose vehicle (SPV). The equity holding of the two companies in the SPV has not been defined as yet. The two companies will also examine the possibilities of mutual cooperation in the domestic market.
As part of its overseas plans, GAIL wants to acquire coal bed methane (CBM) blocks in Australia and plans to use its association with Arrow Energy NL for the same.
GAIL already has three CBM blocks in India in a consortium along with Arrow Energy (India) Pty Ltd and EIG Energy Infrastructure Group AB Ltd. Arrow Energy NL holds substantial CBM acreage in Australia.
“We plan to expedite the process to get the CBM blocks in Australia as it is a good potential area for growth,” said U.D. Choubey, chairman and managing director, GAIL.
Energy security is an important area for GAIL as the challenge before it is that it does not have any gas of its own.