GAIL seeks to raise Rs7,000 crore for doubling pipeline network

GAIL seeks to raise Rs7,000 crore for doubling pipeline network

New Delhi: Natural gas company GAIL (India) Ltd plans to raise up to Rs7,000 crore from domestic and foreign markets to double its pipeline network by 2011, its director of finance said on Tuesday.

Expanding the New Delhi-based firm’s pipeline infrastructure to 12,000km will cost Rs20,000 crore, GAIL’s finance director R. Goel said.

“Of the total borrowings of Rs6,000-7,000 crore, around 30% will be through foreign loans and remaining through domestic markets," he added.

However, Goel said that the foreign loan component may rise to 40% if the government relaxes a cap on external commercial borrowing for public sector units.

Ahead of securing funds overseas, GAIL is being rated by Moody’s Investors Service for the first time. “The rating is expected very soon," he added.

Goel said GAIL wanted to mop up the funding by the final quarter of 2008 and would raise Rs1,500-2,000 crore a year up to 2011.

To help fund its network expansion, GAIL may also consider selling a part of its stakes in Oil and Natural Gas Corp. Ltd (ONGC), and China Gas Holdings Ltd, Goel said.

GAIL owns 2.4% of ONGC and 6.6% of China Gas, and Goel said that the company would keep at least the 150 million shares in the Chinese firm, which would assure it a seat on the board.

He added that GAIL and China Gas would soon set up an equal joint venture in Bermuda for gas distribution projects in China and India.

China Gas would transfer its exclusive licence for gas distribution projects in major Chinese cities, including Beijing, to the new venture, and GAIL may do something similar with projects planned for India.

As part of its overseas expansion drive, GAIL is looking to set up a petrochemicals project in gas-rich Algeria, but negotiations are at a preliminary stage, Goel said.

GAIL may also pitch for a partnership with Reliance Industries Ltd (RIL) for a proposed 1- million-tonne per annum petrochemicals plant in Iran, which the company is looking to set up with other partners using gas from the giant South Pars field, he added.

To do so, the company would need the approval of its partners Indian Oil Corp. Ltd and National Iranian Gas Export Co., the GAIL official said.

Goel added that setting up a plant in Iran and exporting the products to India would be cheaper than importing the gas from Iran and setting up a plant here.

GAIL earlier this year signed a broad agreement with RIL that included the possible exploration of petrochemical projects in India and overseas.

Goel said GAIL may relinquish its offshore exploration block in the Bay of Bengal, but only after obtaining a final report from Russian block operator Gazprom, which extracts natural gas.