05 February 2013 08:59 [Source: ICIS news]
KOLKATA (ICIS)—GAIL India Limited will scrap its 1410km gas pipeline project entailing an investment of $1.4bn (€1.04bn) , dealing a blow to the Indian government’s plans to revive defunct fertilizer plants along the route of the pipeline, an official in Ministry for Petroleum and Natural Gas said on Tuesday.
The oil and gas infrastructure company’s decision not to go ahead with the gas pipeline project follows the stand taken by the Petroleum and Natural Gas Regulatory Board (PNGRB) that current gas availability in the country would not justify the additional investment in the gas pipeline project aimed at supplying feedstock to these closed fertilizer plants, the official said.
Instead, GAIL is considering an alternative investment of about $570m in constructing a floating storage and gasification unit (FSRU) for imported liquefied natural gas (LNG), possibly along the Bay of Bengal coastline in the eastern Indian province of West Bengal, the official said.
However, a decision on investing in an FSRU would be subject to review of the country’s Department of Chemicals and Fertiliser, which was not keen on the project on the grounds that imported LNG would not be viable for plans to revive the closed fertilizer plants. Furthermore, the economic viability of reviving those closed plants had been worked out based on the domestic availability of natural gas, the official added.
Last year a Committee of Secretaries (CoS), set up by the Indian government, had called for expediting the pipeline connecting Jagdishpur in northern Indian province of Uttar Pradesh and Haldia, a port town in West Bengal.
This project was conceived as an expansion of GAIL’s major 1700km trunk gas transportation system, the Hazira-Bijapur-Jagidshpur pipeline, traversing six Indian provinces in the west and north.
CoS had felt that the Jagdishpur-Haldia infrastructure would ensure natural gas feedstock to a number of closed fertilizer units along the route and hasten their revival plans. The defunct fertilizer plants along the pipeline included Kanpur Fertilizer and Cement Limited, Fertilizer Corporation of India Limited’s plants at Sindri and Gorakhpur and Hindustan Fertilizer Corporation’s plants at Barauni, Durgapur and Haldia.
These government-owned fertilizer production facilities were closed down in 2002 owing to a shortage of feedstock naphtha and the government’s decision to stop financial support to offset operating losses.
However, with the Department of Chemicals and Fertilizers setting a target of creating additional 10m urea production capacity by 2016 and since greenfield projects would have a longer gestation period, it was decided to revive these closed units by inviting competitive bids from public and private investors.
Meanwhile, investor interest in these plants could only be ensured by making feedstock available at competitive prices and imported LNG would not be of interest to most prospective investor, the official said.
($1 = €0.74)
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