Reliance Gas, GAIL may Lose Licences for 5 D6 Gas Pipelines

The petroleum regulator has recommended cancellation of licences for five pipelines that state-run GAIL India and a Mukesh Ambani-controlled company were planning to build to transport natural gas from Reliance Industries' D6 block, where output has fallen sharply, official sources said. 

The oil ministry has received a communication from the Petroleum and Natural Gas Regulatory Board (PNGRB) saying the licence for one pipeline being planned by GAIL and four by Reliance Gas Transportation Infrastructure (RGTIL) should be revoked as work has not progressed on the projects for a long time. 

GAIL and RGTIL did not respond to ET's queries. A source close to RGTIL, which is controlled by Mukesh Ambani, said building pipelines would be justified only if gas was available, and if output from D6 rose, the company could build the pipelines quickly. D6 output has dropped to 34 mmscmd since hitting a peak of 61.5 mmscmd in March 2010. It was initially expected to rise to 80 mmscmd. GAIL is one of the suitors considering picking up a stake in Reliance Gas, which has appointed JPMorgan, Citi and SBI Caps as advisors for the sale and is seeking a valuation of up to . 10,000 crore, industry sources say. The pipelines that were planned include RGTIL's projects to link Kakinada near the D6 block with Chennai, Tuticorin, Bangalore, Mangalore and Haldia, and GAIL's pipeline from Haldia to Jagishpur. GAIL India executives said the company was keen to build the Jagdishpur-Haldia pipeline. Unnecessary Blame Game, Say Analysts 

"There has been a delay in building the Jagdishpur-Haldia pipeline and lack of gas in KG-D6 is a constant concern, but we remain keen to build it and have done considerable pre-project work and will be applying for some preliminary permissions soon th8at will allow us to start some groundwork on the pipeline," said a senior GAIL executive. 

"I'm currently not aware of the PNGRB order, but it is only the ministry's mandate to issue or cancel licences; so I'm not overtly concerned," he added. The deadline to build this pipeline expires in December 2012. Sources told ET that RGTIL not building the Kakinada-Haldia pipeline is one major reason why GAIL is unable to build the Jagdishpur-Haldia pipeline, "That is a problem, but we know how to overcome it and will be going ahead with our plans soon," added the GAIL executive. Analysts believe this is unnecessary blame game as the crux of the overall delay is the sheer lack of gas availability in KG-D6 due to the fall in production. RGTIL operates the $3.75-billion east-west gas pipeline that transports gas from Kakinada to other parts in the country.