Ahmedabad: Gujarat has long been considered the oil and gas capital of India and that status has been reinforced of late, with Gujarat State Petronet Ltd (GSPL) racing towards the completion of the pipeline infrastructure for distributing gas.

GSPL (www.gujpetronet.com) was set up in 1998 by Gujarat State Petroleum Corporation (GSPC), one of the fastest-growing groups in the energy sector and the only state government-owned E&P (exploration and production) company in the country, as a special purpose vehicle in order to set up the gas grid. Once completed, the grid will connect the supply and demand centres of natural gas in Gujarat.

The project envisages transporting indigenous natural gas from production centres and LNG from terminals to end-consumption points and local distributors all over Gujarat through a high-pressure trunk pipeline.

Says GSPC managing director D J Pandian, who is also the director of GSPL: "The establishment of the gas grid through our group company, GSPL, has been the dream project of GSPC. GSPL is the only gas transmission company in India operating on the Common Carrier Principle. It is also the only state-wide gas grid to connect industrial and domestic consumers."

The project is being carried out in two phases, with the total cost being Rs 2,500 crore. Phase-I, for which an outlay of Rs 1,200 crore has been made, involves laying down 525 kilometres of pipeline. Out of this, 200 kilometres of pipelines are already under operation and maintenance.

Phase-I is further divided into two parts, Part A and Part B. Rs 900 crore have been invested in Part A and gas has reached up to Vadodara, with companies like GIPCL and GSFC already getting it through the pipeline. Part B involves the Surat-Vapi stretch. Phase II involves the Ahmedabad-to-Morbi stretch and it will cover a distance of 600 kilometres.

Along the way, it will pass the Mundra port, the Saurashtra region, Rajkot, Jamnagar, Pipavav and Alang. The cost envisaged is Rs 1,300 crore and the work is expected to commence in this month and finish by March 2006. And in between this period, piped gas will reach Ahmedabad from Vadodara by April 2004.

Apart from GSPL, Gujarat is poised to see hectic activity on the oil and gas front from various other companies as well. Already, Shell and Petronet LNG are in the process of setting up their LNG terminals at Hazira and Dahej at a cost of Rs 3,000 crore each. The first consignment of LNG is expected to land as early as January 2004. Hence, it is vital for GSPL to have the infrastructure in place so that it gets a sizeable share of natural gas to flow thorough its pipeline network.

Says Pandian: "We will supply gas to power and fertiliser plants, and ceramic industries, which are all heavy users of gas. The automotive sector is also being aggressively targeted for gas usage Besides, we have signed gas transportation agreements with 11 government-owned and private companies - Essar Steel, Essar Power, Kribhco, GEB, GPEC, GNFC, Narmada Videocon, GSFC, GPCL, GIPCL and Gujarat Gas. Besides, we will be signing similar agreements with AEC, Arvind Mills and Adani Energy."

GSPL has, however, faced a problem in its attempt to sell a part of its stake to various interested parties. Earlier, the company was looking to offload 11 per cent equity each in favour of companies like Shell, Gaz de France, Gail and Kribhco. But this proposition has come undone, with most of the prospective companies demanding a higher stake than what GSPL was willing to part with.

"We had a ceiling of 11 per cent for each company, but it has not worked out," admits Pandian. "Hence, we are not divesting as of now and till such time as suitable partners are found, the parent company [GSPC] will fill in the gap."

For future fund requirements, GSPL is looking at all possible avenues, including a public issue and external commercial borrowings. It has also raised debt through bonds, deposits and term loans from banks. Says Pandian: "Performance has been quite satisfactory so far. Revenues have been going up - in 2002-03 our turnover was Rs 91 crore, which is expected to jump up to Rs 126 crore in 2003-04. For an investment of Rs 1,200 crore, this is quite adequate."

GSPL will also play an important role in the project of setting up CNG stations, for which consultancy firm Dalal McDermott is preparing a detailed report. Pandian, in fact, is quite enthusiastic about the CNG stations: "We have about 20 CNG stations planned. These will be linked to the GSPL gas grid project. The stations are being positioned more as synergy stations. Conceptualised and designed by renowned architect B V Doshi, we are projecting the stations as hangout joints as well."

He adds: "We are currently in the process of signing memorandums of understanding with other oil companies for setting up CNG stations. We can also set up a CNG terminal in exiting petrol stations, provided there is enough space. Petrol pump owners will also benefit, along with us, by having an alternate fuel for customers." The first CNG station, set up on a pilot basis, is already operational in Icchapore, near Surat.

Piped natural gas (PNG) for the domestic sector is also on the cards. The Adani group will be part of this venture, wherein it will distribute the GSPL-transported gas for domestic purposes in Ahmedabad and Vadodara.

Say experts: "Just like CNG, PNG is also about 50 per cent cheaper than LPG. The cost of installation of Rs 5,000 is covered in four-to-five years. Its other advantages are that there are less chances of explosion, it saves space in the kitchen and also, the customer is spared the trouble of calling up a gas agency for refilling. Supplying gas to the domestic sector could earn major revenues for both GSPL and the Adani group, once the concept catches on and the convenience becomes evident to the householders."

GSPC chairman C K Koshy is upbeat about the proceedings at GSPL as well as the parent company: "Things have gone well for us but we are not harping on that; we are looking ahead. For NELP IV, we have bid for four blocks and also for coal bed methane. As far as our pipeline-laying project is concerned, work is going on round the clock.

"Pipelines have a certain speed - the industry norm is 2 kilometres per day. We have kept pace with that. Moreover, the recently concluded Vibrant Gujarat Global Investors Summit went off quite well for the oil and gas sector. There is a lot of excitement in the oil and gas segment in Gujarat and GSPL, in fact, articulates the excitement of the sector."