Introduction

Currently, the share of railways in carrying this load is around 70 per cent, followed by 25 per cent for pipelines and 5 per cent for roads. Railways and roads are inefficient modes of carrying petroleum products because they consume significantly more energy (320 BTU for railways and 1700 BTU for roads to move one tonne of petroleum products over one km) than pipelines for which the comparable figure is only 50-135 BTU. Clearly, pipeline transportation is the most efficient way of moving petroleum products and gases and, hence, is the preferred mode all over the world. In developed countries like the USA and the UK, almost all long distance transportation of petroleum products and gas takes place through pipelines. India is far behind these countries in realizing the full potential of pipelines because it does not have a well-developed pipeline network. A rapid development of pipelines, therefore, is essential to ensure that the share of this mode in the transportation of petroleum products and natural gas reaches the desired level.
It is estimated that around Rs 30,000 crore are likely to be invested over the next 10-12 years in setting up pipeline networks for liquid petroleum products
The efficient and effective movement of natural gas from producing regions to consumption regions requires an extensive and elaborate transportation system. In many instances, natural gas produced from a particular well will have to travel a great distance to reach its point of use. The transportation system for natural gas consists of a complex network of pipelines, designed to quickly and efficiently transport natural gas from its origin, to areas of high natural gas demand. Transportation of natural gas is closely linked to its storage, as well; should the natural gas being transported not be required at that time, it can be put into storage facilities for when it is needed.

Pipeline Industry History
In early 1860 attempts made to lay crude pipeline using gravity principle by Mr. James L. Hutchings.
The cast iron pipes used in oil transportation posed problems of leakage in the system during year 1863-64.
The first successful crude oil pipeline was constructed using wrought iron pipes for a total length of 32,000 feet in Pit Hole Creek Ohio. Subsequently in 1867, 62 mile long, pipeline constructed in Columbia.
First trunk crude oil pipeline (1960-62): 1156 km long pipeline from Naharkatiya and Moran oil fields to the refineries at Guwahati and Barauni for transporting 5.5 MMTPA crude oil.
First cross country product pipeline (1962-64): Guwahati refinery to Siliguri with a capacity to transport 0.48 Million metric tones of product through 435 kms. 8” line. Subsequently number of petroleum pipelines has been laid.

Strength of Pipeline Infrastructure

▪ Negligible transit loss ▪ Cost effective- depending upon capacity utilization ▪ Energy efficient-Only the product moves whereas the container remains stationery ▪ Reliable, Safe, environment friendly ▪ Improved Air Quality: Arrests pollution due to emission from vehicles transporting the Petroleum Products. ▪ Also, no Product evaporation (during loading / unloading as in Road / Rail transportation). ▪ Efficient Land Use: With buried underground pipelines, no disturbance to Land from use. ▪ Multi-product Transportation: More than one Product can be transported without purging / cleaning procedures. ▪ No impact on supply from Strikes, Rasta Roko, Floods, Cyclones, Monsoon etc. ▪ Pipeline can traverse most difficult terrains not reachable by Rail / Road. ▪ Flexibility in capacity increase at a short notice – Drag reducer, addition of Pumps / Pumping stations. ▪ Over all clear edge for pipelines especially crude oil due to: high volumes, less uncertainty on throughputs and in Indian context, mostly inland movement not competing with Tankers.

Installing a pipeline
There are essentially three major types of pipelines along the transportation routes: ▪ Gathering system. ▪ Interstate pipeline. ▪ Distribution system.
The gathering system consists of low pressure, low diameter pipelines that transport raw natural gas from the wellhead to the processing plant. Should natural gas from a particular well have high sulfur and carbon dioxide contents (sour gas), a specialized sour gas gathering pipe must be installed. Sour gas is extremely corrosive and dangerous, thus its transportation from the wellhead to the sweetening plant must be done carefully. Natural gas pipelines are subject to regulatory oversight, which in many ways determines the manner in which pipeline companies must operate
Pipelines can be characterized as interstate or intrastate.
Interstate pipelines carry natural gas across state boundaries, in some cases clear across the country.
Intrastate pipelines, on the other hand, transport natural gas within a particular state. The interstate natural gas pipeline network transports processed natural gas from processing plants in producing regions to those areas with high natural gas requirements, particularly large, populated urban areas. Interstate pipelines are the 'highways' of natural gas transmission. Natural gas that is transported through interstate pipelines travels at high pressure in the pipeline. This reduces the volume of the natural gas being transported (by up to 600 times), as well as providing propellant force to move the natural gas through the pipeline.
Pipes
Pipelines can measure anywhere from 6 to 48 inches in diameter, although certain component pipe sections can consist of small diameter pipe, as small as 0.5 inches in diameter. However, this small diameter pipe is usually used only in gathering and distribution systems. Mainline pipes, the principle pipeline in a given system, are usually between 16 and 48 inches in diameter. Lateral pipelines, which deliver natural gas to or from the mainline, are typically between 6 and 16 inches in diameter. Most major interstate pipelines are between 24 and 36 inches in diameter. The actual pipeline itself, commonly called 'line pipe', consists of a strong carbon steel material, engineered to meet standards set by the API
The pipe is tested before being shipped from the steel mill, to ensure that it can meet the pressure and strength standards for transporting natural gas. Line pipe is also covered with a specialized coating to ensure that it does not corrode once placed in the ground. The purpose of the coating is to protect the pipe from moisture, which causes corrosion and rusting. There are a number of different coating techniques. In the past, pipelines were coated with specialized coal tar enamel. Today, pipes are often protected with what is known as a fusion bond epoxy, which gives the pipe a noticeable light blue color. In addition, cathodic protection is often used; which is a technique of running an electric current through the pipe to ward off corrosion and rusting.
Compressor Stations
As mentioned, natural gas is highly pressurized as it travels through an interstate pipeline. To ensure that the natural gas flowing through any one pipeline remains pressurized, compression of this natural gas is required periodically along the pipe. This is accomplished by compressor stations, usually placed at 40 to 100 mile intervals along the pipeline. The natural gas enters the compressor station, where it is compressed by a turbine, motor, or engine. Turbine compressors gain their energy by using up a small proportion of the natural gas that they compress. The turbine itself serves to operate a centrifugal compressor, which contains a type of fan that compresses and pumps the natural gas through the pipeline.
Metering Stations
In addition to compressing natural gas to reduce its volume and push it through the pipe, metering stations are placed periodically along interstate natural gas pipelines. These stations allow pipeline companies to monitor and manage the natural gas in their pipes. Essentially, these metering stations measure the flow of gas along the pipeline, and allow pipeline companies to 'track' natural gas as it flows along the pipeline. These metering stations employ specialized meters to measure the natural gas as it flows through the pipeline, without impeding its movement.
Valves
Interstate pipelines include a great number of valves along their entire length. These valves work like gateways; they are usually open and allow natural gas to flow freely, or they can be used to stop gas flow along a certain section of pipe. There are many reasons why a pipeline may need to restrict gas flow in certain areas. For example, if a section of pipe requires replacement or maintenance, valves on either end of that section of pipe can be closed to allow engineers and work crews safe access. These large valves can be placed every 5 to 20 miles along the pipeline, and are subject to regulation by safety codes.
Control Stations and SCADA Systems
Natural gas pipeline companies have customers on both ends of the pipeline - the producers and processors that input gas into the pipeline, and the consumers and local distribution companies that take gas out of the pipeline. In order to manage the natural gas that enters the pipeline, and to ensure that all customers receive timely delivery of their portion of this gas, sophisticated control systems are required to monitor the gas as it travels through all sections of what could be a very lengthy pipeline network. To accomplish this task of monitoring and controlling the natural gas that is traveling through the pipeline, centralized gas control stations that collect, assimilate, and manage data received from monitoring and compressor stations all along the pipe Most of the data that is received by a control station is provided by Supervisory Control and Data Acquisition (SCADA) systems. These systems are essentially sophisticated communications systems that take measurements and collect data along the pipeline (usually in a metering or compressor stations and valves) and transmit them to the centralized control station. Flow rate through the pipeline, operational status, pressure, and temperature readings may all be used to assess the status of the pipeline at any one time. These systems also work in real-time, meaning that there is little lag time between the measurements taken along the pipeline and their transmission to the control station. Some SCADA systems also incorporate the ability to remotely operate certain equipment along the pipeline, including compressor stations, allowing engineers in a centralized control center to immediately and easily adjust flow rates in the pipeline the pipeline and their transmission to the control station. ▪ To monitor and control the natural gas flow through the pipeline. ▪ Purpose to collect, assimilate, and manage data received from monitoring and compressor stations all along the pipe. ▪ Data provided by Supervisory Control and Data Acquisition (SCADA) systems. ▪ Parameters include Flow rate through the pipeline, operational status, pressure, and temperature readings.
Once the pipe is in place, trenches are dug alongside the laid out pipe. These trenches are typically 5 to 6 feet deep, as the regulations require the pipe to be at least 30 inches below the surface. In certain areas, however, including road crossings and bodies of water, the pipe is buried even deeper. Once the trenches are dug, the pipe is assembled and contoured. This includes welding the sections of pipe together into one continuous pipeline, and bending it slightly, if needed, to fit the contour of the pipelines path. Coating is applied to the ends of the pipes.
Laying pipe across streams or rivers can be accomplished in one of two ways. Open cut crossing involves the digging of trenches on the floor of the river to house the pipe. When this is done, the pipe itself is usually fitted with a concrete casing, which both ensures that the pipe stays on the bottom of the river, and adds an extra protective coating to prevent any natural gas leaks into the water. Alternately, a form of directional drilling may be employed, in which a sort of 'tunnel' is drilled under the river through which the pipe may be passed. The same techniques are used for road crossings - either an open trench is dug up across the road and replaced once the pipe is installed, or a tunnel may be drilled underneath the road.

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Pipeline Inspection and Safety
In order to ensure the efficient and safe operation of the extensive network of natural gas pipelines, pipeline companies routinely inspect their pipelines for corrosion and defects. This is done through the use of sophisticated pieces of equipment known as pigs. Pigs are intelligent robotic devices that are propelled down pipelines to evaluate the interior of the pipe. Pigs can test pipe thickness, and roundness, check for signs of corrosion, detect minute leaks, and any other defect along the interior of the pipeline that may either impede the flow of gas, or pose a potential safety risk for the operation of the pipeline. Sending a pig down a pipeline is fittingly known as 'pigging' the pipeline.
Few of the safety precautions associated with natural gas pipelines include: ▪ Aerial Patrols - Planes are used to ensure no construction activities are taking place too close to the route of the pipeline, particularly in residential areas. Unauthorized construction and digging is the primary threat to pipeline safety. ▪ Leak Detection - Natural gas detecting equipment is periodically used by pipeline personnel on the surface to check for leaks. This is especially important in areas where the natural gas is not odorized. ▪ Pipeline Markers - Signs on the surface above natural gas pipelines indicate the presence of underground pipelines to the public, to reduce the chance of any interference with the pipeline. ▪ Gas Sampling - Routine sampling of the natural gas in pipelines ensures its quality, and may also indicate corrosion of the interior of the pipeline, or the influx of contaminants. ▪ Preventative Maintenance - This involves the testing of valves and the removal of surface impediments to pipeline inspection.

Mode-wise transportation of petroleum products

INDIA USA

Pipeline network (includes Crude oil, gas, product & LPG) –
US vs. India

Pipeline network (includes Crude oil, gas, product & LPG) –
World vs. India
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Need for pipelines

|Year |Product Demand(MMTPA) |Industry Pipeline Capacity(MMTPA) |% Share of Pipeline |
|2001-02 (Actual) |100 |38 |38 |
|2002-03 |107 |46 |42.99 |
|2006-07 |124 |51 |41.13 |
|2011-12 |148 |65 |43.92 |

Hydrocarbon Vision 2025 suggested 45 % share of pipelines
Required Pipeline capacity estimated at 105 MMTPA in 2024-25

Pipeline Scenario in India
Existing gas pipeline
The existing gas pipeline infrastructure spans 6,269 km. GAIL India Ltd is the largest gas transmission and marketing company in the country. It owns and operates over 4,500 km of pipeline, concentrated principally in northwestern India, but spread over all the regions of the country. The existing gas infrastructure of GAIL can support the production and transportation of more than 100 mmscmd of gas. GAIL's most prominent 2,700 km Hazira-Bijaipur-Jagdishpur (HBJ) natural gas pipeline runs from southern Gujarat to Uttar Pradash to Delhi handling a capacity of 33.4 mmscmd. The company has regional pipeline networks in the areas of Mumbai, Gujarat, Rajasthan, Andhra Pradesh, Tamil Nadu, Pondicherry, Assam and Tripura. These pipeline networks are smaller and vary in size from 4 km to 90 km in length.
Gujarat State Petroleum Corporation (GSPC), a Gujarat Government owned company, has also entered the gas transportation business and is setting up an Rs 32 billion, 2,500 km pipeline network for transportation of gas. Gujarat State Petronet Ltd. (GSPL), a special purpose vehicle (SPV) floated by GSPC, is executing this two-phase pipeline project. Phase 1 involves an investment of Rs 12 billion and covers a distance of 525 km from Vadnagar in the north of Gujarat to Vapi in the south. Phase II involves extending the network to Saurashtra, Surendranagar, Rajkot and Jamnagar. The length of this segment is 500-600 km and the investment involves Rs 20 billion. Among other regional pipelines, Assam Gas Company has a prominent pipeline network in northeast India. In addition to its 250 km pipeline linking Sibsagar with Marsharita in Assam; it has over 350 km of branch pipelines in the region.

Recent gas discoveries are expected to lead to new pipeline infrastructure set-up. Similarly the product pipelines also may see growth with new refineries being set-up.

Transportation Modes

|Mode |Market share |Energy Consumption |Handling Losses |
|Road |18% |1700 |0.5-1% |
|Rail |40% |320 |0.3-0.5% |
|Pipelines |30% |50-135 |0.02-0.05% |

Categorization of Pipeline

The natural gas pipelines are categorized as follows:-

i. Low pressure pipelines - All pipelines developed for transportation of natural gas at operating pressure upto the level, as notified by the government from time to time.

ii. Upstream pipelines - Pipelines operated and/or constructed as part of gas production project, on under or over the surface of land or on any sea bed that is situated in the territorial seas of the State, which are used to carry natural gas from one or more than one such projects to processing plants or terminals or final coastal landing terminals, laid and operated by the producer or his designated agency. Upstream pipelines also include transnational pipelines and/or sub-sea pipeline from other countries upto the Indian boarder.

iii. Pipelines lay to supply natural gas to a specific consumer - Pipelines lay to supply gas only to a specific consumer at any pressure.

iv. Transmission pipelines - All pipelines authorized by the government and other than low pressure pipelines, city or local natural gas distribution networks, upstream pipelines for transportation of natural gas and pipelines laid to supply natural gas to a specific consumer.

Natural gas pipelines
|Pipeline Details |Company |Length(km) |
|HBJ Pipeline |GAIL |2700 |
|KG Basin |GAIL |700 |
|Cauvery Basin |GAIL |150 |
|North East, Mumbai & Rajasthan |GAIL |950 |
|North East |OIL |100 |
|Hazira – Uran (offshore) |ONGC |200 |
|Bombay High – Uran (offshore) |ONGC |150 |
|South Bassein – Hazira (offshore) |ONGC |460 |
|Gujarat Gas Grid |GSPL |186 |
|North East |Assam Gas |600 |
|Hazira – Ankleshwar |GGCL |73 |
|Total (km) | |6,269 |

RIL’s Gas Transportation & Infrastructure Company Ltd. (GTICL)

To meet its burgeoning gas and petroleum products transportation need, Reliance set up an SPV called Gas Transportation Infrastructure Company Ltd. (GTICL) to build, own, operate and transfer pipelines and terminals for marketing and distribution of natural gas and petroleum products. GTICL’s objective is to lay pipelines to interconnect RIL’s various gas and petroleum products sources to their market.
RIL set up a separate SPV since the regulatory aspects on pipelines are under evolution and the separate company would enable RIL to monitor this activity in a superior manner to comply with all the norms laid down by the proposed regulatory authority and abide by common carrier principles.

GTICL has been approaching the MoP&NG for notification of some RoUs so that it can transport its gas to the Western and Northern India. GTICL approached the Ministry of petroleum and natural gas for issuance of notifications for Kakinada-Hyderabad-Uran- Ahmedabad gas pipeline projects originating from Jamnagar to connect the proposed regasification terminal at Jamnagar RIL’s block in Saurashtra and Kutch region and east coast blocks (offshore). It is the first company, which sought approval of RoUs for these pipeline projects in 2001-02 itself much prior to the announcement of Draft pipeline policy. GTICL proposed the following three pipelines:

|Route |Length (Km) |
|Kakinada - Hyderabad - Goa |1121 |
|Jamnagar to Cuttack |1650 |
|Phase -I Jamnagar to Bhopal |828 |
|Phase - II Bhopal to Cuttack |822 |
|Hyderabad - Uran - Ahmedabad pipeline |1079 |

Approval status of proposed projects

|Segment |ROU |Environmental Clearance |
|Jamnagar-Bhopal |100% |Obtained |
|Goa-Hyderabad |100% | Obtained |
|Hyderabad-Kakinada |Approved: 45 km Approval Pending: 424 km | submitted |
|Hyd- Uran- Ahmd. |Sub. Approval Pending |All public hearings comp. Proposal with MoEF for final |
| | |approval |

Reliance has an equity stake in the Vadinar-Kandla product pipeline. Gas Transportation and Infrastructure Co. Ltd. has proposed to lay a pipeline network of 5895 km consisting of six product pipelines - Jamnagar-Patiala, Jamnagar-Kanpur, Goa Hyderabad, Chennai-Bangalore, Kakinada-Vijayawada and Haldia-Ranchi. The pipeline network will traverse through 13 states viz. Gujarat, Madhya Pradesh, Chattisgarh, Maharashtra, Rajasthan, Uttar Pradesh, Punjab, Andhra Pradesh, Karnataka, Tamil Naidu, Goa, Jharkhand and West Bengal. The pipeline network will involve an outlay of around Rs 45 billion. The length and indicative capital expenditure for these pipelines is shown in the table below:

|Pipeline |Length(km) |Indicative Capital Expenditure |
| | |(Rs Billion) |
|Jamnagar-Patiala |1580 |16.40 |
|Jamnagar-Kanpur |2540 |17.80 |
|Goa-Hyderabad |660 |4.60 |
|Chennai-Bangalore |540 |3.25 |
|Haldia-Ranchi |200 |2.60 |
|Kakinada-Vijayawada |375 |1.10 |

Policy for development of Natural Gas transmission pipelines

The natural gas sector, in general, and gas transmission in particular, is at the threshold of rapid development in India. With the commencement of the import of LNG at Dahej and Hazira LNG terminals in Gujarat, recent huge discoveries of gas in the East Coast and the Government's initiatives in importing natural gas through transnational pipelines and in the form of LNG, there is an imminent need to promote investment from public as well as private sector in natural gas transmission and city or local natural gas distribution networks for making gas available in different parts of the country and to provide inter-connectivity between regions, consumers and producers. Thus, it is necessary to provide a framework for the future growth of the pipeline infrastructure in the country with a view to facilitating the evolvement of a nation-wide gas grid and the growth of city or local gas distribution networks.

The objective of the policy is to facilitate the establishment of an efficient gas grid with open access for all players on a non-discriminatory basis, encouraging investment in the gas pipelines including city or local distribution networks, promoting competition among entities thereby avoiding any abuse of the dominant position by any entity, and securing the consumer interest in terms of gas availability and reasonable tariff for transmission pipelines and city or local natural gas distribution networks.

Extent of Regulation

This policy will apply to all transmission pipelines and city or local natural gas distribution networks except for the following:

▪ Pipelines lay to supply gas to a particular consumer

▪ Upstream pipelines.

Provided that any extension or expansion of pipelines laid to supply gas to a particular consumer will also be covered under this policy if the additional requirements are meant for third party.

The policy will deal with the issues of laying, building, operating or expanding gas pipelines; and city or local natural gas distribution networks; declaring pipelines as common or contract carrier and regulating access to such pipelines on a nondiscriminatory open access basis with level playing field for all players. The government shall approve/regulate transportation rates for gas transmission pipelines and city or local natural gas distribution networks including prioritization of regions to be serviced.

Salient features of the revised draft Natural Gas pipeline policy

i) All common carrier pipelines will require authorization from Regulator/Government.

ii) Designed pipeline capacity to be at least 25 per cent more than the capacity requirement of the project developer. This capacity to be made available on non-discriminatory basis.

iii) Subject to permission of Regulator, any producer of gas will have the right to sell gas within a notified distance of well-head or landfall point to consumers directly and lay the pipeline for this purpose.

iv) If more than one proposer applies for common carrier pipeline, then government to decide authorization on following basis:

▪ Proposed terms for transmission tariff ▪ Timeframe for completion of pipeline project ▪ More than one pipeline may be considered on same route based on upstream tie-up for gas sourcing and extent of marketing tie-up for gas.

v) Transportation of gas through common carrier pipelines to be on unbundled basis.

vi) To ensure grid connectivity, the Regulator may issue appropriate directions. A technical body would be set up to advice Government/Regulator on technical issues.

vii) A Committee of transporters of gas will be set up to advice on managerial and operational aspects of pipeline.

viii) Excess capacity of the existing pipeline companies will be available on common carrier basis after 1 year.

ix) Govt. to prepare long term plan in consultation with state government and such plans will be kept in mind while approving new pipelines.

x) Transportation rate to be based on: ▪ Reasonable rate of return on investment to recover costs, ▪ Factors encouraging competition, ▪ Mutually negotiated tariff.

xi) Transportation rates will be approved by Government/Regulator and shall be treated as cap to lower negotiated rates.

xii) National Advisory Council, consisting of stakeholders of common carrier pipeline, to advice Govt. /Regulator on all matters relating to this policy.

Gail gas distribution network in India

Gail gas distribution network in Assam region

| Name of the pipeline |Length(Km.) |
|Lakwa GGS(GRT) to LPG plant |2.00 |
|LPG plant to GDT |2.30 |
|By pass line (GRT to GDT) |0.30 |
|GDT to Aseb-I Maibella |1.00 |
|Adamtilla GGS to Longai Te |3.00 |
| Total |8.60 |

Gas supplier : ONGCL Average sale: 0.6 MMSCMD

Gail gas distribution network in Mumbai region

| Name of the pipeline |Length Km. |
|Uran - Thal |19.50 |
|Trombay – RCF |5.50 |
|Trombay – EGS |7.70 |
|Usar-Thal |20.00 |
|Thal Salav |26.00 |
|Thal - Iil |20.00 |
|Iil-h.r. Johnson |6.00 |
| Total |124.70 |

Gail gas distribution network in Rajasthan region

| Name of the pipeline |Length Km. |
| Dandewala - Gamnewala |34.03 |
|Gamnewala – Rseb Ramgarh | 32.08 |
| Total |66.11 |

Gas source : OIL, ONGCL Gas supply : OIL- 0.42 MMSCMD ONGCL-0.06 MMSCMD Gail gas distribution network in Tripura region

| Name of the pipeline |Length Km. |
| Konaban-Anand Nagar – Rcnagar (i) |22.51 |
| Konaban-Anand Nagar – Rcnagar (ii) |20.00 |
| Konaban - Rokhia pipeline |12.20 |
| Dukli – Maharajganj |5.00 |
| Total |59.71 |

Gas source : ONGC Average supply : 1.5 MMSCMD

Gail gas distribution network in Bharuch & Baroda region

Baroda * New GAIL Pipeline
| Name of the pipeline |Length (Km.) |
|Gandhar - Dabka - Chokari |55.000 |
|Gandhar - Dabka - Chokari |29.000 |
|Chokari-Undera-Gipcl |32.000 |
|Gipcl-Gacl |4.800 |
|'Ekalbara (Tp)-Belgium Glass* |3.000 |
|Gnaq-Jambusar T.Point |13.000 |
|'Ankhi(Tp)-Schott Glass * |3.200 |
|Chitral(Tp)-H.N.P.L. * |5.200 |
|'Gavasad(Tp)-Bell Granito * |0.900 |
|Masar (Tp)-Madhusudan * |2.750 |
|Madhu -Gujarat Glass * |0.120 |
|Ankleswar-Undera-Gsfc |48.000 |
|Undera-B.I.G.S. |9.900 |
|Abgl Tap Off-Western |2.050 |
|Laxmipura-Rotomould |1.250 |
|Rotomould - Banco |3.200 |
|Banco - Transpek |3.830 |
|Dabka-Sarsawani |16.600 |
|Dabka Ggs-Haldyn Glass * |0.900 |
|Kanawara- G.E.Apar * |13.500 |
|Palej-Bell Ceramics |9.000 |
|Total |257.200 |

Bharuch

| Name of the pipeline |Length (Km). |
|Gandhar-Ntpc,Jhanore |40.500 |
|Gandhar-Gnfc, Bharuch |41.990 |
|Gnfc-Ntpc, Jhanore |16.000 |
|Ggcl-Bharuch |4.942 |
|Ggcl-Ankleshr |1.612 |
|Vngl-Bharuch |0.800 |
|Gacl-Dahej |11.251 |
|Guj Guardian-Kondh |13.500 |
|Guj. Borosil-Gowali |13.100 |
|Pragati Glass - Kosamba |1.500 |
|Neutral Glass-Kosamba |1.100 |
|Guj. Glass-Kosamba |2.700 |
|Gsfc-Kosamba |2.300 |
|Abgl (Partly) |45.000 |
|Augl |48.000 |
|Gpec-Paguthan |4.500 |
|Olpad-Cyn &Cyn |1.200 |
|Augl Tp-Ggs Kosamba |2.200 |
| Total |252.195 |

Gas supplier : ONGCL Average Sale : 3.43 MMSCMD

Gas pipeline maps

(A) GAIL gas pipeline network

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(B) Crude oil & LPG pipeline in India

[pic]

(C) HVJ gas transmission system

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(D) Natural gas pipeline network in India

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(E) Gas distribution system in south Gujarat

Current Status & Future Outlook

Hazira Vijaipur Jagdishpur & Dahej-Vijaipur Pipeline

It passes through Gujarat, MP, UP, Rajasthan, Haryana, Delhi

Initially designed to transport 18.2 MMSCMD

Under GREP (Gas Rehabilitation and Expansion Project) capacity has been expanded 33.4 MMSCMD.

Pipeline system consists of pipes of various sizes ranging from 18” to 36” Diameter.It is lifeline for various customers in west-north corridor in India.

The Hazira-Vijaipur-Jagdishpur (HVJ) gas pipeline network is the first cross country gas pipeline through which GAIL transports and markets the gas delivered by ONGC and other joint venture companies in Western, Central and Northern India. GAIL has also laid a 610 km Dahej-Vijaipur pipeline (DVPL) connecting PLL’s Dahej LNG terminal to the HVJ pipeline to transmit regasified LNG (R-LNG) from the LNG terminal to various consumers. The paper highlights the existing transportation tariff, financial performance of GAIL, project description and operating parameters, normative transportation tariff of HVJ pipeline, normative transportation tariff of DVPL pipeline as well as suggests an approach for fixation of transportation tariff of the two pipeline projects.

LPG transportation: Future Plans

(A) Interconnection of Vizag-Secunderabad LPG Pipeline with Kakinada Port

GAIL is examining possibility of interconnecting Vizag-Secunderabad LPG Pipeline with Kakinada Port to bring LPG from Kakinada. 10”45 km pipeline with pumping station at Kakinada is to be put up and this will involve an expenditure of around Rs. 40 Crores. GAIL is taking up the matter with KSPL for upgrading the port for handling LPG and OMCs for their commitment of LPG supply.

(B) Mangalore – Coimbatore LPG Pipeline

It is proposed to transport 1.1 MMTPA LPG from Mangalore to Coimbatore via Bangalore & Mysore receipt terminals. In this project, imported LPG has been considered as supply source. It is also proposed to import LPG & develop facilities such as jetty, storage, etc for receiving imported LPG at Mangalore & storage/pumping facilities at receipt terminals. DFR for pipeline system & storage facilities has been prepared. The cost of the project is estimated to be around Rs.500 crores.

Current Status of Gas Pipeline

(A) Dahej Vijaipur Pipeline Project

▪ The project consists of 610 km of 42" pipeline along with a compressor station at Vijaipur and passes through Gujarat and Madhya Pradesh. The pipeline will evacuate the Regasified LNG from PLL Terminal at Dahej and transport the same up to Vijaipur from where the gas will be further distributed in Rajasthan and NCR of Delhi. With interconnections with existing pipeline network in south Gujarat and the existing HVJ Pipeline, the pipeline is ready to commence supply of 4 MMSCMD of Gas in South Gujarat and evacuation of 3.0 MMSCMD through the HVJ Pipeline ▪ Project cost is Rs 2936 crore ▪ Pipeline capacity is 17.54 MMSCMD approximately

(B) Dahej Uran Pipeline Project

▪ The project consists of laying of 504 kms of 30", 24", 18", Pipeline from Dahej to Uran. The pipeline passes through Gujarat and Maharashtra. The pipeline will evacuate the Regasified LNG from PLL Terminal at Dahej, Shell terminal at Hazira and transport the same up to Uran. The pipeline is a part of the proposed National Gas Grid. ▪ Project cost is Rs 1416 crore. ▪ Pipeline capacity is 12 MSCMD approximately.

(C) South Gujarat Pipeline Project

▪ The project comprises of laying of 47 kms of 16"/8"/6"/4" pipeline for supplying R-LNG to existing consumers in South Gujarat Region from Tap-off points on Dahej-Vijaipur Pipeline at Ankot, Samni & Vaghodia ▪ Project cost is Rs 94.90 crore ▪ Pipeline capacity is 9.5 MMSCMD approximately

(D) HVJ Phase III Pipeline Project

▪ The project consists laying of 260 km pipeline in Uttar Pradesh, Harayana & Punjab for augmenting the gas supply in these states to new / existing consumers. The details of the pipeline being laid are: ▪ Thulendi to Phulpur in Uttar Pradesh: 18", 139 km ▪ Dadri to Panipat in Haryana & Punjab: 28", 114 km & 16", 8 km ▪ Project cost is Rs 567 crore (Thulendi Phulpur: Rs 220 crore, Dadri Panipat P/l: Rs 347 crore)

(E) Project Blue Sky

▪ The project is being implemented to supply natural gas for domestic, commercial, transport sectors, thereby reducing the pollution level in Lucknow, Kanpur, Faridabad, Pune and Agra. The system constitutes laying the feeder pipelines and setting up City Gas Station from where the ▪ low pressure gas will be supplied in the cities. The project is also being executed at Barielly & Baroda ▪ Project cost is Rs 554 crore ▪ Pipeline capacity is 3 MMSCMD approximately

(F) Chaisa Gurgoan Pipeline Project

▪ The project is being implemented to augment the gas supply to various consumers in the National Capital Region of Delhi viz. IGL, DVB, Pragati Power and Delhi Industries through 16", 60 km pipeline from Chainsa on Vijaipur-Dadri 36" GREP pipeline to Gurgoan. ▪ Project cost is Rs 67 crore ▪ Pipeline capacity is 2.25 MMSCMD approximately

(G) Vizag Secunderabad LPG Pipeline Project

▪ The project is being executed to transport LPG from Vizag to Secunderabad by laying 600 km pipe.. The pipeline passes through five districts of Andhra Pradesh. The LPG shall be picked up from the Import terminal and refinery of HPCL at Vizag. Import terminal would feed the LPG pipeline approximately 0.914 MMTPA of LPG while the HPCL refinery would contribute 0.25 MMTPA of LPG into the pipeline system. This LPG would be used for filling cylinders in bottling plants located at Cherlapalli, Vijayawada, Kondapalli, Timmapur, Cuddapah and Khammam. ▪ Project cost is Rs 491 crore ▪ Pipeline capacity is 1.33 MMTPA

Profile of Upcoming Key Projects

GAIL is planning to establish a National Gas Grid by lying approximately 7900 km of high pressure transmission pipeline in 15 states across the country. The important sectors are as below
|SI. |Sector |Length(Kms.) |Remarks |
|1. |Kakinada - Kolkotta |1140 | |
|2. |Kolkota - Jagdishpur |887 | |
|3. |Kakinada- Chennai |584 | |
|4. |Uran-Hyderabad-Kakinada |955 | |
|5. |Bangalore-Chennai |300 | |
|6. |Kochi-Kayamakulam-Bangalore |927 | |
|7. |Dabhol - Bangalore |700 | |
|8. |Panvel- Dhabhol |187 | |
|9. |Kota-Mathania |301 | |
|10. |Vijaipur-Kota |245 | |
|11. |Dadri-Bhatinda |427 | |
|12. |Dahej-Vijaipur |610 |Ongoing |
|13. |Dahej-Hazira-Uran |504 |Ongoing |
|14. |Thulendi - Phulpur |139 |Ongoing |
|15. |Dadri - Panipat |114 |Ongoing |

Economics of pipeline and LNG transportation

The transportation segment, either by pipeline or by LNG tankers requires large, up-front investment. Gas transport costs easily exceed half of the gas market value and so far only 22% of gas crosses borders whereas 57% of oil does so. Gas projects are also characterized by long lead times as more than 10 years may elapse between the conception of a project and its first revenues, increasing financial risks associated with it.

Economics of pipeline transportation

Large-diameter and long distance pipelines imply very high capital investment. They require both large, high-value markets and substantial proven reserves to be economically viable. Capital charges typically make up at least 90% of the cost of transmission pipelines. The key determinants of pipeline construction costs are diameter, operating pressures, distance and terrain. Other factors, including climate, labour costs, the degree of competition among contracting companies, safety regulations, population density and rights of way, may cause construction costs to vary significantly from one region to another.

Pipeline operating costs vary mainly according to the number of compressor stations, which require significant amounts of fuel, and local economic conditions, especially labour costs. In designing a pipeline, the optimal mix of diameter and compression capacity will depend on the expected load factor. Once a pipeline is built, the average cost per unit of throughput will depend almost entirely on the average rate of capacity utilization. A high level of utilization with a high load factor is usually critical to the economic viability of the pipeline.

Globally, the investment required to lay a long distance, large diameter line (46 to 60 inches), enabling a throughput of about 15 to 30 109 m3/year, currently amounts to $1 billion to $1.5 billion/1000 km. The Alliance Gas pipeline between Canada and US for instance (36 inch of diameter, 3686 km long, operated at 120 bar) cost about US$3 billion. Investment for sub sea lines is much higher, depending on water depths.

Because pipeline transportation is less complex than the LNG process, cost reductions have been less impressive. However, substantial improvements have been achieved in optimizing project design and construction, inspection activities, lying and welding methods, steel quality and weight, thus reducing

material costs and the period of construction. Increased competition among inspection-service companies also contributed to reduce the overall cost.

Developments over the past decade in offshore pipeline technology have contributed to lower unit costs and have made possible deep-water projects that were previously impossible. The development of a pipe-laying technology capable of laying pipes at 650 metres depth represented a breakthrough in the early 1980s and allowed to lay the Transmed pipeline between Tunisia and Sicily. Offshore pipeline technology also played a big role in the exploitation of North Sea gas resources in the 1970-80s and those more recently in the Gulf of Mexico.

One of the methods most commonly used to install marine pipelines is the S-lay method. This production process leads to a very fast laying rate even when handling large diameter pipes, from 2 up to 6 km / day. For greater depths and larger diameter pipelines the main alternative to S-lay is the J-lay method. It is based on applying the axial force in a near-vertical direction, virtually eliminating any horizontal reaction on the vessel equipment. The most recent example of the J- lay method is its recent application to the construction of the $3.2 billion Blue Stream Project, designed to deliver Russian gas across the Black Sea to Turkey.

As installation and intervention works represent about half of the cost to lay a pipeline over a difficult seabed, these developments have contributed to lower unit costs and have made possible deep-water projects that were previously impossible.

Improvement to the transport technology is the key for extending the world-wide gas grid. In the past, the progress has been most rapid in offshore pipeline technology. New technologies have been developed, including automatic laying methods, the use of high tensile steels and high pressure transport. Such technologies may be progressively applied also onshore, with a significant impact on the development of an interconnected grid at the intercontinental scale. Cost reductions can be expected from stronger steels, high-pressure technology, and deepwater pipe-laying.

High pressure (HP) technology is expected to play a major role in reducing the unit cost of large-scale, long-distance pipeline projects. HP technology is more economic than conventional technology.
By increasing the operating pressure two benefits can be expected. With the same cross section, the transport capacity increases while the friction losses, referred to unit of mass transported, are reduced. Pressure pipelines are the only solution capable of reconciling the transport requirements with the reduction of the transportation costs.

According to the Gate 2020 Survey, further progress in deep-water pipeline technology can be expected in the following areas:

▪ The use of higher grade steels, which reduce pipeline weight (and therefore the amount of steel required) and make pipe-laying quicker and easier.

▪ Improved manufacturing processes, including sophisticated computer techniques for optimizing pipe design criteria that allow for reduced pipe-wall thickness and material cost savings.

▪ Large-diameter pipeline-laying techniques such as j-laying, which reduces the curvature of the line and, therefore, stress during lying allowing the use of lighter pipes.

▪ High Frequency Induced (HFI) pipes, an alternative to seamless pipes, which can be up to 30% cheaper due to reduced construction and welding costs.

▪ Advanced seabed-surveying techniques, which permit optimization of steel weight, concrete coating and trenching for pipeline stability.

▪ Improved insulation to reduce hydrate problems.

Pipelines economics - Indian scenario

India seems poised to increase the existing pipeline network (product and gas) in the near future. It is, thus, essential, to understand the dynamics of the business and regulatory factors and their impact on the economics of lying pipelines and/or expanding existing pipeline networks.

Like other infrastructure projects, pipeline projects have significant associated risks –

▪ Requirement for large investments in the establishment of operations. ▪ Laying down a gas pipeline has to be a decision well thought off since the investment runs into billions of dollars. Every company must engage in a through cost benefit analysis of the proposed project also taking into consideration the geo- political situation in the area and then think about financing the project in case the company has a limited equity. ▪ Long gestation periods prior to which returns on investment are negligible. ▪ Potential time and cost overruns ▪ High uncertainty in demand cycles over the long operating life of projects ▪ Limited alternative uses for assets created ▪ Uncertainty about the regulatory regime in which the projects would have to operate

Major long-distance gas pipelines planned or under study (onshore and offshore)

|Route/Pipeline |(km) |
|Libya to Italy (GreenStream) |570 |
|Algeria to Sardinia (Italy) |1470 |
|Algeria to Spain (Medgas) |747 |
|Nigeria-Niger-Algeria-Europe (Trans-Saharan) |4000 |
| |
|Middle-East to Europe |
|Iraq - Turkey |1383 |
|Iran to India via Pakistan |3300 |
|Qatar – Pakistan (GUSA) |1600 |
| |
|Africa (intra-regional) |
|Mozambique – South Africa (Pande Project) |905 |
|West Africa Gas Line (Nigeria-Ghana-Togo-Benin) |3400 |
| |
|Middle-East (intra-regional) |
|Qatar – Abu-Dhabi - Dubai (Dolphin project) |1600 |
| |
|South-East Asia (national and intra-regional) |
|West-East China Pipeline (Xianjiang to Shanghai) |2400 |
|Indonesia’s South Sumatra - Singapore |500 |
|Gulf of Thailand - peninsular Malaysia - Singapore - Sumatra -Java |2000 - 2500 |

Importance of Pipelines

A Vital Energy Transport Medium.

Gas pipelines are also vital arteries.

A properly designed and well-maintained pipeline is an extremely efficient means of transmitting.

Inevitable resource for distribution in locked land areas as compared to other transportation mediums.

LNG Vs Pipeline So far, pipeline flows between countries or continents have largely dominated the international gas trade. It suffices to recall that LNG only accounts for 22% of international trade (only 5.6% of world natural gas demand). However, the rebalancing of natural gas markets, via gas pipelines, is often faced with technical, economic, even political limitations.

▪ The growing geographic distance from the discoveries and hence reserves to the large consumer zones may result in physical or technical/economic impossibilities for international gas pipelines.

▪ Some of the major traditional exporting countries via pipeline (Canada, Netherlands), should be approaching their maximum export capacity limit in the next ten to twenty years.

▪ The new importing countries, mostly emerging countries, located far from the pipeline networks, seek supplies adapted to their highly localized and fast growing needs. LNG, a maritime option with excellent modularity and progressiveness in project capacity, fits adequately this requirement.

▪ The diversification of supply sources is also a primary concern of the importing countries essentially for security related reasons, and LNG, with ever widening possibilities of suppliers, also meets this political necessity.

▪ The international gas pipelines usually entail the crossing of a number of countries and borders, with possibly unstable political situation, or requiring lengthy and difficult right-of-way negotiations, while LNG helps overcome this type of constraints.

▪ The rapid development of gas-fired power plants on coastal or nearby sites, relying on very competitive technologies, obviously offers a huge market for LNG projects: several dozen potential projects combining LNG receiving terminals and gas-fired power plants are currently on the design boards throughout the world.

▪ The general trend of liberalization of energy markets is causing the breakup of the traditional industrial structures, the diversification of contractual forms, and the proliferation of players and trading flows, particularly for gas and electricity. This should favor the growth of independent LNG import terminals.

Therefore the LNG trade should expand rapidly in the next decades. Total LNG trade was 143109 m3 in 2001 (137109 m3 in 2000) corresponding to less than 3 million barrels a day, with twelve importing and twelve exporting countries. LNG flows have doubled in the past decade and are expected to experience strong growth in the coming years, with LNG trade estimated to rise to approximately 300109 m3 by 2010 and 700109 m3 by 2030.

The changes in costs also affect the relative attractiveness of the pipeline and LNG options. In determining the most economic transportation method for a given supply route, distance and the volumes transported are the key factors. For short distances, pipelines – where feasible – are usually more economic. LNG is more competitive for long distance routes, since overall costs are less affected by distance. The normal breakeven distance for a single-train LNG project against a 42” onshore pipeline (not allowing for transit costs) is around 4,500 km at a cost of around $1.60/millionBtu. The breakeven point has tended to fall over the last decade, as LNG costs have fallen faster than pipeline costs. But technology advances have made possible short-distance offshore pipelines where previously LNG had been the only viable option.

In practice, however, LNG projects do not often compete directly against pipeline projects for the same supply route. Competition to supply a given market is usually between different supply sources, either by pipeline or LNG.

For smaller projects to fit into more competitive markets or markets that start with a small bankable demand, LNG should be more attractive than pipeline gas even at much shorter distances (2,000 to 4,000 km).

Geographic and political factors

However, as noted before, not all gas-producing countries have a choice. Russia and most FSU countries are landlocked and will depend on pipeline gas exports with, maybe, the exception of gas from Sakhalin. The long distances separating gas producing countries or regions and major consuming centers are generating the need for high-capacity gas pipeline systems. This also applies for North American and South American intra-regional trade. For gas exports from South America to North America, the LNG option seems preferred.

North Africa has a pipeline option to the European Union and an LNG option to the United States. For small distances, such as linking Libya to Italy or Algeria to Spain, the pipeline option will be preferred. For longer distances, Nigeria to Europe, the two options compete. However, so far only the LNG option has been developed.

For Middle East the pipeline option might be advantageous to supply Turkey and Europe onwards. A link is already operating between Iran and Turkey. Exports to Pakistan by pipeline may also be considered. For political reasons, LNG is currently the obvious export route for Middle East gas to India. . Moreover, with lower costs for LNG, the Middle East is well-placed to supply LNG to OECD Europe, OECD Pacific, and even OECD North America. Qatar is a frontrunner on this in expanding its LNG plants. Iran is also planning to export LNG.

In Asia/Pacific, due to geographic considerations, LNG dominates. The pipeline option should emerge in the medium term. Certainly, new links between neighbouring countries could in the long run enable the development of an integrated gas grid in the region.
In the Indian Subcontinent, although pipe option should be certainly the more economic, political considerations so far have impeded this development and favoured the LNG option. The opposite applies to China, where political factors have favoured the development of an East-West pipeline. However, the LNG option is also in progress.
The transport of gas by pipeline will maintain a primary role in the intra-regional gas trade. Despite the development of intercontinental gas pipelines, LNG should play a growing role in inter-regional trade. It allows supply diversification and provides increased flexibility in gas trade.

The growing competition between pipelines and LNG for gas markets.

▪ Recently, pipeline and LNG projects have been in competition in such far-flung markets as Spain, turkey, the Indian subcontinent, the Asian region, China and even Japan and Korea.

▪ LNG was initially selected for the trades from Algeria and Libya to southern Europe largely because the technology to lay pipelines across Mediterranean did not exist at the time.

▪ Once the problem of deep water crossing was solved in 1977 with the trans med pipeline, the emphasis shifted away from LNG to pipelining for Italy and the Iberian peninsula

▪ This is a result of newer pipeline technology and the growing energy consumption of nearby markets.

▪ The development of high pressure pipelining brings down costs by utilizing steel pipe more efficiently.

▪ High pressures have been particularly important offshore, since they sharply reduce the need for expensive riser platforms for compressor stations.

▪ Deep water pipelining, as characterized by the SNAM / GAZPROM blue stream line (7,000 feet deep) across the black sea to turkey, has opened up new marine pipeline competition for LNG.

▪ For many trades, including Mediterranean Europe, LNG may be more costly than pipelining.

▪ But pipeline transit fee and political risk issues tend to preserve some of these markets for LNG despite poorer economics.

Current Examples Include:

▪ Trinidad LNG versus the Mahgreb Pipeline to Spain. ▪ Algerian and Egyptian LNG to Turkey versus Russian, Iranian, Turkmen and Azeri Pipelines. ▪ Various Pipeline Proposals for the Indian Subcontinent versus LNG. ▪ Russian, Kazakh and Turkmen Pipelines for China versus LNG. ▪ A Sakhalin Pipeline for Japan versus LNG.

Both pipeline and LNG projects have been able to capitalize on the growing demand through cost reduction.

▪ For LNG, increases in train sizes, improved equipment design, elimination of "gold plating" and other technical improvements have brought about a substantial reduction in costs over the past decade.

▪ But for pipelines improved design has not only been able to reduce costs, but developments in submarine pipelining have made it possible to consider options that were previously not technically feasible. This has made pipelining somewhat more competitive with LNG than it might have been a decade ago.

Two major improvements in submarine pipeline design are deep water lines and higher pressure operation.

▪ Improved pipe laying techniques have made deep water lines, such as Transmed, Statpipe and Mahgreb, technically feasible.

▪ The new blue stream line designed to cross the black sea from Russia to turkey is engineered for depths of 2,150 meters (7,050 feet), testing the technical frontier.

▪ Another development is the use of much higher pressures for submarine lines substantially reducing the need for closely-spaced - and costly – riser platforms for compressor stations on longer lines.

▪ The very high costs of pipeline construction in onshore Japan (more than five times those of typical costs elsewhere) make the proposed Japanese gas grid extremely costly and argue for putting as much of it offshore as possible.

Economic evaluation of import pipelines

|Pipeline costs |$ 850 / tonne |
|Coating costs |$ 25 / m2 |
|Compressor costs |$ 1,800 / kw |
|Construction costs |$ 250 + 4.8 * D (inches) / meter |
|Horizontal Directional Drilling (HDD) |$ 2.5 million per river crossing |
|Operations And Maintenance costs |1 % of capital expenditure(including 0.3% insurance) |

Illustrations:

(A) Submarine pipelining costs

Newer high pressure line compared to older low pressure line with compressor riser platforms.

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(B) Transportation costs for competing supplies to Kanto (Tokyo) region.
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Marine Pipeline LNG

(C) Transportation costs for competing supplies to India 48” pipelines (20 BCM), 2 train LNG (7.9 BCM)

(D) Illustrative costs of delivering gas from Algeria (Hassi r'mel) to Italy and Spain

[pic]

Gas Trade Flow

Net Gas - Trade Flows ( BCM ): TODAY

[pic]

Net Gas--Trade Flows (BCM): 2030

[pic]

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Import Options

Reserves are primarily concentrated in the Middle East (Iran, Qatar), Turkmenistan, South Asia, (Indonesia, Malaysia) and Australia.

Myanmar, Bangladesh also has good gas reserves adjacent to India

Import through Pipeline

Economics:

Thumb Rule:-

Offshore ------- 3000 – 4000 Km

Onshore ------- 1000 – 2000 Km

But this rule must be qualified against gas quantities, type of terrain, water depth, etc.

Economics more depends on Pipeline diameter

Incremental steel – cost be proportional to the proportional to the dia. of pipe.

Incremental flow will be proportional to the square of the dia. of pipe

Growing demand and benefits of Natural Gas

In recent years, there has been a shift in global energy markets' demands for natural gas. Demand for natural gas in Asia alone "expected to expand from 650 million tons of oil equivalent (mtoe) in 1994 to 1,380 mtoe by 2010." This is an annual growth rate of 4.9 percent (World Bank). In 2000 alone, the gas import demand for just South Asia was 8.8 percent and is expected to grow to 28.3 percent in 2005 and 54.9 percent in 2010 (World Bank 2000).
With the increase in demand in Asia, and with 32 percent (45,000 BCM) of natural gas reserves in the Middle East, the potential for trade between the two regions is high. The lack of sufficient indigenous gas reserves in Asia also makes trade with the Middle East very crucial. Ultimately, the " volumes of exploitable gas reserves" in Asia and the Middle East " form the basis for greatly expanded intra- and inter-regional trade" (World Bank 2000).
The increase in demand for natural gas is characterized by its overall efficiency, abundance, and existence as a clean burning fuel. The power sector has the potential to become the largest consumer of natural gas in global gas markets and specifically for South Asia.
Compared to using fuel, oil, or coal, natural gas has the following economic benefits: (1) Least capital cost per unit power generation capacity: - natural gas plant: $650/kW - coal-fired plant: $1,300/kW - fuel-oil fired plant: $1,000/kW (2) Higher thermal efficiency: - natural gas plant: 45 - 50 % - coal fired plant: 30 - 35 % - fuel-oil fired plant: 30 - 35 % (3) Shorter construction period: - natural gas plant: 2 - 3 years - coal fired plant: 5 years - fuel-oil fired plant: 4 years

Regulation in Oil and Gas Pipelines
Gas Transmission Tariff in India
In India gas transmission began in 1960s when ONGC started laying pipelines to supply gas to its consumers. However, much of these pipelines were small and isolated and were used only for a particular consumer. Gas transmission was recognized as a separate activity and industry only in 1984-85, when the Gas Authority of India Limited (GAIL) was formed. In 1987, India’s first transmission network of 1400km was commissioned and it was called the Hazira-Vijaipur-Jagdishpur (HVJ) pipeline network.
Since then the gas transmission network has grown in the country with multiple consumers being serviced from the same pipeline. Gas transmission tariffs have also been divorced from the gas price and are being set independently on a common carrier principle.
Need for regulation
While movement by pipelines is irrefutably the least-cost option for product movement, for transmission and distribution of gas, it is the sole option. In addition, product movements by pipelines require much less energy than by other modes. Trends in the modal shares confirm this.
While current market shares for petroleum products are dictated by the sales plan entitlement scheme, market volumes in a deregulated scenario would be based on the competitive advantage that one company enjoys with respect to another, be it service, technology, quality, marketing skills, or prices.
Given that distribution expenses contribute significantly to retail prices at the consumer end, a firm can exercise competitive advantage by streamlining its distribution system. Access to pipelines, which offer the most economic mode of transport, would thus be critical in a deregulated scenario.
Key reasons generally cited for pipeline regulation as follows:-
1. Pipelines exhibit technical economies of scale
2. Pipelines are not subject to significant inter-modal competition
3. Pipelines construction is capital intensive, implying appreciable barriers to entry.
Issues in pipeline regulation
There are three types of regulation relevant to pipelines.

Structural Regulation: - wherein a regulatory authority determines which firms can or must engage in particular activities.
Conduct Regulation: - which involves measures to control the conduct of a firm.

Use of standards: - which shape the behaviour of firms in areas related to health, safety, and pollution.
Given the need and form of pipeline regulation, two key issues emerge, namely open access and the other tariff setting.
Mandatory open access
In the Indian context, the term MOA (mandatory open access) is preferable to ‘third party access’. The Commission of the European Communities defines third party access as “a regime providing for an obligation, to the extent that there is capacity available, on companies operating transmission and distribution networks to offer terms of use of their grid, in particular to individual consumers or distribution companies, in return for payment” (IEA 1994). The term mandatory open access is intended to cover both rights that are directly enforceable by virtue of explicit legislation and general obligations.
Under the APM regime, asset ownership has had little impact on operations, primarily due to the fact that public sector oil companies have conducted all marketing operations. Distribution of controlled products, including that via pipelines, is coordinated by the OCC, which ensures product availability to all players. The situation is likely to be quite different in the deregulated scenario with the entry of private players and even amongst public sector oil companies. Given the ownership pattern, both IOC and GAIL are in a position to exert monopolistic influence on the existing networks.
Next, one needs to examine the issue of conditional access subject to spare capacity in a pipeline in the third party access regime. Evaluating a deregulated scenario, one does not expect higher volumes on account of entry of new players; only the individual shares of players would change. It stands to reason, then, that if the total volume in question remains the same, unconditional access should be allowed to the existing networks for all players to ensure a level playing field to all marketers. As volumes build up eventually, new infrastructure could be developed by new players, which would again be on MOA mandatory open access terms.
Tariffs setting
Tariff setting is a complex exercise, the complexity being particularly high in the case of an existing pipeline to which access is requested by new players. In matured markets, one may expect independent ownership of pipelines, wherein the marketers are different from pipeline owners.
In the Indian context, Petronet India Ltd, a joint venture financial holding company engaged in setting up of pipeline infrastructure on a open access system, was formed only recently. In most cases, thus, one expects to find a situation wherein new shippers are keen on accessing pipeline infrastructure owned by another player.
In such a scenario, pipeline tariffs may be guided by floors and ceilings. For a new shipper, the maximum tariff (ceiling) that can be paid is equal to his opportunity cost, i.e. what the shipper expects to pay for an alternative mode of transport. From the owner’s point of view, the minimum tariff (floor) is dictated by the short-run marginal cost, i.e. the additional cost of increasing the system throughput by one unit. Clearly, a workable solution lies only when the opportunity cost of new users exceeds that of the owners.
In other countries, as in the case of US where tariffs regulated by the FERC (Federal Energy Regulatory Commission), a formal tariff setting procedure are established which considers the following points. ▪ The overall cost of service, i.e., the overall revenue needed to cover the pipeline’s operations, including a just and reasonable return. ▪ Functionalization of the costs to identify cost centers, i.e., transmission, storage, etc. ▪ Categorization of costs into fixed and variable elements. ▪ Cost allocation for different rate zones. ▪ Assessment of unit rates for billing purposes.
Carrier Status ▪ Common carrier'' means pipelines covered under clause 2 above, for transportation of natural gas by more than one entity on open access and non-discriminatory basis as the government may declare or authorize from time to time. A contract carrier shall be treated as common carrier if (i) such contract carrier has surplus capacity over and above the firm contracts entered into; or (ii) the firm contract period has expired. ▪ Provided that the government may decide for exclusivity to establish, own or operate city or local natural gas distribution network, for a certain initial period in a transparent manner on case to case basis. However, the selection of local distribution company would be subject to competitive bidding process in a transparent manner and protection of consumer interest fully
The following issues emerge regarding the carrier status, ▪ Contract carriage, wherein a pipeline provides transportation service for those who buy space in its lines, or common carriage? ▪ If the common carrier principle is adopted, then should it be mandatory open access or third party access?
Common sense in common carrier pipelines
Its purpose is to promote the laying of pipelines in the national interest. This is achieved by making available the machinery of compulsory acquisition by the state to pipelines that would otherwise struggle to purchase permissions in a nascent Indian market.In normal circumstances, the need for regulation arises only when the pipeline company finds itself in a situation of having less oil/gas to transport than is possible with the pipeline. It is the excess capacity so arising in a pipeline that can be considered a natural monopoly, not the pipeline itself.
Tariff setting issues
The key issues in tariff regulation include the following.
It may be noted that under the present system, tariffs for pipeline use are insensitive to distance moved. In the case of gas, while the availability is restricted to the western region, this system has facilitated gas-based industrial development along the HVJ up to the northern state of Haryana. A shift to economic fuel costing (distance-related) would have probably precluded the use of gas in northern India, as other fuels would have been more competitive. The system, however, places customers in the vicinity of supply sources at a disadvantage. The continuance of the existing policy, thus, needs to be evaluated.
Tariff structure, in turn, influences demand for gas/petroleum products. A two-part tariff is likely to encourage occasional use of product/gas, as it precludes reservation charges. In addition, the segregation into fixed and variable components offers a hedge against fluctuations in pipeline flows, encouraging investments in pipelines.
Jurisdiction
With regards to jurisdiction, the following issue emerges, namely should there be separate regulators for inter-state and intra-state pipelines? The state governments I have raised the issue of jurisdiction of a national regulator over state-level infrastructure. The Government of Gujarat is keen on having a state-level regulatory agency for gas whereas the Government of Tamil Nadu is reportedly evaluating its regulatory options. However, there could be other state governments not keen on developing state-level regulatory mechanisms. Such situations may warrant the national regulator to step in to regulate at the state level.
Gas transmission industry
The gas transmission industry is characterized by large upfront investments; low operating costs and stable operations. This industry is also a natural monopoly. The gas transmission industry has high entry and exit barriers. The first mover bags long term gas transmission contracts from customers and have a higher ability to cut charges to keep out any potential competitor. A new player can have a market only if there is an unserviced demand in the market. However customers would prefer an existing player with a wider network presence since they will have the convenience of dealing with only one company. The high capital cost for putting up a gas transmission network and low operating cost further increase the entry barriers for a new entrant and thereby consolidate the monopoly status of this industry.

Upfront investments
Building a gas transmission network requires large upfront investments in laying pipelines and a gestation period of up to two years. The returns in the form of tariff are slow to accrue owing to the long usable life of the network. In the UK and US gas networks are assumed to have a life of more than 30 years. Thus the returns are also spread over the useful life. The very nature of this investment, which calls for a large single shot investment with returns spread over a long term, has led to state owned companies dominating gas transmission companies. Of late, private investors have also shown interest in laying networks although these are not as extensive as those constructed by state companies
Investment required on gas infrastructure (all kinds)

▪ LNG terminals US $ 1.5-2.0 billion

▪ Interstate trunk p/l (10,000 km) US $ 5.0 – 8.0 billion

▪ Intra state pipelines (25,000 km) US $ 5.0 – 7.0 billion

▪ Distribution networks(28 cities) US $ 3.0 – 4.0 billion

▪ Total US $ 15 – 21 billion
Low operating costs/Simple operations
Operating a gas transmission network is relatively inexpensive activity. Typically, operating costs are less than 5 per cent of the capital cost of putting the network. Much of the expenses are for routine repair and maintenance and operating compressors and pumping stations. Such operations also do not require much manpower and are usually controlled from a central control cell through telemetry systems and SCADA. The operations are also not complicated, with a few large consumers implying few meters measuring the entry and exit of gas from the system and gas flows at specified pressure.
Highly regulated
Owing to its natural monopoly status, gas transmission is a highly regulated industry. Regulation in gas transmission covers almost all aspects, be it operating norms, capacity expansions, efficiency parameters, cost recovery principles and tariff. Even the returns from the business are subject to regulator’s approval and scrutiny. Most of the developed markets such as United States, UK and Australia have set up gas regulators (mostly combined with power sector) with clear mandates.
Transmission tariff
Much of the natural gas is used in generating power, producing fertilizers and as a fuel in heavy industries. Consequently, any increase in the delivered price of

natural gas has to be passed on to the ultimate consumers. The monopoly nature of the business coupled with wide public interest in utilities has led to transmission tariff being regulated in most of the countries. The various types of approaches to determine prices and administer them,
Typically there are three different approaches that are being used to price gas transmission. These can be described as: ▪ Discounted Cash Flow(DCF) approach ▪ Cost of Service (COS) approach ▪ Performance based Regulation (PBR) approach
Methodology for development of gas transmission & distribution system

▪ Cluster the demand from various sectors for each location and identify these locations as demand centers.

▪ Identify sources of gas supply as supply centers.

▪ Identify existing natural gas pipelines which are between the supply and demand centers.

▪ Assess the health of the existing pipelines based on operational history, design conditions and maintenance history.

▪ Determine the usability of the pipelines under common carrier principle.

▪ Determine surplus/spare capacity of transportation in these pipelines.

▪ Establish new pipeline sectors to ensure availability of gas to each demand center from two alternative sources.

▪ Firm-up design basis of the new pipelines - delivery pressure for different sectors of consumers, flow rate, supply pressure from LNG terminal.

▪ Design the new pipelines to meet the full demand of the center from either of the two sources of gas supply.

▪ Firm up design basis of the gas transmission & distribution system for final demand-supply scenario

▪ Carry out basic design of all components of transmission & distribution system incorporating provisions for achieving final capacity. ▪ Carry out basic engineering for all systems. Incorporate features like TELECOM/SCADA and corrosion prevention techniques suited to terrain and environment and adopt in cost estimation.

Details of National Gas Grid Project – Phase I

|No. Major Sectors |Length (Km) |Cost (billion) |
|1. Dahej -Vijaipur |610 |- |
|2. Dahej -Uran-Pune |520 |- |
|3. Kakinada-Hyderabad-Pune |1,250 |- |
|4. Kakinada-Kolkata |1,250 |- |
|5. Kakinada-Chennai |580 |- |
|6. Chennai-Bangalore |500 |- |
|7.Dabhol-Bangaore-Coimbatore-Kochi |900 |- |
|8. Kolkata-Jagdishpur |980 |- |
|Sub Total |6, 490 |180 |
|Associated Spur Lines |1,400 |22 |
|Grand Total |7,890 |202 |

Natural gas demand supply (In Million Std. Cubic Meters/day)

|Years |2001-02 |2006-07 |2011-12 |
|Demand | 151 | 231 | 313 |
|Supply | 72 | 86 | 86 |
|Deficit | 79 | 145 | 227 |

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Natural Gas Demand Potential

|Sector |2004-05 |2005-06 |2006-07 |2007-08 |
|Baku-Erzurum |Baku (Azerbaijan) via Tbilisi (Georgia)| | |$1 billion (includes |
| |to Erzurum (Turkey), linking with | | |up to $500 million to |
| |Turkish natural gas pipeline system |Planned 254 Bcf |540 miles |construct new Azeri |
| | |capacity | |section) |
|"Cent gas" (Central Asia Gas) |Daulatabad (Turkmenistan) via Herat | |870 miles to Multan | |
| |(Afghanistan) to Multan (Pakistan). | |(additional 400 |$2 billion to Pakistan|
| |Could extend to India. |700 Bcf/year |miles to India) |(additional $500 |
| | | | |million to India) |
|Central Asia-Center Pipeline |Turkmenistan and Uzbekistan via |3.5 Tcf/year |Existing route |N/A |
| |Kazakhstan to Saratov (Russia), linking| | | |
| |to Russian natural gas pipeline system | | | |
|China Gas Pipeline |Turkmenistan to Xinjiang (China). Could|1 Tcf/year |4,1,61 miles; more |$10 billion to China; |
| |extend to Japan. | |if to Japan |more if to Japan |
|Trans-Caspian Gas Pipeline |Turkmenbashy (Turkmenistan) via Baku |565 Bcf in first stage,|1,020 miles |$2 billion to $3 |
|(TCGP) |and Tbilisi to Erzurum, linking with |eventually rising to | |billion |
| |Turkish natural gas pipeline system |1.1 Tcf/year | | |
|Korpezhe-Kurt-Kui |Korpezhe (Turkmenistan) to Kurt-Kui |283-350 Bcf/year; |124 miles |$190 million; 2005 |
| |(Iran) |expansion proposed to | |expansion: $300 |
| | |459 Bcf/year by 2005 | |million to $400 |
| | | | |million |

Natural gas through transnational pipelines: India's geographical advantage.
Flanked by large gas reserves to its east, north-west and west, India is strategically located to meet its natural gas requirements through transnational pipelines. These sources include the world's leading supply sources in terms of proven gas reserves, viz., Iran (15%), Qatar (9%), Saudi Arabia (4%) and UAE (4%). To the North-West, Turkmenistan (particularly the Dauletabad field), holds potential. Bangladesh and Myanmar to the east hold substantial reserves. There could be a price advantage of around $1-1.50 per Million British Thermal Unit (MMBTU) in favour of the delivery price of a high volume of gas through on-land pipelines against LNG or deep-sea pipelines. An annual import of, say, 100 MMSCMD by pipelines would thus, constitute savings of about US$1.5-2.0 billion/annum as compared to LNG.
India's Pipeline Initiative
In the above perspective, MOP&NG approached the Government of India in January 2005 with the proposal to allow pursuing transnational natural gas pipeline project from Iran, Central Asia and South-East Asia. Government considered the proposal on February 9, 2005 and approved the proposal subject to the following conditions:- ▪ getting natural gas from Iran delivered at Indian borders; and ▪ Setting up of the pipeline as a commercial venture. Number of major initiative on Trans-national gas pipelines examined 1. Oman – India gas pipeline 2. Iran – India Shallow water gas pipeline 3. Iran – Indian deepwater gas pipeline 4. Bangladesh Indian- Gas pipeline 5. Myanmar India Gas pipeline

The economic challenges in natural gas trade involve locating direct investment and securing financial arrangements for the construction of the pipeline. According to the World Bank, securing financial arrangements for projects in Asia should not be difficult. The real challenges lie in resolving commercial and political conflicts (World Bank 2000). This is exactly the case in the Iran to India natural gas pipeline. While numerous oil companies are interested in constructing and investing in the pipeline, commercial and political conflicts like sanctions and regional politics have proven to be strong challenges
(A) Oman - India gas pipeline – bilateral framework 1993 –Bilateral MOU for studying Oman India gas pipeline 1994/1995–Considerable work done on technical, commercial & contractual framework including bilateral agreement on supply. 1995/1996–Hold up/ stoppage on account of gas reserves issue, technological issues on deep water pipeline, project financing issues.

(B) Iran-Pakistan-India (IPI) Pipeline Project

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The following map shows the pipeline's main route. Starting from the left side of the map, the pipeline originates in Asaluyeh, Iran on the coast of the Persian Gulf near the Iranian South Pars fields. It travels to Pakistan through Khuzdar, with one section of it going on to Karachi on the Arabian Sea coast, and the main section traveling on to Multan, Pakistan. From Multan, the pipeline travels to Delhi, where it ends. At this point, India is free to consider and negotiate further domestic routing of the pipeline
In the above perspective, MOP&NG approached the Government of India in January 2005 with the proposal to allow pursuing transnational natural gas pipeline project from Iran, Central Asia and South-East Asia. Government considered the proposal on February 9, 2005 and approved the proposal subject to the following conditions:- ▪ Getting natural gas from Iran delivered at Indian borders. ▪ Setting up of the pipeline as a commercial venture.
There are two alternative approaches to the proposed pipeline:-

▪ A trilateral agreement between Iran, India and Pakistan; or ▪ Two sets of bilateral agreement.
The first between India and Iran to determine the terms and conditions on which natural gas will be delivered by Iran at the India-Pakistan border .
The second between Iran and Pakistan to determine the terms and conditions of the transit arrangements through Pakistan. If an umbrella agreement on sovereign guarantees is required to achieve financial closure for the Iran-Pakistan agreement that could be considered.
The Ministry of Petroleum & Natural Gas has shown its preference for the second alternative as the question of importing Natural Gas by pipeline from Iran is primarily a domestic matter of energy security.
It has been suggested in the past that Indian involvement might commence from the point the pipeline enters India. Such projects are only possible when the developers and the financers are able to achieve commercially viable project structures supported by adequate guarantees whereby the stringent "supply or pay" commitments could be met. These arrangements might be put in place mainly by Iran, with Iran involving Pakistan to the extent necessary, and possibly through an MNC with external multilateral/commercial funding.
The security and assured supply arrangement might require a tripartite umbrella agreement among the countries concerned, but the arrangements themselves would specifically be addressed in commercial terms between the supplier of the gas, the pipeline company, lenders and the buyer company (GAIL) with adequate guarantees etc.
On Indian side, the country would have a receiving station. Apart from assured supply and guarantees, the quantity, quality and price of gas would have to be competitive. Further, the designated agency GAIL would integrate this system with their storage facilities and pipeline network that in any case is required to be set up to link up domestic gas sources of ONGC, Reliance, etc., various LNG terminals and possible gas supplies from Myanmar, etc.
The most beneficial thing of this proposed pipeline is that in due course of time, the country would be able to develop a pipeline network with storage capacity of one month's supplies and provision for load shedding like in power supplies. In this manner, our dependence on Iranian gas, in the event of any disruption, would be minimized and capital investment for the purpose would also be minimized.
On land pipeline option
|Pipeline Route |On land via Pakistan |
| |First Section: Khuzdar-Karachi-Rann of Kutch-HVJ Pipeline |
| |Second Section: Khuzdar-Multan-Jodhpur-HVJ Pipeline |
|Length (km) |2775 |
|Initial Project Cost ($ billion) |2.5 |
|Escalated Project Cost ($billion) |4.16 |
|Completion Date |4 years after clearance |
|Installed Compression |72548 KW |
|No. of Compressors |12 |
|Pipeline Diameter |48 inch |
|Capacity |50-75 mmscmd |

Deepwater Offshore Pipeline
|Pipeline Route |Deep Sea (South Pars-Assouliyeh-Persian Gulf-Strait of Hormuz- Rann of Kutch) |
|Length (km) |1600 |
|Project Cost ($ billion) |4 |
|Completion Date |5-7 years after clearance |
|Capacity |27.4 MMscmd |

(C) Myanmar-Bangladesh-India Gas Pipeline Project.
The growing energy needs of India have prompted it to explore newer sources of supply. In this quest of India, Myanmar has now emerged as an important partner. Huge reserves of oil and gas has been found in that country.

India has been now pursuing a tri-nation pipeline project for nearly a decade since it has a stake in these findings and wants to bring these resources home in a cost-effective manner.

The tri-nation pipeline project was initiated by a Bangladeshi private company, the Mohona Holdings Limited way back in 1997. The pipeline was to run through Arakan state in Myanmar and the Indian states of Mizoram and Tripura before crossing Bangladesh to reach India's West Bengal capital Kolkata. The governments of India and Myanmar have already approved the Mohona's proposal for the cross-border pipeline. But Bangladesh is yet to approve it. The laying of this 900-km tri-nation pipeline was agreed to in principle by the energy ministers of the three countries in Yangon in January.However a formal signing of the agreement has been delayed up to now.
Dhaka now wants India to first address issues like reduction of trade imbalance, providing a corridor for Nepalese goods to Bangladeshi ports and access to hydropower from Bhutan before moving ahead on the pipeline. India has been opposed to making bilateral issues part of a trilateral agreement.
It is difficult for India to accept any of these demands as it would mean seriously compromising with its strategic interests. Allowing Bangladesh a corridor to trade with Nepal is just not possible in present situation, as it would worsen the problem of illegal immigration and insurgency. The vulnerability of the region to foreign agencies like ISI and DGFI would increase. Allowing this facility to Bangladesh would seriously threaten the internal security of India.
India on the other hand thinks that pipeline should be considered as a standalone project, and Bangladesh is adequately compensated by the $125m that will be getting as transit fee. At the same time, Bangladesh would be able to transfer gas supplies from the east to the western region of the country. Besides, Bangladesh will also benefit as the construction of pipeline would create new jobs in the country.
The new conditions imposed by Bangladesh have made the future of gas pipeline completely uncertain. But a gas pipeline from Myanmar is in India’s economic and strategic interests. The economic cooperation between India and Myanmar has brought both these countries close to each other.
Myanmar quickly wants to ‘monetize’ its new found gas and oil resources. India's state-run Oil and Natural Gas Corporation has a 20 per cent stake in Myanmar's A-1 and A-3 Blocks, while GAIL has a 10 per cent stake in the two sites. The proposed pipeline was one of several options India has been considering to bring gas reserves from the Shwe Field's Block A-1 site in Myanmar.
India is now at a juncture where it has to take a decision on how it wants to transport the gas purchased from Myanmar. It is possible either through a gas pipeline or through ship in LNG form. The gas pipeline is the most cost-effective way and India has been trying for this. The shortest and convenient route of this gas pipeline passes through Bangladesh. But unfortunately, Bangladesh wants to take unreasonable advantage for allowing the gas pipeline pass through its territory.
It has forced India and Myanmar to rethink about the route of the gas pipeline. It has also forced them to explore other possible alternatives to bring gas to India. Both sides have now started considering a proposal to redesign the gas pipeline so that it runs entirely through Indian territory skipping Bangladesh altogether. According to the new plan, the pipeline coming from Myanmar will run through Mizoram and Assam before culminating in West Bengal. Its revised length would be 1400 km. Minister of Energy, said that the techno-commercial group would examine the possibility of laying the pipeline bypassing Bangladesh and importing natural gas through ships in its liquefied (LNG) or compressed (CNG) form.
If the pipeline is constructed through Bangladesh, its length would be 900 km long and cost around Rs 4,500 crore. On the other hand, if it is laid through the Northeast bypassing Bangladesh, the pipeline will have to cover an additional 500 km. The cost would also go up by about Rs 2,500 crore.
Although laying the pipeline through Bangladesh will be cheaper, bringing it through the Indian territory also has its merit. Part of this additional cost will be offset by the transit fee that Bangladesh will charge for allowing the pipeline to pass through its territory.
If the pipeline enters India directly from Myanmar through the northeastern states, it would be a boon as the gas produced in these states cannot be evacuated to the more lucrative markets at present. The region as well as oil exploration companies would gain from higher prices, if the gas can be evacuated. A pipeline is like a road, it benefits the entire territory that it passes through.
Since the gas from Myanmar is expected to flow over a period of 15 to 20 years or even more, the security cover of laying the pipeline entirely through the Indian territory could well be worth the additional cost.
Myanmar would not wait indefinitely for India to buy gas. Moreover, Myanmar, which had banned foreign companies from exploring for oil and gas in on land blocks, has agreed to consider the bid by Oil India Ltd consortium for two blocks as a special case. Yangon was also open to Indian firms bidding for offshore blocks. Hence, India would have to decide on this issue. It should take a decision in favour of pipeline, with or without Bangladesh.
However, if the pipeline is laid through Bangladesh, it will be an example of regional cooperation. The success of this project might encourage the partner countries to contemplate cooperation in other areas. It should make very clear to Bangladesh that it would not entertain bilateral matters when a tri-nation project is being considered for the benefit of all the involved parties.
Interestingly, recently Bangladesh has shown keen interest in exporting the same gas to Nepal through pipeline passing through Indian territory. This clearly shows that there are other factors involved in Bangladesh not exporting gas to India and allowing the laying of pipeline. But, India must take care of its own interest. It should now take a decision on the construction of pipeline. If Bangladesh is willing to consider it as standalone project, well and good, otherwise India should start a feasibility study of laying the pipeline through northeast. It must tap the energy sources available in Myanmar, which might go elsewhere, if India allows Bangladesh to delay this project.
Proposed pipeline from Bangladesh

• Route: Silhat – West Bengal – Bihar – Uttar pradesh – Delhi. • Length : 1,350 km • Project cost : Rs 45 bn • Completion date : 4 years after clearance • Volume capacity : 500 cubic feet of gas/day

Proposed pipeline from Myanmar

Offshore pipeline:

Route : Rakhine coast to Exclusive Economic Zone of Bangladesh to west Bengal Length: 600 Km.

Inland pipeline:

Route 1: Myanmar to Mizoram, Tripura, through Bangladesh bring at Indo-Bengal border to east of Kolkata. Route 2: Myanmar to North East India to Bihar / Bengal. But feasibility of this option depends on the more ascertained gas find.

Target market states – West Bengal, Bihar, Jharkhand, Orissa, Chhattisgarh, UP (Eastern Part) Other Potential Market – Nepal

(D) Turkmenistan-Afghanistan-Pakistan (TAP) pipeline

The proposal to carry gas from the newly developed fields in Turkmenistan across Afghanistan to Pakistan, and possibly India was first conceived in the mid-1990's; the lead role in this regard was played by an American company, UNOCAL. However, the proposal could not be pursued on account of continued civil war in Afghanistan through the late 1990's.

The project was later revived following the removal of the Taliban administration from Afghanistan and the installation of the Karzai Government. In order to pursue the project, the Petroleum/Energy Ministers of Turkmenistan, Afghanistan and Pakistan set up a "Steering Committee" at Ministerial level. In July 2002, the Steering Committee agreed that the ADB would provide technical assistance for preparation of a feasibility report for the project. Later, the Heads of States/Government of the three countries concluded a "Gas Pipeline Framework Agreement" on December 27. 2002. This agreement affirms the commitment of these Governments to the project during the construction and operational phases.

ADB had got the pre-feasibility report (PFR) of project prepared in 2003. As per this PFR, the pipeline will be of 56" diameter and 1680 km length with a carrying capacity of 30 billion cubic metres (bcm) per year, entailing a project cost of $ 3.3 billion.

With regard to the routing of the pipeline through Afghanistan and Pakistan, two alternative routes are now under consideration, viz., the Northern route and the Southern route. The Northern route moves from the Dauletabad field in Turkmenistan eastwards into Afghanistan, dips southwards to Kabul, and then enters Pakistan through the Khyber Pas and after crossing the North-West Frontier Province (NWFP), reaches Islamabad. It then moves southwards to Lahore and reaches the Indian border near Amritsar.
The Southern route moves southwards from Dauletabad and crosses the Afghan provinces of Herat, Helmand and Kandahar, before entering Pakistan through Northern Baluchistan. It moves Eastwards to Multan and then reaches the Indian border at Fazilka. According to the ADB, both, the proposed routes are technically feasible. However, in the Northern route, the pipeline passes through very formidable terrain, both in Afghanistan and Pakistan. While the terrain through which the Southern route passes is more attractive, the security situation in the region remains uncertain. The security situation in Afghanistan as also the geographical obstacles will determine the final selection of the pipeline route.

The field is currently producing about 27 bcm/year. The Proven + Probable + Possible reserves as of December 31, 2003 were 1.427 trillion cubic metres (tcm). The report also indicated that the total geological Original Gas-In-Place (OGIP) is estimated to be 2.319 tcm

Pakistan confirmed that they would require 30 mmscmd of gas by 2011, 60 mmscmd by 2014 and 90 mmscmd by 2016. India made a brief presentation on its gas sector outlook and confirmed that subject to satisfactory understanding and resolution of various issues India could take around 70 mmscmd of gas.
The Steering Committee reconfirmed the invitation to India to become an official member of the project. The Committee further indicated that they would appreciate India's submission of its formal request to join the project. Further, upon approval of the Governments of Turkmenistan, Afghanistan and Pakistan the project name will be officially changed to Turkmenistan-Afghanistan-Pakistan-India (TAPI) Natural Gas Pipeline Project.

National Gas Grid Project

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In the wake of recent world class gas finds in the east coast and the imminent arrival of LNG cargoes on the western coast of India, Indian gas sector is moving away from a supply constrained market to a multi-source multi-market entity. In this emerging scenario, the need of the hour is an integrally planned optimum National Gas Grid to serve the entire industry on an “open access” basis.

Opening up Competition

The primary objective of the National Gas Grid will be as far as possible, to create a homogenous gas market in India. This would mean that gas from various production sources could reach uninterruptedly to the markets where it is most needed. Hence in order to balance supply and demand in these geographically wide spread markets in India a planned Gas Grid is required to avoid sub-optimal utilization of gas pipeline infrastructure. Otherwise proliferation of individual regional pipeline systems could create supply shortfall in an area of high demand and surplus supply in another area with inadequate demand. This could lead to disproportionately higher prices and an opportunity

for profiteering in some areas due to demand supply mismatch. A National Gas Grid would relieve such pressures by the redistribution of gas, thereby balancing supply and demand.

Attracting E&P activities

If a gas market is new and an emerging one, as in India, the economies of a pipeline project will be a critical factor for the decision to invest in the E&P activities and may create a significant barrier to potential investment. This may slow down the development of gas transmission infrastructure and the utilization of gas in India. An arterial National Gas Grid is therefore a vital prerequisite for the development of country’s E&P assets.

Attracting Foreign Investment

Another important economic benefit arising from a National Gas Grid (providing market connectivity) is that its existence in a country inspirers confidence for the potential investors to consider investing in the upstream E&P activities in the country as well as in gas import projects and unconventional gas exploration of a speculative nature.

Locations of Power Generation / Fertilizer plants

With the National Gas Grid in place or its future commissioning plan known, more effective decision for locating power and fertilizer plants can be made to minimize the logistic problem of delivering gas to these locations from the grid.

Other Policy Objectives

Without an exception, governments of countries with mature as well as emerging gas sector have firmly realized that the economic efficiency of gas transmission has to be coupled with other important policy objectives underlying a National Gas Grid which are:

▪ Security of Supply The risk to the gas supply in terms of supply security which needs to be addressed through a National Grid can be summarized as follows:-

a) Failure to mobilize long term supply ensuring deliverability to meet national energy need at the right place and at the right time . Given the long lead time to lay pipelines, sufficient transportation capacity cannot be made available to meet the centrally planned long term demand forecast without a comprehensive long term planning for Gas Transportation Capacity(GTC) requirement.

b) Political events having an impact on supply source. This position could worsen with an increase in India’s dependence on gas importation i.e.,from Qatar, Bangladesh, Iran etc.. Alternative arrangement for gas flow through an integrated network could become vitally necessary for India to enable substitution of gas from a different source in place of the affected source of India’s reliance on foreign sources were to grow.

▪ Risk Mitigation.

a) The need to protect against these supply security risks, based on the concept of integrated National Gas Grid is becoming progressively of strategic importance to India with the increase of the share of gas in India’s Total Primary Energy Supply (TPES).

b) Advantage can only be taken of strategic storage of gas if there is a National Gas Grid to transport the gas from the storage through the grid to where the gas is needed. Furthermore the national Gas Grid could itself act as a huge storage and act as a source of supply security.

▪ Need for Integration to International Gas Network.

It is of strategic importance at the national level for India to develop its gas transmission framework by way of an integrated National Gas Grid, which could be linked to an external grid through one input point of interface at the border of India with the neighbouring countries. This would ensure that that the national gas market is opened up to each other in the South East Asia. Without a National Gas Grid providing an opportunity to evacuate gas from a different grid across the national boundaries, India may miss out on the opportunity to integrate its network with others.

Social Objectives

Energy distribution has always been an instrument to pursue social policy objectives in most gas trading countries of the world. This is to ensure affordable gas for consumers, meeting the industrial/structural policy needs, regional planning including resurgence of underdeveloped areas and employment. In these countries such as in the UK, Italy and France, the public service aspect of energy policy is very strong. In some countries the industries and the public in general have a right to be provided with gas supply.

Particularly in India distribution of gas through a well planned national gas grid could enable application of gas in new uses including food preservation through mass refrigeration, CHP, agricultural need and many more benefits to agriculture and allied sector ensuring a much wider economic well being of the people of India.

Environmental and Climate Protection

MOP & NG has identified major cities where pollution level requires to be reduced through substitution of other fuel by gas, all of which will require gas transmission planned centrally preferably based on an integrated National Gas Grid.

Factors affecting the useful life of oil and gas pipeline

No specific rate of depreciation has been prescribed for oil and gas pipeline. Certain companies charge the general rate of depreciation applicable to plant and machinery working on triple shift at 10.34 per cent per annum on straight-line basis; the life, if this rate is applied, comes to about 9.5 years. However, there are some companies which are charging depreciation on pipelines at the straight-line rate of 5.28 per cent treating it as a continuous process plant. The life in this case comes to about 19 years.
The actual useful life of the are designed to last for more than 25 years and in some cases the pipelines are actually working without any problem for more than 40 years
Some of the factors affecting are:
1. Pressure, Temperature and other loadings: The piping component at any point in the piping system is required to design for an internal pressure which is not less than the maximum steady state operating pressure at that point. The design temperature is the metal temperature expected in normal operation. In Indian conditions the subsoil temperature remains around 200C and the ambient temperature varies between 400C and 500C. The designer takes care of the low temperature properties of the materials used for the facilities to be exposed to unusually low ground temperature or low atmospheric temp. Amongst the other loadings, Fluid Expansion Effects, dynamic effects such as external impact, wind pressure, earthquake, vibration, waves and currents mainly for off-shore pipelines, live and dead loads etc. are considered while designing the pipelines. Type of fluid to be handled will have effect in determining thickness of the pipeline to be considered in the design.

2. Pipe Diameter and Thickness: Pipe wall thickness is calculated based on the pipe diameter, internal pressure and specified minimum yield stress of the pipe material.

3. Selection of Materials: Percentage of Carbon, Manganese, Sulfur and Tensile strength of the materials mainly determine is suitability of application and can never be compromised against the design requirements. Pipeline alignment, ditching, lowering criteria, back-filling, rail, road and river crossings etc, determine service life of the pipeline. It is very important that stresses induced into the pipeline by construction be minimized.

4. Inspection and Testing Construction and inspection provisions for the pipelines and related facilities are required to be adequate to assure compliance with the material, construction, welding, assembly and testing requirement. Pressure controls and protective equipment, including pressure limiting devices shall be installed by competent and skilled workman.

5. Pipeline operation and maintenance ▪ It is to be ensured that at any point in the piping system the maximum steady state operating pressure and static head pressure with the line in static condition do not exceed at that point the internal design pressure. ▪ Patrolling of the main line to see whether physically any damage/leak has occurred in the main line. ▪ Cathodic protection system has to be maintained in serviceable conditions. Appropriate corrective measures have to be taken where tests indicate that adequate protection does not exist. ▪ Inspection of the coating system by carrying out person survey at least once in five years. ▪ Periodical pigging of the mainline at least twice in a year. ▪ Intelligent pigging of the line has to be carried out at least once in five years. ▪ Hourly maintenance of the pump station equipment, electrical equipment, fire fighting equipment etc. ▪ Pipeline block valve has to be inspected and serviced wherever necessary and partially operated at least once in a year to assure proper operating conditions. 6. Prevention of external corrosion a) Cathodic Protection System By providing Cathodic Protection (CP) system as a supplement to the coating system. In CP system, DC current is forced to flow from external source (anode bed) to pipe surface (cathode bed). When current density is adjusted properly it will overpower corrosion current discharging from anodic areas. Hence, there will not be current flow from pipe surface to soil (electrolyte) and hence corrosion will be controlled/stopped. b) Pipeline coating system Corrosion is the root cause of deterioration of ferrous products. This deterioration can be prevented if a suitable corrosion resistance coating is applied on the bare steel surface. The types of coating system which are commonly used in pipeline are as follows: ▪ Coal Tar Enamel (CTE) ▪ 3-LPE coating (Three Layers Polyethylene) ▪ Fusion Bonded Epoxy coating (FBE)

7. Prevention of internal corrosion Methods used to prevent internal corrosion are as follows: ▪ Coating of the internal pipe surface. ▪ Corrosion inhibitor is used along with the pumping products at the recommended rates. ▪ Corrosion probes are used to monitor internal corrosion of the pipe surface. 8. Predictive measures Measurement of pipe to soil potential: The pipe to soil potential is measured and monitored online through the Scada system where the potential drop across the pipeline system at various locations is measured. The voltage indicates the state of coating along the pipeline system.

Intelligent Pigging: In order to ascertain the quality of pipe, internal surface the pipeline system undergoes intelligent pigging operation wherein data pertaining to pipe internal are collected for analysis. The data is analyzed and the health of internal pipe is ascertained.

Useful life of oil and gas pipelines submitted by various oil and gas companies
International Practices
The useful life estimated by certain oil and gas companies in other countries given in the following table:
|S.No. |Name of the company |Name of the Pipeline |Life |Material transported |
|1 |Transco Plc |Mains and Services |55 to 65 years |Liquid Natural Gas (LNG) |
|2 |BG group plc |Mains and services |Upto 60 years |Gas |

The following table provides the useful life of oil and gas pipelines as estimated by various oil and gas companies in India:
|S.No |Name of the company |Name of the Pipeline |Life of the |Material transported |Remarks |
| | | |pipeline | | |
|1 |Engineers India Ltd. |Onshore pipelinesystem |25-30 years |Gas |In some cases it also extends to 40 |
| | | | | |years. However taking 0.5 mm as |
| | | | | |corrosion allowance, 30 yrs is a |
| | | | | |conservative estimate. |
|2 |GAIL (India)Ltd. |Hazira Vijaipur Jagdishpur |30 years |Gas | |
| | |(HVJ) Pipeline | | | |
| | |Jamnagar Loni LPG pipeline |35 years |LPG | |
|3. |Oil and Natural Gas |Well fluid, gas lift and |25 years |Gas |Have already surpassed their designed|
| |Corporation Ltd. |collector lines | | |life of 25 yrs. And are proposed to |
| | | | | |be replaced. |
| | |MUT Oil and Gas Pipeline |25 years |Oil and Gas |Have already surpassed their designed|
| | |project | | |life of 25 yrs (expired in June |
| | | | | |2003). However, there have been 2 |
| | | | | |instances of leakages resulting into |
| | | | | |replacement. |
|4. |Mahanagar Gas Limited |Piped Natural Gas (PNG) and |30 years |Gas | |
| | |Compressed Natural Gas (CNG)| | | |

Future Projects

Reliance Industries signs memorandum of understanding to bring gas pipeline to Bengal.

Reliance Industries has signed a memorandum of understanding (MoU) with the Bengal government to bring a gas pipeline from its Bay of Bengal reserve (off the Orissa coast) to the state. The development marks the first step by India’s largest private sector company towards investing in Bengal.
Reliance will undertake a detailed feasibility study to assess the demand for natural gas in Calcutta and the Haldia region. The state has also agreed to assist the company in acquiring the crucial right of way (RoW) to lay the pipeline. In other words, the government will help Reliance procure land to build the pipe network.According to the plan, the first landfall point (where the undersea pipeline surfaces on land) will be Basudebpur on the north coast of Orissa. It will then be extended to Calcutta, through Haldia. The 400-kilometre pipeline will entail an investment of over Rs 1,000 crore. Reliance is primarily targeting industrial customers at Haldia, but the large unexplored Calcutta market is a big attraction for the company.According to the development plan of the Mahanadi basin reserve, known as NEC 25, Reliance can start production by the end of 2008 or early 2009. Early estimates suggest that 10 million standard cubic meter gas per day will flow in through this pipeline.
Reliance may also link the mega reserve of the Krishna Godavri basin in offshore Andhra Pradesh with this pipeline.

GAIL starts work on Kailaras - Malanpur pipeline

The foundation stone for GAIL India's Kailaras-Malanpur pipeline project was laid by Jyotirditya Scindia, MP, at Bhind district in Madhya Pradesh.
The 87km-long pipeline will be completed by end July 2006 at an investment of Rs 920 million. The pipeline has a carrying capacity of 2 mmscmd. The pipeline will enhance the availability of natural gas for the gas-based industrial units such as Godrej Consumers, Hotline, Surya Roshni, Cadburys, among other industrial users. The gas supplied through this pipeline will also support the city gas distribution projects in Gwalior. The Kailaras-Malanpur pipeline is linked to the Hazira-Vijaipur-Jagdishpur (HVJ) and the Dahej-Vijaipur pipeline (DVPL) systems.The gas PSU has invested Rs 4,612 crore in Madhya Pradesh for a gas pipeline network of over 1,150km and associated compressor stations at Jhabua, Khera and Vijaipur. GAIL is now laying a 135km-long pipeline from Jagoti to Pithampur via Indore at an investment of Rs195 crore to transport gas to Dewas, Ujjain, Indore, and Pithampur.

Its largest LPG recovery plant is located at Vijaipur in the state, which has an installed capacity of 412,000mtpa of liquefied petroleum gas, 130,000mtpa of

propane, 40,000mtpa of pentane and 27,000mtpa of special boiling point solvent. The LPG production from this plant translates into 27 million domestic LPG cylinders annually.
In addition to its gas business, GAIL has a 22-per cent share of the petrochemical market in the state.

GAIL to complete 198 km Vijaipur-Kota pipeline project by December 2006

GAIL (India) Ltd is on course to complete the 198 km Vijaipur-Kota pipeline project as per schedule, that is, December 2006. The Rs 300 crore scheme is part of the National Gas Grid. The project envisages the laying of a pipeline for transportation of natural gas (or R-LNG) from Vijaipur in Madhya Pradesh to Kota in Rajasthan.
The main trunk line (Vijaipur to Gadepan) will be of 18 inch diameter and the Gadepan to Keshoraj Patan section will be of 16 in.dia. Two 8 in. dia. spur pipelines will be laid from Samcore to SFCL and from Keshoraj Patan to Chambal Power. The pipelines will have capacity to transport 3.47 mmscmd of gas to users.
Another gas pipeline project, from Thulendi to Phulpur, will be completed by next month. The Rs 220 crore project is also part of the National Gas Grid project. Tractebel Engineering is the contractor. The 18 inch diameter pipeline will have a capacity to carry 2.8 mmscmd of gas. IFFCO's phulpur fertiliser complex is one of the main customers of gas supplied from the pipeline.

GSPC plans southern Indian network before K-G basin development

Gujarat State Petroleum Corporation (GSPC) plans to expand its gas distribution network in southern India before production begins from the Krishna – Godavari basin in the Bay of Bengal.As part of the strategy, GSPC will distribute gas in Andhra Pradesh, after which it will target other southern states. GSPC is proposing to invest Rs. 1,500 crore ($US340 million) towards the development of the pipeline in its first two years. There is also a possibility of a gas swap deal with Indian company GAIL as GAIL need to strengthen their distribution in the west and GSPC need to strengthen in the east coast. The company is also looking for technical assistance on the pipeline development from ONGC, IOC and GAIL and would also consider a foreign collaboration. “GSPC has laid down 433 km pipeline for gas distribution in Gujarat and planning to add 742 km more to it in one year, which is why GSPC is pursuing an Initial Public Officer (IPO). The company is planning to spend Rs 1450 crore for the expansion of gas network, The company’s Initial Public Offer, which will partly finance the expansion, is set to be released on January 24. It is expected to raise about Rs. 373 crore ($US84 million).

GAIL announces go-ahead of Orissa pipeline, petrochemical complex

Gas Authority of India Limited (GAIL) has announced the go-ahead of a major pipeline in Orissa, as part of a Rs. 15,000 crore ($US3.3 billion) package of joint venture projects which will also include the development of a petrochemical complex, a power plant and a coal gasification unit in the Indian state. The Rs. 4,000 crore ($US885 million) pipeline will stretch 1,140 km from Kakinada and Haldia, feeding major towns such as Balasore, Bhadark, Cuttack and Khurda in Orissa where a number of steel and other metal processing industries are being developed. The company also plans to implement city gas distribution projects in Orissa, supplying compressed natural gas and piped natural gas for domestic use in cities such as Cuttack and Bhubanewar. GAIL has also proposed to establish a Rs. 5,000 crore ($US1.1 billion) petrochemical complex, a Rs. 4,000 crore ($US885 million) and a Rs. 2,000 crore ($US443 million) coal gasification project. All the proposed projects other than the pipeline will be undertaken as joint ventures with other companies, and that GAIL is open to the possibility of foreign company participation.
GAIL and the Orissa State Government will finalise a comprehensive Energy Cooperation Agreement shortly which would pave the way for GAIL’s major investments in the state.

Essar, IOC to commission Baroda-Kalol gas pipeline

Essar Constructions, Stroytranzgas of Russia and IndianOil Corporation - set to commission the prestigious Baroda-Kalol gas pipeline.The Baroda-Kalol gas pipeline project is a part of the 2,200-km gas grid project being set up in the state by Gujarat State Petronet (GSPL), a subsidiary of the state-owned Gujarat State Petroleum Corporation(GSPCL).

According to sources, the project is in the final stage of implementation and a trial run is currently being carried out. Once this is over, gas is likely to flow through the pipeline within a fortnight. The project is perceived as one of the important sections in the entire gas grid project, as the pipeline will supply gas to Ahmedabad and to important projects such as Ahmedabad Electric (AEC) and IFFCO's fertiliser plant at Kalol.

It was completed as per schedule in about a year, at a cost of Rs 198 crore. The steel requirement for the pipeline, which was approximately 25,000 MT, was supplied by ssar's steel plant at Hazira.The Mora-Hazira pipeline has reached Baroda and from there, has come to the Vatva area of Ahmedabad near AEC power station. Sources said the pipeline will supply 60 lakh cubic metres. Of this, AEC and IFFCO will pick up 5 lakh and 6 lakh cubic metres respectively. Adanis will receive l0 lakh cubic metres for gas distribution in Ahmedabad and Baroda.

The main pipeline from Baroda to Kalol has two spur lines for supply of gas to AEC and IFFCO at Kalol. Besides, the pipeline has seven sectionalising valve stations, five tap-off stations for future gas supplies, in addition to one terminal station at Kalol and metering stations at AEC & IFFCO (Kalol). Sources said that with the commissioning of this line, gas will also flow to Gandhinagar soon.

Tokyo Gas, Teikoku Oil to develop $US256 million pipeline.

Japan’s Tokyo Gas and Teikoku Oil have agreed to develop a $US256 million gas pipeline which will serve increasing demand for natural gas in Tokyo. The pipeline will be constructed in two phases, with the first commencing development in 2006. This stage will involve construction of a 20 km pipeline, which will connect an existing pipeline owned by Teikoku Oil at Myogi to Takasaki. The first phase is scheduled for commissioning in 2010. The second phase will connect Takasaki to Tokyo Gas’s existing Kumagaya-Sano pipeline. With a length of 80 km, the pipeline will have a diameter of 500 mm and will be commissioned in 2012. The two companies will take an equal share in the pipeline, though Tokyo Gas will mainly finance the first stretch. Tokyo Gas and Teikoku Oil are expanding pipelines in areas north and west of Tokyo to supply increasing residential and industrial demand for gas as competing oil-based fuels surge in price. Osaka Gas is also planning a $US250 million pipeline in western Japan as it takes advantage of deregulation to sell outside its main supply area. Tokyo Gas and Teikoku Oil have also undertaken a joint venture with Shizuoka Gas to construct a 31 km pipeline from Gotemba to Fuji in the Shizuoka region. Development will commence in December 2006.
All India region-wise & sector-wise gas supply by GAIL- (2003-04) (mmscmd)
|Region/Sector |Power |Fertilizer |S. Iron |Others |Total |
|HVJ & Ex-Hazira |12.61 |13.63 |1.24 |9.81 |37.29 |
|Onshore Gujarat |1.66 |1.04 | |2.08 |4.78 |
|Uran |3.57 |3.53 |1.33 |1.41 |9.85 |
|K.G. Basin |4.96 |1.91 | |0.38 |7.25 |
|Cauvery Basin |1.07 | | |0.25 |1.32 |
|Assam |0.41 |0.04 | |0.29 |0.74 |
|Tripura |1.37 | | |0.01 |1.38 |
|Grand Total |25.65 |20.15 |2.58 |14.23 |62.61 |

Weakness of Pipeline

▪ Capital intensive

▪ Once laid it is sunk cost/ no alternate use

▪ Capacity utilization is very crucial

▪ Change in supply logistics can make the project un viable

▪ Market driven tariff

▪ Interface contamination of product.

▪ Door to door delivery is not possible.

Advantages of Pipeline Transportation

▪ Loss in transit is less in pipeline transportation vis-à-vis other modes.

▪ Pipeline offers large-scale economies in transportation.

▪ Environmental impact during construction, operation and maintenance is negligible and reversible which is environment friendly.

▪ Unlike other modes, in which different containers may be required for different products, pipeline transportation can handle multiple products.

▪ Pipeline transportation is flexible, as the volume transported can be increased/decreased quickly and at negligible cost

Some Observations

Countries like China Korea and Japan are interested in pipeline supply to create competition because of overly rigid contracting practices by LNG suppliers.

Pipelines and LNG necessarily be rivals since there can be positive interactions between the two.

The choice between the pipeline and LNG will be influenced not only by economics but by domestic policy and political risk considerations, as well.

As international trade grows and gas markets become more complex, LNG or pipeline project sponsors who fully understand the advantages and disadvantages of each in their target markets will have the best chance for success.

Pipelines are the most efficient, economical, environmental friendly, safe and reliable mode of liquid / gas transportation.

Pipelines are cost effective-depending upon capacity utilization.

Pipelines density is negligible in comparison with developed countries.

Regulatory support is necessary to enable speedy development of pipelines infrastructure.

Recent gas finds and surplus refining capacity can only spur growth of pipeline infrastructure.

Governments have a special role in reducing Political, Legal & Regulatory risks.

Establish a comprehensive, consistent & predictable long term gas & power policy

Define roles of market participants, Governments, regulators.

Create conducive domestic investment conditions.

Expand domestic transmission infrastructure.

Develop bilateral and, multilateral agreements.

Gas Pipeline in Mumbai Region: A Study
The Maharashtra government has stepped up efforts to set up a gas grid and enter into gas transmission and distribution to cater to increasing demand from various industrial units. It appointed MIDC as a nodal agency for this purpose, and has already moved its application for the registration of a separate company for this purpose. MIDC, in turn, roped in PricewaterhouseCoopers to conduct a pre-feasibility study for laying and operating natural gas transportation pipeline in and around Mumbai region. MIDC has planned to lay three pipelines connecting Talasari-Tarapur, Talasari-Uran and Pune-Uran. The corporation has entered into an alliance with Gujarat State Petroleum Corporation Ltd. (GSPCL) for the purpose of laying pipelines.
The Demand Scenario in and around Mumbai region
In and around the Mumbai region, the demand of natural gas is quite clustered. Talking about the sections where pipelines are proposed as mentioned above, it has been estimated that 0.4 to 0.75 MMSCMD of gas is required in the Talasari-Tarapur region while demand of 12 MMSCMD has been recorded in Talasari-Uran region. Demand in Pune-Uran region is to the extent of 1 MMSCMD. In the event of coming of new power plants, the probable demand along the following three stretches would be as follow:
| Stretches |Demand |
|Talasari-Tarapur |1 |
|Dahej-Uran |2.5 |
|Pune-Uran |1.5 MMSCMD |

At present, a total of 14.1 MMSCMD is the unmet demand for gas in the region under study. The major consumers, who are suffering because of shortage of natural gas, are ONGC, Gail, Rashtriya Chemicals & Fertilizers Ltd., MSEB, Tata Power etc.
Demand would even increase in the region with the reverse flow of gas to Gujarat. Gujarat is full of large gas consumer as can be seen by the tie-ups for gas supply that Reliance has done. Reliance has already contracted 12 MMSCMD with NTPC in Gujarat. Reliance would also be supplying gas to Reliance Energy Limited's proposed power plant at Dadri. The gas to Dadri plant has to flow to Gujarat to be fed to HBJ pipeline.
As far as the domestic gas consumption is concerned, it has to grow with availability of gas and CNG consumption in the transport sector is very imperative for that.
The Pipeline Routes

Talasari-Uran :
GSPCL has planned to complete pipeline till Talasari by 2006. The length of this pipeline is approximately 270 Kms. For its optimum utilization, the pipeline should be integrated with proposed Kakinada-Uran Pipeline & Dabhol LNG terminal.
The design philosophy of this pipeline is that it would be having reverse flow capability. It will be controlled centrally with state-of-the-art SCADA control system. To implement SCADA, Optical Fiber Cable will be laid along the route. For at least ten years, intermittent compression would be avoided. This pipeline has been designed to sustain in high pressure such as 90 bar.
At its Uran point, the minimum pressure requirement would be 40 bar. The gas would be supplied at 90 bar from Hazira. However, to maintain the pressure at 90 bar, reverse gas flows might require a node at Uran.
As per the study done by PwC, considering minimum flow at Hazira to be 25 bar, increasing line size beyond 42" would not be rewarding in terms of increase in capacity. A loop line has been suggested by the study in the possibility of supplying gas beyond 25 MMSCMD. 36" and 42" line sizes can also be explored in current demand & supply situations.
The Sources of Gas
Western India
As far as imported gas in the form of LNG is concerned, there are two LNG terminals in operation in this region viz. Dahej and Hazira of Petronet LNG Limited and Shell Hazira LNG Pvt. Ltd. respectively. There is one more LNG terminal coming at Dabhol the capacity of which would be 20 MMSCMD. The capacity of Dahej terminal is 20 MMSCMD which would be expanded to 40 MMSCMD. Shell has also planned to expand its current capacity of 10 MMSCMD and reach 20 .
Coal Bed Methane from North Gujarat would start flowing in 2-3 years. Currently, the Panna-Mukta-Tapti gas field is producing 11 MMSCMD of gas which can grow upto 20 MMSCMD. The Vasai offshore gas discovery of ONGC would be to the tune of 2.5 to 3 MMSCMD.
Eastern India
With Reliance and GSPC's huge finds in KG Basin, Eastern India has emerged as the gashouse of the country. While Reliance's find is believed to be in the range of 7-14 tcf, that of GSPC is being considered even bigger.

Pipeline Economics
According to PwC's study, to achieve an IRR (Post Tax) of 16%, the transportation charge per SCM for the proposed pipelines should be as follows:
| Pipelines |*Transportation Charge (Rs./SCM) |
|Talasari-Tarapur |0.94 |
|Talasari-Uran |0.84 |
|Pune-Uran |1.72 |

*The transportation charges are net of service tax@10.2%.
The above findings are made on some key assumptions that PricewaterhouseCoopers has worked out in the course of doing this study. These assumptions are: ▪ The capital expenditure involved in laying the pipelines which is given below:
| Section |Cost/Km |Kms |Rs. (Lacs) |
|Talasari-Tarapur |250 |60 |15,000 |
|Talasari-Uran |300 |270 |81,000 |
|Pune-Uran |250 |150 |37,500 |
|Total | |480 |1,33,500 |

▪ Pipeline size for Talasari-Tarapur and Pune-Uran is taken at 24" ▪ Project life has been assumed to be 20 years. ▪ Debt: Equity is 60:40 (Debt raised for 9 years including 2 years moratorium @ 10%) ▪ Operating expenditure@ 5% of capex. ▪ Demand across sections. ▪ Industrial & Commercial demand buildup over 3 years. ▪ Power plants are set up in 4th year of operations.

|Section |Non-Power |Power Plant |Total |
|Talasari-Tarapur |0.75 |1 |1.75 |
|Talasari-Uran |9 |2.50 |11.50 |
|Pune-Uran |1 |1.50 |2.50 |
|Total |10.75 |5 |15.75 |

Pricing Comparison of Fuels

Fuel cost of generation is considered to be the biggest factor in driving the demand for gas. PwC analyzed the cost of different fuel and reached a conclusion that while domestic coal is the cheapest source of energy which stands at $1.31/MMBtu, price is not the sole determinant. Ease of transport and usage also influences the choice of fuel. Also, Pollution and environmental impact plays their due role.The study also established that delivered price of natural gas would climb to $7.5 to 8/MMBtu. According to study, even at such a high price, customers are willing to use gas and this price is also competitive for customers to convert to natural gas.

Financial Dynamics
PwC has established that volumes would grow at a fast pace in the first 3 years of operation and stabilize by year 4 of the project. The demand from power plants is expected to commence in the fifth year of the project. It has been assumed that the volumes after 5th year would remain flat.
PwC has assumed levelised tariff for the sake of study and therefore, revenues (net of service tax) are expected to follow the same trend as of volumes. The tariff for the various pipeline segments is:
|Pipelines |*Transportation Charge (Rs./SCM) |
|Talasari-Tarapur |0.94 |
|Talasari-Uran |0.84 |
|Pune-Uran |1.72 |

*The transportation charges are net of service tax@10.2% The tariffs have been calculated based on post-tax equity IRR of 16%.
Conclusion
Summing up, PricewaterhouseCoopers has established that there is a demand of 13.4 to 13.75 MMSCMD along the three pipeline routes with a distribution of 0.4-0.75 MMSCMD along Talasari-Tarapur, 12 MMSCMD along Talasari-Uran and 1 MMSCMD along Pune-Uran route.
Considering that pipeline would be built of 30", the likely pricing to get a post-tax equity return of 16% is calculated at Rs. 0.94/SCM for Talasari-Tarapur, Rs. 0.84/SCM for Talasari-Uran and Rs. 1.72/SCM for Pune-Uran pipeline.
As far as economics of pipeline transportation is concerned, the study has established that there is a high feasibility in Talasari-Tarapur and Talasari-Uran section while the feasibility in the third section is subject to the cost of alternate fuel. And finally, once again it has been established that natural gas scores high over any other fuel available

List of Abbreviations

BTU - British Thermal Unit EIA - Energy Information Administration IEA - International Energy Agency LNG - Liquefied Natural Gas mmscd - million metric standard cubic meters per day mmb / d - million barrels per day MMBtu - million British Thermal units mmscf / d - million standard cubic feet per day mmtoe - million tones of oil equivalent mmtoe /d - million tones of oil equivalent per day mtpa - million tones per annum tcm - thousand cubic meter JV - Joint Venture PSC - Production Sharing Contract GAIL - Gas Authority of India Limited ADB - Asian Development Bank JCC - Japanese Crude Cocktail (Japanese custom cleared price)

Conversion Factors

Main conversions used in petroleum industry

CRUDE OIL

1 Tonne = 7.33 Barrel = 1.165 Cubic Metres (kilolitres)
1 Barrel = 0.136 Tonnes = 0.159 Cubic Metres (Kilolitres)
1 Cubic Metre = 0.858 Tonnes = 6.289 Barrels
1 Million Tonne = 1.111 Billion Cubic Metres Natural Gas = 39.2 Billion Cubic Feet Natural Gas = 0.805 Million Tonnes LNG = 40.4 Trillion British Thermal Units

NATURAL GAS
1 Billion Cubic Metre = 35.3 Billion Cubic Feet Natural Gas = 0.90 Million Tonnes Crude Oil = 0.73 Million Tonnes LNG = 36 Trillion British Thermal Units = 6.29 Million Barrels of Oil Equiv.

LNG
1 Million Tonne = 1.38 Billion Cubic Metres Natural Gas = 48.7 Billion Cubic Feet Natural Gas = 1.23 Million Tonnes Crud e Oil = 52 Trillion British thermal Units = 8.68 Million Barrels of Oil Equiv.
CNG
1 Kilogram = 1.244 Standard Cubic Metres Natural Gas = 1.391 Litres of Petrol = 1.399 Litres of HSDO

1 SCM of gas ≡ 0.8 Kg in wt.
1 m3 of oil ≡ 800 kg LNG Volume about 1/600 times the Natural gas volume
1 m3 LNG ≡ 600 m3 of gas ≡ 480 kg
Sp. Gravity (w.r.t. air at 1.0 sp. gr.)
Sp. gravity air = 1.0
Sp. gravity Methane = 0.55
Sp. gravity natural gas = 0.60
Sp. gravity of propane = 1.56
Sp. gravity of butane = 2.0

Natural gas Octane No. = 130

Reference

http://www.infraline.com

http://www.gailonline.com

http://www.eia.com

http://www.naturalgas.org

http://www.mapsofindia.com

http://www.google.com

http://www.indialpg.com

http://www.wikipedia.org

http://www.businessline.com

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