December 04, 2008

GAIL to foray into gas pipeline construction business

BL reported that GAIL India Limited is considering diversifying into gas pipeline construction business. The move is expected to create increased synergy in its core area of activity of gas transmission and marketing. GAIL, which has rolled out ambitious plans to expand its existing pipeline network, currently outsource this activity.

A GAIL source said that “Now there is thinking within GAIL to form a JV with a company which has a sound footing in the pipeline construction business, expertise as well as international exposure. It has considered a few options for unbundling the business including that of a pyramid structure, where there would be one holding company followed by subsidiaries. The unbundling will not affect the company’s profitability.”

GAIL has a market share of 78% in natural gas transmission and 70% in natural gas marketing in India. GAIL is expanding the pipeline infrastructure, which would double its existing trunk pipeline network to 12,000 kilometer, costing about INR 20,000 crore by 2011-12. Its existing carrying capacity will increase from 140 million standard cubic meters a day to 300 million standard cubic meters a day, which will also boost its revenues from the transportation business. It plans to complete eight new gas pipelines in two phases targeting 100% completion by 2011. These will form part of an integrated gas grid in the country spread over more than 5,000 kilometer.