GAIL's strategy

Financial Express

State-run GAIL (India) Ltd and private player Reliance Industries Ltd have joined hands to set up a multi-billion dollar petrochemical plant in gas-rich Middle-East, Central Asia or Russia.

According to the chairman and managing director GAIL, the JV petrochemical plant will be a mega size one with a capacity of around 2 million tonne. A memorandum of understanding (MoU) in this regard was signed by RIL executive director Nikhil R Meswani and GAIL director (Business Development) AK Purwaha. The agreement was exchanged by Choubey and RIL chairman and managing director Mukesh Ambani.

Choubey said that RIL and GAIL will also jointly study opportunities in Russia, Qatar, Saudi Arabia, UAE, Algeria, Nigeria and former Soviet republics for the petrochemical complex.

“We have formed a joint working group to select sites in three countries by March. We may also jointly take up integrated project involving production of feedstock and then converting it into value added products,” he said

As per Choubey, the project details, cost, financing and equity will be decided once sites are selected and feasibility report commissioned. “All I can tell you is that it will be a mega petrochemical plant, potentially costing billions of dollars.” He did indicate that the two firms were in all likelihood forge an equal partnership.

Natural gas or naphtha are likely to be the feedstock for the plant and the two Companies, if allocated a gas field in the target countries, will look at jointly developing it and converting the gas into petrochemicals.

During the January visit of President Vladimir Putin, TOI had said that GAIL's MoU with a Russian state-owned firm would actually play out in the Russian petrochem field, with Indian entities riding piggyback on it to enter the country.

Russia controls a quarter of the world's gas reserves and is a major supplier to Europe but does not have the facilities to realise full value of its exports by extracting petrochem-making elements in the fuel.

The same is the case in Central Asian countries such as Kazakhstan and West Asian countries, which are supplying gas but are hamstrung by inadequate facilities to extract elements for making petrochemicals.

The MoU, signed by Reliance executive director Nikhil R Meswani and GAIL director (business development) AK Purwaha, envisage the two companies jointly studying opportunities in Russia, Qatar, Saudi Arabia, UAE, Algeria, Nigeria and former Soviet republics for the petrochemical complex. The two firms will in all likelihood forge an equal partnership.

The deal with Reliance is part of GAIL's strategy to expand its petrochemicals business. Petrochemicals is one of the three core areas identified by Choubey after he took over as the head of India's largest gas transmission and marketing company earlier this year. The other focus areas being gas transmission and distribution and city gas distribution.

Choubey has over the past couple of months initiated dialogues with companies in Russia, Qatar, Nigeria and Algeria for setting up of petrochemical plants. GAIL has opened dialogue with LukOil of Russia and Qatar Petroleum and these may be expanded to include Reliance Industries. "It is in line with our strategy to set up a petrochemical project overseas where feedstock is available," Choubey said.

Reliance and GAIL already have an agreement for cooperation in the gas sector. The areas of joint cooperation identified include natural gas pipeline transmission and marketing, CBM gas opportunities, city gas distribution, maintenance services, exploration and production.