GAIL to Invest $10 Billion in Indian and Global Expansion

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Researched by Industrial Info Resources (Sugar Land, Texas)--GAIL India Limited -- GAIL (New Delhi) has registered a turnover of $4.5 billion in fiscal year (FY) 2007-08, a 12% increase from nearly $4 billion in FY 2006-07. Profit before tax rose 35% from $715 million in FY 2006-07 to nearly $964 million in FY 2007-08 while net profits increased by 9% from $597 million to $650 million in the same period. As on March 31, 2008, the company had a market capitalization of $8.75 billion as against $5.59 billion, a year ago.

During FY 2008-09, the public sector undertaking (PSU) plans to make investments of $854 million in various expansion initiatives. Of these, roughly $641 million will be used in pipeline projects, $125 million in exploration and production initiatives, $47 million in petrochemicals, $29 million in business development activities and nearly $12.25 million in city gas and telecom projects.

GAIL has entered into a joint venture (JV) with Oil India Limited -- OIL (Noida), Numaligarh Refineries Limited (Guwahati, Assam) and the Government of Assam to set up a Petrochemical Complex in the state at a cost of $1.37 billion. The complex will have a production capacity of 60,000 tons per annum (tpa) of propylene and 220,000 tpa of ethylene and will be commissioned by September 2012.

GAIL will also invest $7.5 billion over the next four years in two mega petrochemical projects, one in India and one abroad. In India, GAIL will set up an Integrated Refinery and Petrochemical Complex at Vishakhapatnam, Andhra Pradesh and has already signed a Memorandum of Understanding (MoU) with OIL, TOTAL (NYSE:TOT) (Paris, France) and Hindustan Petroleum Corporation Limited (Mumbai). For its overseas venture, GAIL will set up a multi-billion dollar project in collaboration with an Indian partner and has identified three locations, the names of which are yet to be announced.

Reliance Industries Limited -- RIL (Mumbai) and GAIL have entered into an MoU to jointly explore opportunities for setting up petrochemical complexes abroad.

The PSU is incorporating GAIL Gas Limited, a wholly owned subsidiary, with an initial authorized capital of $500 million to undertake city gas projects across India. GAIL China Gas Global Energy Holding Limited, a JV with China Gas Holding Limited (Kowloon, Hong Kong) will undertake projects such as coal bed methane in Inner Mongolia, Beijing Gas compressed natural gas, and coal-based petrochemicals.

GAIL has signed an MoU with Oil and Natural Gas Corporation -- ONGC (Dehradun, Uttarakhand) to adopt a JV approach towards production and distribution of gas procured from reserves in Krishna Godavari (KG) and Mahanadi basins. It has also signed an agreement with Reliance Gas Transportation Infrastructure Limited for transportation of natural gas from the KG basins through GAIL's network.

GAIL has recently signed the Gas Pipeline Framework Agreement and is making forays into the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project and the upcoming Iran-Pakistan-India pipeline. The company is also pursuing participation in the New Exploration Licensing Policy (NELP) VII, under which the Government of India offers gas and oil blocks for bidding.

The company has also entered into an MoU with Rashtriya Chemicals and Fertilizers Limited -- RCF (Mumbai, Maharashtra) to set up a coal gasification project and supply the synthesis gas produced for utilization by a fertilizer plant set up by RCF at Talcher, Orissa. A similar agreement between GAIL and Coal India Limited (Kolkata, West Bengal) will see an investment of $600 million towards development of a coal gasification plant.

In a recent annual performance MoU signed with the Government of India, GAIL has committed to transmit 81.5 million standard cubic meters of gas per day (mmscmd) in FY 2008-09 with a marketing target of nearly 70 mmscmd. Production targets have been set at 1.26 million tons for liquid hydrocarbons and at 390,000 tons for polymers.

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