Gas Supply in South India May Worsen, as GAIL Scraps Pipeline Project

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Researched by Industrial Info Resources India (Delhi, India)--A recent move from India's state-owned gas major GAIL India Limited (GAIL) (BSE:532155) (New Delhi) to scrap its proposed interstate gas pipeline project connecting three South Indian states is likely to further aggravate the gas supply scenario in the region. South India is already reeling under a major gas crisis after the country's much-touted gas-block 'KG D-6', located off the eastern coast of Andhra Pradesh state failed to meet its production goals.

According to GAIL sources, failure to acquire Right-of-User (RoU) over a stretch of 300 kilometer (km) of land in Tamil Nadu state is the primary reason for cancellation of the "Kochi-Koottanad-Bangalore/Mangalore" pipeline project. GAIL has been facing strong protests from the villagers and the landowners in the state.

GAIL had planned to lay pipelines from Kochi to Bangalore through Kanjikode in Kerala and Coimbatore in Tamil Nadu. Out of the 860-kilometer long pipeline, about 300 km would have to pass through Tamil Nadu and 100 km through Karnataka state. The acquisition of land for laying pipelines is governed by India's Petroleum and Mineral Pipelines Act of 1962. Under the Act, the owners of land retains ownership rights over the land for cultivation, other than planting of trees.

Reportedly, GAIL has also declined an offer from the Tamil Nadu government, which has provided an alternate route for laying the pipeline along the existing national highway, as the gas-major found it unviable.

The cancellation of the project will have its direct impact on the Petronet LNG Limited's (BSE: 532522) (New Delhi) re-gasification plant of 5-million tons per annum (MTPA) capacity at Puthuvype in the state. The LNG terminal had raised hopes of providing natural gas to the bulk consumers in Kerala and the neighboring states.

As Bangalore is already connected to Dabhol LNG terminal in Maharashtra, the Kochi-Bangalore link would have helped establishing national grid connectivity, which in turn would be useful in making use of indigenous gas.

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