Soon GAIL Gas Pipelines Available For Hire

State gas utility GAIL (India) Ltd. will tomorrow launch a portal to allow anyone to hire its vast pipeline network for transporting natural gas as it makes a last-ditch attempt to ward off breaking of the company, people in the know said.

The Oil Ministry has been for the last few months considering separating GAIL's gas transportation and marketing business to resolve the conflict of the same entity doing both the jobs. One of the reasons for this was some industry players alleging that GAIL was not giving them access to its 11,000-kilometer pipeline network to transport their gas.

Sources said while GAIL has maintained that it allows third-party access based on firm commitment, the company will tomorrow launch an online portal for common carrier capacity booking by marketing entities and consumers for transportation of natural gas through its pipelines.

The ministry had in January stated that it is considering to split GAIL into two—for laying pipelines and for marketing and petrochemicals—to encourage more transparency between the two operations and resolve the conflict of interest in it being both the transporter and marketer of natural gas.

This is because it believed that all entities authorised to lay natural gas pipelines, including GAIL have to “provide mandatory open access of its gas pipeline infrastructure on common carrier principle at the non-discriminatory basis, at transportation rates determined by the Petroleum and Natural Gas Regulatory Board”.

Citing a 2006 policy, it stated that in the long run with the maturity of gas markets, the authorised entities should have transportation of natural gas as their sole business activity and not have interest in gas marketing or city gas distribution network.

GAIL is the country's biggest gas marketing and trading firm and owns most of the country's pipeline network. The ministry, however, seemed to have softened its stand on splitting GAIL since then.

In its comments on the issue to a Parliamentary Standing Committee on Petroleum and Natural Gas, the ministry said for unbundling “market maturity is critical”.

It did not expand on market maturity. It is widely considered that the Indian gas market is far from mature.

At an open house called by the sector regulator, Petroleum and Natural Gas Regulatory Board, on July 17 to discuss unified traffic for pipelines, global energy majors Royal Dutch Shell and BP Plc sought separation of natural gas marketing and transportation business.

While Shell sought “legal unbundling” of gas trading and transmission business, so that benefit goes to all shippers, BP felt unified tariff “should be done after unbundling of transmission and marketing functions of an entity”.

GAIL Chairman and Managing Director BC Tripathi had on May 24 stated that unbundling of gas marketing and transportation business globally has been done only after the gas market has matured.

In mature markets, monopoly gas transporting and marketing companies have been unbundled or split after the share of natural gas in energy mix has reached at least 15 percent and a well-connected pipeline network built. Also, domestically produced natural gas forms bulk of consumption.

In India, the share of natural gas in the energy mix is 6.2 percent, its eastern and southern parts are not connected to any pipeline and domestically produced gas makes up for just 40 percent of the consumption.

GAIL also insists that it operates the two business at arm's length principle and hasn't ever tried to use its monopolistic situation for undue commercial gains.

“We will come up with a portal where capacity on our pipelines can be booked transparently,” he had said. The portal being launched tomorrow is a step in that direction.