India-Oman deepwater gas pipeline to cost up to $3.4 bn

Sumantra Das
Posted: Wednesday, Apr 02, 2008 at 2240 hrs IST
Updated: Wednesday, Apr 02, 2008 at 2240 hrs IST

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Mumbai, Apr 1: The proposed deepwater gas pipeline designed to transport large quantities of natural gas from the Oman coast to India by South Asia Gas Enterprise Pvt Ltd (SAGE) will cost around $2.1-3.4 billion for first line. The tariff would be around $1.1-1.8 per mmbtu, much cheaper compared with the current $5-6 per (domestic use) mmbtu in India.

According to sources, SAGE will develop the deepwater pipeline system with the help of Heerema group and in association with existing regional gas transportation and distribution companies. Last month, a high-level meeting was held between SAGE and ministry of power, where SAGE made a presentation to GAIL, EIL, IOC, Tata group, NTPC and some domestic fertiliser companies.

At present, Indian LNG import prices, for fertiliser feedstock, are around $5.50-6 per mmbtu and naphtha prices are $12 per mmbtu. SAGE will seek a tariff expected not to exceed $1.80 per mmbtu for the first line and falling thereafter towards $1.10 per mmbtu as the system grows. The SAGE tariff will be set by its owners, which can be the gas sellers or buyers. Therefore, buyers can have $3.70-4.80 available for gas gathering and purchase after paying the SAGE tariff.

In its presentation, the company mentioned that it will also help huge local content opportunity for engineering companies across the country and pipe mills in Gujarat. Sources also said the design development work has started and if everything goes well, the first gas is expected in the year 2012.There is an unsatisfied gas demand in the country. The gas deficit of the Indian fertiliser industry is reported to be 20-30 mmscm per day. Similarly, power industry needs 77 mmscm from the current 39 mmmscm. SAGE is expected to be a competitive option, complementary to indigenous gas and LNG imports.

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