GAIL explores investment scope in China

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Mumbai, Oct 3: The state-run GAIL India proposes to explore investment opportunities in China in the areas of Coal Gasification, City Gas Didstribution and Liquefaction businesses. GAIL India’s move comes close on the heels of the joint venture formed between GAIL India and China Gas.

The JV company GAIL China Gas Global Energy Holdings Ltd aims at identifying the projects in China. The first board meeting of the JV is expected to hold in November.

Informed sources told FE that GAIL India, during the recent visit by its officials, was informed that coal price is market determined which is monitored by the Chinese Government. Natural gas price is fixed by central govt. Coal gas price is also market determined and ensured by local government before project is started. Further all ceramic companies use two section gas producing technology and government regulate the coal gas price using cost pass through mechanism. Further two section gas producing technology uses anthracite as feedstock , its price is double than long flame coal and bituminous coal which are proposed to be used in our project.

Coal Gasification Project for supply of gas to Ceramic industry in Gao’an city in Jiangxi Province was discussed. It is estimated that demand for gas will be around 3.5 billion cubic meter (bcm) in 2009 which will increase to 10 bcm by 2013. The pay back period of the project is estimated as five years. Total Investment is envisaged in four stages. Investment in 1st stage would be 380 million Yuan (Rs 255 crore). The Investment in each second, third and fourth stage would be 270 million yuan (Rs 181 crores) each.

As far as city gas distribution project in Yonhzhou city in the south of Hunan Province, the Chinese authorities informed that the city has a population of 5.7 million.

The objective of above project is to improve the environmental quality of the city , raise living standards of people and facilitate the development of society. The city gas project has been proposed by Yongzhou Public Utility Bureau Administration. It is proposed to build 5 gasification stations in Lengshuita n District and Lingling District to supply gas to 150000 households. This will be divided in three phases. Besides 185 km long low and medium pressure distribution network and its supporting indoor pipelines will be built for the project. Total Investment will be around Rs. 210 Million Yuan (Rs141 crores) .

Debt equity ratio will be 30:70. Sales revenue expected will be 94 million Yuan (Rs 63 crore) per annum. Profit is estimated at 20% of sales revenue.