As for the equity portion, Indian Oil Corporation and Petronet India will pick up 26 per cent each, while Essar Oil and Reliance Petroleum (RPL) will subscribe to 13 per cent apiece. The list of the 5 per cent equity holders includes the Infrastructure Leasing & Financial Services (IL&FS), State Bank of India, Gujarat Industrial Investment Corporation and the Kandla Port Trust. Canara Bank will pick up the balance 2 per cent.

All the partners have signed the subscription agreement for commitment of equity.

The Vadinar-Kandla pipeline is proposed to be set up by Petronet-VK and is scheduled to be commissioned towards the end of this year. It will transport up to 11.5 million tonnes of petroleumproducts over a distance of 113 km. The pipeline will act as an input to the Kandla-Bhatinda network, whose achievable capacity is 11.5 million tonnes.

The pipeline will originate at Essar Oil's refinery at Jamnagar, where adequate pumping facilities would be provided. Thereafter, the line would traverse about 17 km to reach the main tank farm of RPL's refinery. The main pumping station would be provided at this location.

From the tank farm, the pipeline would be laid on pedestals and trestles till 8 km and as sub-sea across RPL's shipping channel for 4 km. The pipeline would traverse sub-sea thereafter and would come out on the other bank of the Gulf of Kutch near Luni. From Luni to Kandla, the pipeline would take the land route.

Sources say that there is a need to transport at least 11.6 MT of petro-products to the northwest region after considering all planned reifnery capacity additions in the region till 2006-'07.

The deficit in the region is currently met from imports at Kandla, moved into thehinterland via road, rail and the Kandla-Bhatinda pipeline (KBPL) which traverses through Gujarat, Rajasthan, Haryana and Punjab.

RPL and Essar Oil are implementing two refineries with combined capacities of 32 million tonnes. The natural road-fed hinterland for Jamnagar refineries comprises of Jamnagar, Rajkot and Bhavnagar areas and the absorption potential for these areas from the refineries ranges from 1.4 million tonnes in 1999-2000 to 2.2 million tonnes in 2006-07.

Due to limited consumption potential in the natural road-fed hinterland, bulk of the products from RPL and Essar Oil would need to be moved towards the high-growth consumption centres in northwest India. The total movement to Kandla from these refineries varies from 10.6 million tonnes in 1999-2000 to 9.6 million tonnes in 2006-07.

Thus, experts conclude, it would be logical to transport products from these refineries to Kandla for onward transportation towards the northwest through KBPL. Volumes transported through the Vadinar-Kandlapipeline in excess of the KBPL's capacity can be moved by rail or road from Kandla to different consumption centres.

INSIGHT

Assured returns fuel enthusiasm

The equity structure for Petronet's Rs 400-crore Vadinar-Kandla pipeline has finally been decided. Apart from IOC, Petronet, Reliance and Essar, banks like SBI and Canara Bank are also picking up a stake. That is because returns in a pipeline business are very lucrative, as such projects are natural monopolies and have a small operating cost. Further, this pipeline will be one of the busiest in the country, as it will be in the proximity of two large refineries, Essar and Reliance, as well as the busiest port in the country, Kandla. Returns from this line will thus be better than other pipelines being planned by Petronet.