There will be three separate long-term offtake agreements for polypropylene, propylene and pentane, besides a product-swap agreement for 40,000 million tonne per annum of polyethylene of prime grade, Gail chairman and managing director Proshanto Banerjee said.
Under the long-term polypropylene offtake agreement, Gail will buy 35,000 tonne per annum of this product from HPL. This will be a major diversification for Gail, which currently produces only two types of polymers - high density polyethylene and linear low density polyethylene - at its Pata petrochemical complex in Uttar Pradesh.
Under the terms and conditions of the agreement, it has been agreed that Gail will not sell the product to any of HPLs regular customers. Gail will have to locate new customers for marketing the product in the country. Moreover, for sale of product by Gail in the Eastern region - West Bengal, Bihar, Orissa, Assam and eastern Madhya Pradesh - Gail will consult HPL before effecting any sale of the product, a senior HPL official said on condition of anonymity.
Moreover, the official said under the marketing agreement, it was also agreed that all sales of polypropylene by Gail would be in the domestic market only and not for exports. HPL has an existing capacity of 2,10,000tpa for producing polypropylene. The polypropylene plant has been debottlenecked to capacity of 2,45,000tpa and this additional capacity has been offered to Gail, the official added.
Under the other long-term offtake pacts, Gail will sell 20,000mtpa pentane and 7,000mtpa propylene to HPL on ex-Pata/ex-Vijaipur basis (Gail has its petrochemical plants at Pata in UP and at Vijaipur in MP) for three years, extendable by another three years.
Both the companies have agreed to incorporate the take-or-pay and supply-or-pay clauses in their marketing agreement.
In addition to this, the two will be signing a product swap agreement for supplying 40,000mtpa polyethylene. Both will save on freight costs which they are currently incurring.
HPL will manufacture 40,000mtpa polyethylene at its Haldia plant for Gail, which the latter will use for exports as well as for domestic sale. Similarly, HPL will sell the product received from Gail for its customers located in the Northern and Western regions.