East-West Gas Pipeline

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In June 2005, the Ministry of Petroleum and Natural Gas, Government of India, granted an authorization to build, own and operate East-West natural gas transmission pipeline to Reliance Industries Limited (RIL). The East-West gas pipeline was to start from landfall point of natural gas at Kakinada in Andhra Pradesh, pass through the states of Karnataka, Maharashtra, and culminate in Ahmedabad (Gujarat).The pipeline, whose initial capacity was 1440 km of length and 120 million standard cubic meters per day (mmscmd), was to supply natural gas to power plants of National Thermal Power Corporation (NTPC) in Khawas and Gandhar in Gujarat apart from catering to fertilizer plant and city gas distribution projects built by various private players along the route of the pipeline. The authorization for the pipeline was granted under direct negotiations with the Government of India. The pipeline was granted authorization to break the monopoly of state-owned GAIL (India) Limited and increase competition in India’s gas transmission business. The project’s capacity included an excess capacity of 33% so as to enable non-discriminatory open access to third party users as required by sector regulations in all new trunk pipelines. In May 2007, GAIL signed a term sheet to buy gas from the project company through an agreement with Reliance Industries and also booked capacity in the pipeline. The cost of the project was estimated at US$125 million. The project achieved financial closure in September 2007 and was financed by internal accruals of RIL through its 100% owned subsidiary Reliance Gas and Infrastructure Company Limited (RGTIL). Soon after the pipeline construction began and was expected to be completed by May 2008.