Indian Oil, which had in 2016 proposed laying of the LPG pipeline, will hold 50 percent stake in the project. (Photographer: Daniel Acker/Bloomberg)

BPCL, HPCL Take 25% Stake Each In Indian Oil’s Kandla-Gorakhpur LPG Pipeline Project

Bharat Petroleum Corporation Ltd. and Hindustan Petroleum Corporation Ltd. have picked up 25 percent stake each in Indian Oil Corporation Ltd.’s LPG project that seeks to cater to cooking fuel needs of a fourth of India’s population.

BPCL and HPCL will take 25 percent stake each in the Rs 9,000-crore Indian Oil LPG pipeline project that involves laying of a pipeline from Kandla in Gujarat to Gorakhpur in Uttar Pradesh, the companies said in separate regulatory filings.

Indian Oil, which had in 2016 proposed laying of the LPG pipeline, will hold 50 percent stake in the project.

"IOC, BPCL, and HPCL have signed an agreement on June 3, 2019, for the formation of a joint venture company for implementation and subsequent operation of 2757-km long LPG pipeline from Kandla, Gujarat to Gorakhpur, UP," the filings said.

The liquified petroleum gas, some imported at Kandla and some sourced from oil refineries on the west coast of India, will be moved up north via Ahmedabad, Ujjain, Bhopal, Kanpur, Allahabad, Varanasi, and Lucknow.

The pipeline will carry 6 million tonnes of LPG per annum.

This will be the longest LPG pipeline in the country. State-owned gas utility GAIL (India) Ltd. currently operates a 1,415-km line from Jamnagar in Gujarat to Loni near Ghaziabad Delhi-NCR. The line carries 2.5 million tonnes of LPG annually.

GAIL also has a 623-km Vizag-Secunderabad pipeline. Indian Oil also has a 274-km pipeline from Panipat in Haryana to Jalandhar.

In pre-election project inauguration spree, Prime Minister Narendra Modi had on Feb. 24 laid the foundation stone of the pipeline project, which will be built over the next four years.

The companies said the pipeline will supply LPG to 22 bottling plants along the route.

"The proposed pipeline will source product from Kandla and other LPG import terminals on West Coast and two refineries at Koyali in Gujarat and Bina in Madhya Pradesh and would directly link 22 LPG bottling plants in Gujarat (3), Madhya Pradesh (6) and Uttar Pradesh (13) owned by the three promoter companies," the oil marketing companies said in their filings.

In addition, the pipeline would feed LPG through road-bridging to an additional 21 LPG bottling plants in Rajasthan, Gujarat, Madhya Pradesh, Maharashtra, and Uttar Pradesh.

"The pipeline is expected to provide reliability in the supply chain of LPG. Besides economic benefit as compared to road transportation, movement of LPG by pipelines shall enhance safety as well," the filings said.

Indian Oil has committed to using 3 million tonnes of capacity while HPCL and BPCL have committed 1.8 million tonnes and 1.7 million tonnes respectively. Reliance Industries Ltd. wants to use the pipeline to transport 2.42 lakh tonnes of LPG. These companies will source some LPG from their respective refineries.

"The demand for LPG is increasing consistently in recent years. Further, due to the Government of India's emphasis to make LPG, a clean and environmentally friendly fuel, available to every domestic household in the country, LPG demand is expected to increase at a much steeper rate in the coming year,” Indian Oil had said in its 2016 application to Petroleum and Natural Gas Regulatory Board for laying the pipeline.

Indian Oil had then expected the deficit between what its refineries produce and the demand to reach about 10 million tonnes per annum by 2031-32. LPG demand has grown 10.5 percent in 2018-19 with just about half of the 8.4 million tonnes consumed being locally produced.

"Considering the deficit figures for LPG, it is essential to import LPG at the nearest port and then transport it to the bottling plants through the most economical modes," Indian Oil had said in 2016.

Indian Oil is building additional import capacities at Paradip, Cochin, and Kandla to meet the increasing requirements of imports.

"The west coast remains most suitable to import LPG to meet the demand of North and Central India. Though there is a common carrier pipeline to link West Coast to North ie Jamnagar-Loni pipeline, there is no LPG pipeline in existence or in construction to link West Coast to Central India or Eastern India," it had said.