“The loan agreement was signed between GAIL India Director (Finance) P K Jain and Bank of Tokyo General Manager Naoki Isetani here yesterday,” the company said in a press statement.

“This term loan agreement comes close on the heels of an earlier term loan of $150 million taken by GAIL from Bank of Tokyo in June, 2011,” it said. The loan agreement signed now is the first in the series of three tie-ups that GAIL plans to enter into for a total of $300 million in external commercial borrowings (ECB).

The debt would help GAIL fund ongoing expansion plans and new projects of around $9 billion. GAIL is presently implementing projects to lay 5,500 km of pipelines at an estimated cost of Rs 25,000 crore ($5 billion). When completed, the capacity of GAIL’s pipelines would increase to over 300 million standard cubic metres per day from 175 mmscmd at present.

The company is also doubling the capacity of its petrochemicals plant at Pata, in Uttar Pradesh, from 446,000 tonne per annum at present to 900,000 tonne per annum by 2014. GAIL, the nation’s largest gas transmission and marketing company, had a debt-equity ratio of 0.17 and Debt Service Coverage Ratio (DSCR) of 9:1 as of September 30, 2011.

It currently has a natural gas pipeline network spanning 8,700 km and accounts for 3/4th of gas transmission capacity in the country. The statement said GAIL recently acquired its first shale gas asset in the USA. Its wholly owned US subsidiary, GAIL Global (USA), has taken 20% interest in Houston-based Carrizo Oil & Gas Inc’s Eagle Ford Shale acreage.

GAIL has also set up a wholly-owned subsidiary company, GAIL Global (Singapore) Pte Ltd, in Singapore for sourcing and trading of liquefied natural gas.
Agencies

A GAIL spokesperson declined to comment on the allegation. Ramsinh Rathwa, a BJP MP from Gujarat, on October 14 wrote to Prime Minister Manmohan Singh that GAIL was allocated 2.59 million standard cubic metres per day of gas from the KG-D6 fields of Reliance Industries for extracting LPG.

“This allocation to GAIL was made according to the highest priority, because it was expected that this allocation would lead to a substantial increase in availability of domestic LPG,” Rathwa wrote. “Instead, LPG produced by GAIL remains at the same level as it was before the commencement of D-6 gas supply,” he said.

GAIL, according to the MP, produced 1.09 million tonnes of LPG in 2008-09 prior to commencement of supply of KG-D6 gas. It began receiving KG-D6 gas in September, 2009, but produced only 1.10 million tonnes of LPG in 2009-10. Its output fell to 1.07 million tonnes in 2010-11, the first full-year of KG-D6 gas supply.  “What it (GAIL) did was that it quietly diverted this gas to such consumers who failed to secure gas allocation from the government,” Rathwa alleged, adding that GAIL made a killing by selling KG-D6 gas, purchased at a price of $4.2 per million British thermal units, at the price of imported LNG, which ranges between $12 and $17 per mmBtu.

Requesting anonymity, a company official said GAIL had been allocated a certain quantity of gas from the Western Offshore fields of ONGC and joint ventures like Panna/Mukta and Tapti for production of LPG. These supplies have fallen over the years, affecting the production of LPG. As such, the allocation from KG-D6 was intended to augment this output.

Rathwa wrote to the Prime Minister that urea production would been increased by 1.3 million tonnes, or 650 MW of power could have been generated, if the 2.59 mmscmd of KG-D6 gas allocated to GAIL was supplied to fertiliser or power plants. “I will request to direct GAIL to refund to the exchequer illegal profits made by them during the last three financial years,” he said. “This is another mega scam and cannot be ignored. I therefore suggest that the case be throughly pursued and investigated in public interest.”
Agencies

GAIL’s Singapore office, which was inaugurated today but will begin trading next month on getting all formal approvals, will tie-up as much as US $400 million worth of LNG cargoes and petrochemical products next year for delivery into India, he said. Ninety per cent of the trade would be in LNG from the initial start-up.

“India is a huge market for LNG and petrochemical products, while supply remains tight,” stressed Tripathi, reaffirming GAIL’s commitment to energy development both within India and globally through an annual investment of US $2 billion.

He also disclosed that GAIL was building shale gas expertise through participation in projects in the United States. “The company is building expertise in shale gas and will participate in the Indian shale gas projects once the government announces its policy and development plans,” he said.

He said participation in US shale gas was a part of GAIL’s strategy to develop technology, expertise and know-how.

GAIL, along with its international partners in existing projects, will aggressively bid for shale gas concessions in India once the government puts them up for auction, which is expected to take place in about one year.
Agencies

“Shale gas is the future of natural gas because shale gas is going to be one of the major sources of supply. The way it has happened in the US, probably there’s large potential for shale gas in India as well as in China,” he told Reuters.

“Going forward, we expect investments of almost US $1 billion in the shale gas assets in US and Canadian markets in the next one year from now.”

In September, GAIL said it had agreed to buy a 20per cent stake in one of Carrizo Oil & Gas Inc’s shale gas assets in the United States and would invest a total of US $300 million over the next five years. GAIL’s plans come after Reliance Industries, India’s top private sector firm, last year sealed three shale gas joint ventures in the United States, including a US $1.7 billion deal with Atlas Energy to own 40per cent of its Marcellus Shale operations.

Tripathi said in October that GAIL, which planned to open an office in Houston on November 1, aimed to consolidate its presence in shale gas assets in the United States, and use the expertise for exploration in India. India has pushed back plans to unveil its shale gas exploration policy to next year, Oil Minister S. Jaipal Reddy had said.

Tripathi said he expects the company, which has a market capitalisation of around US $11 billion, to maintain the strong growth momentum in its revenue and profitability due to resilient demand for gas in the market.

“We have seen a growth of almost 20per cent both in our topline and bottomline. We expect that a similar momentum will continue in the remaining quarter as well because the market sentiment and demand numbers are quite encouraging at this moment in time,” said Tripathi, who is in the city-state for the Singapore International Energy Week.

Shale gas now makes up one quarter of all US natural gas production and the Energy Information Administration forecasts this proportion to double by 2035.

Shale gas, which has four times the potential of conventional gas, can be extracted from soft finely stratified sedimentary rock that formed from consolidated mud or clay, by creating small cracks in underground rock formations.

Apart from the expansion in shale gas market, Tripathi said GAIL is aiming to boost its transmission pipeline network in India to 15,000 km by 2014 from 8,800 km currently. GAIL share price traded nearly 1 per cent lower on Wednesday. It has declined by around 18 per cent since the start of the year.
Agencies

He said GAIL, which will open a office in Houston on November 1, aims to consolidate its presence in shale gas assets in the United States, and use the expertise for exploration in India. India has pushed back plans to unveil its shale gas exploration policy to next year, Oil Minister S Jaipal Reddy said last week.

Last month, GAIL agreed to buy a 20 per cent stake in one of Carrizo Oil & Gas Inc’s shales gas assets in the United States and would invest a total of US $300 million over the next five years. GAIL announced 19 per cent jump in its second quarter net profit to Rs 1,094 crore.

GAIL, which owns India’s biggest gas pipeline network of about 8,700 kilometres, aims to buy four spot liquefied natural gas (LNG) cargoes in the December quarter, he said. GAIL aims to increase its pipeline network to 10,000 kms in the current fiscal year to end-March 2012. Tripathi said GAIL is still in talks to acquire stake in Yamal LNG project in Russian Arctic.

GAIL has stepped up liquefied natural gas (LNG) imports this fiscal year to make up for a shortfall caused by falling local gas output after Reliance Industries-operated D6 block, off the country’s east cost, saw volumes declining.

Tripathi said in July-September GAIL imported 4 spot LNG cargoes and it planned to buy similar volumes in each of next two quarters. GAIL and top power producer NTPC Ltd hold majority stakes in Ratnagiri Gas and Power Pvt Ltd, which runs the country’s biggest gas-based utility popularly known as Dabhol power plant in western Maharashtra state and owns an LNG terminal there.

Tripathi said GAIL would get a cargo in the third week of January to commission the 5-million-tonne-a-year terminal, which will initially run at lower capacity until a breakwater is built. To meet its growing demand, Tripathi said GAIL will open a trading desk in Singapore on Nov. 1.

“We will be transferring 3-4 people there. They are from marketing and finance side. Initially the desk will focus on sourcing LNG and not on trading,” Tripathi said.
Agencies

GAIL’s investment includes upfront cash payment of US $63.7 million and a carry amount of US $31.3 million linked to Carrizo’s future drilling and development costs, GAIL said. GAIL “will consider expanding its business portfolio in the North American market by pursuing various upstream and midstream opportunities including LNG export to India,” chairman B C Tripathi said in the statement.

The company owns India’s biggest gas pipeline network of about 8,700 kilometres, with capacity to transmit about 170 million cubic metres of gas daily. Carrizo said it expected the drilling carry amount to be fully realised in less than a year.
Agencies

“We have been saying that GAIL should be out of subsidy sharing mechanism as unlike oil and gas producer, we do not get any incremental revenue on increase in oil and gas price,” GAIL Chairman and Managing Director BC Tripathi told reporters. Upstream firms contributed Rs 30,297 crore or 38.75 per cent of the total revenue loss of Rs 78,189 crore in 2010-11 fiscal. GAIL’s share in this was Rs 2,111 crore or 6.97 per cent of the total upstream share.

ONGC, whose revenue increases with rise in crude oil prices, paid Rs 24,892 crore, or 82.16 per cent of the upstream contribution, towards fuel subsidies. Tripathi said various government appointment committees, notably ones headed by Planning Commission Member B K Chaturvedi and Kirit Parikh, too, have opined that GAIL, which essentially is a gas transmission and marketing company, should be kept out of subsidy sharing mechanism. After the last week’s government decision to raise diesel,

domestic LPG and kerosene price together with customs and excise duty reductions to cut revenue loss of fuel retailers, he said GAIL’s subsidy share during current fiscal is likely to come down to 2009-10 levels. In 2009-10, GAIL paid a subsidy of Rs 1,327 crore. This was 9.20 per cent of the total upstream contribution of Rs 14,430 crore. In that year, upstream contribution was 31.33 per cent of the total revenue loss of Rs 46,051 crore.

During the first quarter of the current fiscal, upstream firms may have to chip in Rs 14,446 crore, roughly one-third of the retailers revenues. Indian Oil, Bharat Petroleum and Hindustan Petroleum lost on selling diesel, domestic LPG and kerosene below cost. Of this, ONGC may have to contribute Rs 12,123 crore, OIL Rs 1,640 crore and GAIL Rs 683 crore.

Tripathi said GAIL will import at least one shipload of liquefied natural gas (LNG) every month to make up for fall in domestic gas output. “We have already tied up import of 2 cargoes in July.”

Reliance Industries’ eastern offshore KG-D6 field has seen output fall from 61.5 million standard cubic meters per day to less than 48 mmscmd. LNG costs about $12.5 per million British thermal unit, double the price of KG-D6 gas.
Agencies

The pact was signed by GAIL Director (Business Development) S Venkatraman and UJVNL Managing Director G P Patel, the company said in a statement. Uttarakhand is facing a power shortage and no new hydro plant is coming up due to environmental issues. To improve the availability of power in the state, UJVNL intends to set up 300 to 500-MW gas-based power plants at Kashipur and Haridwar.

“As per GAIL’s assessment, there is a demand potential of 4.5-5 million standard cubic metres per day of gas in Uttarakhand,” the statement said. Looking at the demand potential in Uttarakhand, GAIL is currently executing two pipeline projects — the 182-km-long, Rs 239 crore Karanpur-Moradabad-Kashipur-Rudrapur pipeline and the 170-km-long, Rs 255 crore Saharanpur-Haridwar-Rishikesh- Dehradun pipeline — to transport gas to consumers in the districts of Kashipur, Rudrapur, Roorkee, Haridwar and Dehradun.

“GAIL and UJVNL propose to set up around a 350 to 500-MW gas-based power plant each at both places to meet the power requirement of the state,” the statement said. Natural gas required for both power plants will be supplied by GAIL.

As per current Central Electricity Authority (CEA) guidelines, allocation of domestic gas for new power projects will be considered to the extent of only 60 per cent of the total requirement, subject to meeting specified criteria and gas availability. As such, for the balance volume, these plants have to depend on other sources. GAIL will source liquefied natural gas ( LNG )) from overseas to supply to these plants, it added.
Agencies

The two contracts are worth Rs 1,980 crore ($440 million) and cover the implementation of a PP plant of 340 Kty capacity and two HD/LLD Swing PE Plants of 360 Kty capacity each. The Ineos’ Innovene PP process will be used for the Polypropylene plant and the Ineos.

The award followed International Competitive Bidding process where many major EPC contractors participated.

Maire Tecnimont S.p.A. is the parent company of an international engineering and construction group which operates in oil & gas, petrochemicals, power, infrastructure and civil engineering sectors. The Group, quoted on the Milan Bourse, has a workforce of about 5,200 employees. The Group reported revenues worth €2,536 million and net income of €62 million (after minorities), as on December 31, 2010.
Agencies

ONGC is searching for energy assets worldwide to make up for a fuel shortfall at home, where the targeted economic growth is more than 8 per cent. The start of production from Kashagan has been delayed to the end of 2012 from the original 2005 deadline to allow for technical challenges in the area.

“The field has been a non-starter,” said Sandeep Randery, an analyst with Brics Securities Ltd. in Mumbai. “All that investment would only make sense if production can start very soon. Significant amounts of ONGC’s cash and resources could get blocked if they go ahead with this large deal.”

ONGC Videsh Ltd., the explorer’s overseas unit, and GAIL, India’s biggest gas distributor, plan jointly to buy an 8.4 per cent stake from Exxon in Kashagan, valued at US $5 billion, the Hindustan Times reported citing an unidentified person.

ONGC had 224.5 billion rupees  of cash and near cash and GAIL had 21.3 billion rupees as of March 31, according to data compiled by Bloomberg.  ONGC Videsh Managing Director Joeman Thomas didn’t answer two calls to his mobile phone. GAIL Chairman couldn’t be reached for comment on his office telephone.

Exxon executives couldn’t be reached at the company’s press office in Kazakhstan and a voice mail left at its Singapore office wasn’t immediately answered.In 2008, partners in the Kashagan venture led by Eni SpA (ENI) agreed to pay higher royalties and cede shares to state-run KazMunaiGaz National Co. after the government criticized cost overruns and delays.
Agencies