In The Pipeline

Mohona Holdings and Banamco Energy are the two Bangladeshi companies ongc is liaising with and Unocal of the US and Crain Energy of the UK the two transnationals. The pipeline planned with Mohona Holdings - which also has Trans Canada Pipeline as another partner - has been tentatively named Trans Myanmar Bangladesh Gas Pipeline. 'The Bangladeshi companies will have controlling stake in the projects, while domestic gas producers can buy a stake,' reveals an industry source. The Indian section of the pipeline will be built and owned by gail.

Says Rajesh Sharma, managing director, Indraprastha Gas Ltd, a bpcl-gail joint venture: 'We are confident of this project seeing the light of day because unlike previous occasions, Bangladeshi companies are getting actively into the project and pressuring their government to export gas to India.' Sharma says he is optimistic that local opposition to the gas exports will dissipate if Bangladesh builds the pipeline.

For years, Dhaka has been reluctant to discuss the issue of gas export. Many of Bangladesh's numerous political parties believe any export deal with India will lead to economic dependence on its big neighbour. But, say gail officials, such opposition is now on the wane, especially after West Bengal chief minister Jyoti Basu discussed the importance of such joint ventures between South Asian neighbours with the Bangladeshi Prime Minister Sheikh Hasina. Basu also met a delegation from Dhaka to thrash out the modalities of such ventures.

'West Bengal has been at the forefront of such discussions. We are extremely optimistic that Dhaka will agree to exports,' West Bengal industries minister Bidyut Ganguly told Outlook. The West Bengal Industrial Development Corporation and gail will soon sign a memorandum of understanding to facilitate the project.

The other active player, Occidental, already has a joint venture with Unocal and Petrobangla, Bangladesh's national oil company, to produce natural gas from the Jalalabad gas field at Sylhet in Bangladesh. The country's current in-place gas reserves are estimated at around 23 trillion cubic feet, of which about 13 trillion cubic feet is recoverable and three trillion cubic feet already produced.

gail is also in talks with the Dhaka-based Banamco Energy, which is contemplating an international consortium of India, Bangladesh and Myanmar with equal participation, for a gas highway. 'Bangladesh is realising that selling gas to India is the best option. For, it won't be financially viable for Dhaka to get into the liquefied natural gas (lng) business which raises the price of gas by nearly 10 times,' says Shyam Sunder, director (technical), lng Petronet.

And gas is crucial to India's energy sector. According to Sunder, increasing dependence on natural gas is widening the gap between the current supply (68 mmscmd) and demand (146 mmscmd).'The demand is likely to increase at least seven times in another 10 years, and if there are not too many pipelines, the answer is lng through sea,' Sunder said.

Indeed, lng transportation is set to become a big lucrative business in India. New Delhi alone will need to import 25 billion cubic metres of natural gas by sea every year to serve its growing needs. Anglo-Dutch oil giant Shell has plans to set up a $1 billion lng terminal in Gujarat while Unocal is giving final touches to its plans to build a $300 million lng terminal in partnership with Natelco on the West Coast. Both Shell and Unocal will import gas from the Persian Gulf area for selling to Indian buyers. In fact, as soon as Enron signed a deal with Mitsui osk Lines for transporting 2.1 million tonnes of lng for the Dabhol project, Indian shipping companies approached the surface transport ministry with a demand for partial reservation for domestic players.

Leading the Indian charge are the state-owned Shipping Corporation of India (sci), which has a 20 per cent stake in the Enron-Mitsui venture, Great Eastern Shipping and Varun Shipping. 'This is nothing new. All countries promote their domestic carriers,' sci chairman P.K. Srivastava told Outlook. Sudhir Mulji, director, Great Eastern Shipping agrees: 'Either the government does trade reservation or has to lift restrictions.'

sci officials claim the corporation is negotiating with British Gas, Unocal, Total and a few more for participating in lng shipping ventures where it would have a minority but significant stake. GE Shipping is in touch with a Scandinavian lng operator who will pick up 74 per cent, while Varun Shipping just plans to expand its three-strong lng fleet.

India-based companies are not allowed to charter a foreign vessel for a period exceeding one year but lng operators will be looking for long-term agreements. And the government may relent, say high-level sources in the ministry. 'We are now considering to allow long term, 15 to 20-year-old charters from foreign-based lng shipping operators with an Indian partner,' says a senior official. And that would just be the start.