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SAGE, OVL start gas pipeline talks
Tuesday, November 10, 2009

New Delhi: South Asia Gas Enterprise Pvt. Ltd (SAGE), which has proposed an undersea gas pipeline linking West Asia with India to plug a chronic demand-supply gap, has initiated talks with ONGC Videsh Ltd (OVL), the overseas arm of Oil and Natural Gas Corp. Ltd (ONGC), according to a top executive of the pipeline project.

We have initiated talks with OVL for getting the Farsi gas (from Iran) to India. We are also exploring a gas-swap arrangement with Turkmenistan,” said Subodh Kumar Jain, director of SAGE, on the sidelines of the India Economic Summit.

OVL chairman R. S. Sharma said he was not aware of any such development, while managing director R.S. Butola did not respond to phone calls or a message left on his cellphone. Sharma is also chairman and managing director of ONGC.

According to initial plans, the pipeline proposed by SAGE will originate from Oman and will end either in Gujarat or Maharashtra. For the gas to be routed to Oman from Qatar and Iran, an additional infrastructure investment of $3 billion (Rs13,950 crore) is envisaged. Gas sourced through this will carry an additional transportation tariff of around $1.8 per million British thermal unit, which will accrue to SAGE. The project, however, needs the support of the Indian government to become reality.

“The Indian government has been supportive,” Jain said.

A group of Indian firms comprising Oil India Ltd (OIL), OVL and Indian Oil Corp. Ltd (IOC) have been assigned the Farsi natural gas block in Iran, a country which is facing US economic sanctions. OVL, which had won the bid in 2002, is the operator in the Farsi block with a 40% stake. IOL and OIL have 40% and 20% stakes, respectively. While the Indian consortium does not have ownership rights, it will be paid a 15% rate of return on investments made once they are awarded developmental rights.

In related development, SAGE has appointed consulting and accounting firm Ernst and Young to help it prepare a report on the financial viability of the project. SAGE is a special purpose vehicle (SPV) set up as an equal joint venture between the Siddhomal group, an Indian firm, and UK-based Deep Water Technology Co. for the development of the $3 billion 2,000km pipeline.

Mint had reported on 9 April about the revival of the 10-year-old private sector proposal.

It will take five years for the project, which will have a capacity of 31.1 million standard cubic metres of gas a day, to be completed. The SAGE SPV has also signed a cooperation agreement with GAIL (India) Ltd on the project apart from finalizing a memorandum of understanding with National Iranian Gas Export Co. for developing gas exports, including swaps from Iran to India through this route.

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