Reliance Gas Transport pipeline capacity expansion to be completed next month

In an indication of Mukesh Ambani’s Reliance Industries’ (RIL) plans for its offshore oil and gas fields in the Bay of Bengal, Reliance Gas Transportation Infrastructure (RGTIL) has sought and received an in-principle approval to extend its pipeline along the eastern coast of India.

The company, which was acquired by Mukesh Ambani from RIL for Rs5lakh three years ago, will enhance the capacity of its east-west pipeline to 80 million cubic metres per day from the present 60 million cubic metres of gas, according to sources.

“Currently we are carrying around 40 million cubic metres of gas per day. We are in the final stages of installing compressors and other equipment to increase the carrying capacity to 80 million cubic metres by the next month,” a company official said.

RGTIL is reportedly charging an average $0.93 per million British thermal unit (mmBtu) of gas that it transports from the landfall point in Andhra Pradesh to Gujarat for consumers of gas from RIL’s KG-D6 block.

Nearly all of the ultimate production of 80 million cubic metres of gas, except that is directly supplied to Andhra Pradesh, will be carried by this east-west pipeline. Assuming an average load of 70 million cubic metres per day, the company will earn nearly $2.3 million per day from the pipeline, amounting to nearly $840 million (Rs 4,000 crore) every year.

The official said the company intends to extend its network in the north-south direction as well, particularly as RIL is expected to also start production by other fields in the Bay of Bengal over the coming years where discoveries have already been made.

“We have already got in-principle approval from the government to build two extensions to the pipeline — one northward to Haldia (near Kolkata) and the other towards the south, all the way to Chennai,” the official said.

RGTIL has been the focus of a controversy after Anil Ambani alleged that shareholders of RIL were short-changed when the company was sold to Mukesh Ambani by Reliance Industries.

He had alleged that the regulatory and other approvals and funds raised by the company were based on its RIL parentage and the price of Rs 5 lakh did not reflect the same, nor did it reflect the earnings potential of RGTIL.

RIL had defended the decision saying that the move to divest RGTIL was required after the government objected to the same company producing gas and distributing it.  It also claimed that all the capital expenditure was done after the company was bought by Mukesh Ambani.

The RIL spokesperson did not comment.