Gas Authority of India Ltd has signed a transmission and distribution agreement to carry natural gas on its pipelines for Bharat Petroleum.

The memorandum of understanding between the two public sector companies signed yesterday also covers, working jointly in the areas of gas exploration, production and marketing of naphtha. Additionally the two companies plan to work together to source natural gas and liquefied natural gas from overseas and also develop joint infrastructure if required.

GAIL chairman and managing director U D Choubey said the two companies have already been working without any formal agreement, which this MoU would strengthen. Choubey also indicated the possibility of setting up a joint venture for city gas projects.  Indra Prastha Gas Limited, he said, was an outstanding example of the successful cooperation between GAIL and BPCL.

The two companies have been involved together in wide ranging projects, from which  they expect to leverage synergies for their core businesses. For instance the two companies are co promoters (along with ONGC and IOCL) of Petronet LNG Ltd, which operates  the country's largest liquefied natural gas terminal at Dahej with a capacity of 5 MMTPA, and is setting up another at Kochi in Kerala, with a capacity of 2.5 MMTPA.

Ashok Sinha, chairman managing director, Bharat Petroleum Corporation Limited said, "There are various areas which are of common interest and we should work to each others strengths." Considering the economic and environmental advantages of pipeline transportation, both the companies have agreed to cooperate in developing LPG pipeline networks from existing and new production centres.

Since Petronet has signed a sale and purchase agreement with Qatar's Ras Laffan Liquefied Natural Gas Company Ltd, to supply LNG to India, GAIL and BPCL expect to gain from the procurement of imported fuel and also expand and strenthen network as well as set up new centres.

A new development that could be interest to the two companies and Petronet is the recent $159-billion dollar merger agreement of Petronet's a strategic partner GAZ de France (GDF), which is merging with Suez (See: Suez, GDF shareholders agree to $159-billion merger).  

GAIL and BPCL are also partners in joint ventures for implementation of city gas projects in Delhi and Kanpur and are also partners in an E&P block in Oman. In the future, the two companies also plan to participate jointly for coalbed methane bidding rounds in India and abroad. There are plans for the use of naphtha from BPCL refineries as a feedstock for the expansion of GAIL's existing petrochemical plant at Pata as well as proposed petrochemical plants.

There may be joint participation in other infrastructure related projects in areas of gas processing plants, refining units, pipelines etc. in India and overseas and sharing of technology and knowledge bank.

Other opportunities identified for joint participation would be examined by a working group to be constituted by GAIL and BPCL.