GAIL plans Chinese foray with 3 projects

NEW DELHI: GAIL India is all set to foray into the Chinese market with a series of investments in the natural gas sector. The proposals include a coal-based petrochemical plant in Yulin, a compressed natural gas (CNG) project in Beijing and a coal-bed methane (CBM) project in Mongolia. The company is expected to sign a joint venture (JV) with China Gas in March 2008 to execute these projects.

“It would be a 50:50 JV and incorporated in either Hong Kong or Bermuda,” a company official said. GAIL is exploring the option of investing in the JV through its overseas arm, GAIL Global Singapore. The companies may rope in Arrow Energy of Australia for evaluation of CBM project.

China Gas Holdings is listed on the Hong Kong stock exchange and GAIL has around 6.5% stake in the company. Asian Development Bank, Sinopec and Oman Oil too hold stakes in China Gas.

“GAIL and China Gas have agreed to pursue the three projects under a JV. A team (drawn up from both the sides) would prepare the business plan by the month-end. After preparation of preliminary documents, the team shall meet in China and finalise the business plan,” the official said.

“GAIL’s expertise in mid-stream and downstream gas sector and China Gas’ record in securing contracts and rapid expansion shall be leveraged to make the JV a success,” said a company executive.

Besides CNG and CBM projects, the two partners see tremendous value in coal-based petrochemicals. The technology is credited for development of China’s PVC industry. There are around a dozen projects in China to produce petrochemicals from coal. Sources said Sinopec is planning a coal-to-chemicals project at Erdos. Dow and Shenhua group are also exploring the feasibility of an olefins project near Yulin.