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India Looks To Open Up Natural Gas Sector By Splitting State Firm GAIL

Gas storage

India wants to split its biggest gas marketing and trading firm, state-run GAIL (India) Ltd, into two separate companies by the end of March 2019, in a bid to open up its gas sector to industrial end-users and attract billions of U.S. dollars in investment in liquefied natural gas (LNG) terminals.

GAIL, which currently owns most of India’s gas pipelines, is planned to be split into one gas marketing company and one company operating pipelines, the chairman of India’s sector regulator, the Petroleum and Natural Gas Board, D.K. Sarraf, told Reuters on Friday.

The split—which is expected to be completed by the end of March 2019, when India’s current fiscal year ends—could allow small industrial users of gas to buy the fuel from pipelines without having to pass through GAIL.

“All this un-bundling should be done within this fiscal year,” Sarraf told Reuters, adding that GAIL is already keeping separate accounts for its gas pipeline business and for the marketing division, which would make it easier to split the company into two firms.

The official, however, did not specify which of the two businesses GAIL would keep.

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The plan is ultimately aimed at encouraging gas use instead of dirtier fuels such as diesel and naphtha. India targets to more than double the share of gas in its energy mix, from 6.2 percent to 15 percent within the next 12 years.

India, however, has just four LNG terminals now, with three others under construction, and its gas pipeline network—mostly owned by GAIL—does not reach enough customers.

The country looks to boost its LNG import capacity more than three times to 70 million tons annually. The government plans to build 11 new LNG import terminals over the next seven years—and more afterwards.

For expanding its pipeline network, India would need an investment of almost US$20 billion over the next few years, Sarraf told Reuters.

By Tsvetana Paraskova for Oilprice.com

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