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India’s government is mulling over a plan to spin off the natural gas pipeline business of its biggest gas utility GAIL (India) Ltd in a bid to increase transparency, Bloomberg reported on Monday, citing people with knowledge of the issue.
The Indian oil ministry is seeking government approval to separate the natural gas transmission business from the gas marketing activities of GAIL under a separate fully owned entity under GAIL, Bloomberg’s sources said.
The possible split of the two businesses is aimed at achieving greater transparency and potentially giving the government the opportunity to sell shares in the new entity at some later stage, according to Bloomberg.
This is not the first time that the Indian government has considered separating the transmission from the gas marketing business of GAIL.
In April last year, the chairman of India’s sector regulator, the Petroleum and Natural Gas Board, D.K. Sarraf, told Reuters that India wanted 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.
These plans didn’t materialize, so now India is reportedly pursuing a spin-off of the gas transmission business.
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Answering a question in Parliament about the splitting of GAIL’s businesses, India’s Petroleum Minister Dharmendra Pradhan said earlier this year that the “government in-principle believes that gas transmission and marketing should be two separate functions in order to promote more transparency and competition in both gas marketing and transmission activities.”
According to the BP Energy Outlook – 2019, India’s share of total global primary energy demand is expected to roughly double to around 11 percent by 2040, driven by strong population growth and economic development. India’s natural gas demand—after having surged by 200 percent between 1995 and 2017—is expected to soar by another 242 percent until 2040, at an annual growth rate of 5.5 percent.
India’s domestic gas production will rise only modestly amid this surging demand, meaning that India’s reliance on natural gas imports is set to continue to grow significantly, BP reckons.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.