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Acknowledgement

It gives me great pleasure on bringing out the project report entitled, “Marketing strategy of GAIL (India) Ltd. for its products and identifying areas of improvement”.

I wish to express my sincere thanks to Mr. Partha Jana, DGM,GAIL for his valuable suggestions and unflinching support. He picked interest in me to handle the project and encouraged my work every time. It would have been difficult for me to complete the project without his expert and experienced views.

I also wish to express my sincere gratitude to Mr. P. Ramkrishna, Sr.Manager(Mktg.) and the whole Marketing Department for their thorough support and co-operation throughout my training period. Their invaluable knowledge

and advice guided me towards the completion of the project.

Finally, I would like to thank all my friends and associates whose suggestions and criticism made a scope for the betterment of this report.

Jitendra KumarPGDBA

Registration No. 201211577SCDL

Synopsis

GAIL (India) Limited is Navaratna PSU under the administrative control of Ministry of Petroleum and Natural Gas. It is primarily engaged in to Natural Gas marketing and transmission activities. The company operates and maintains about 8,000 kilometers of Gas Transmission pipelines in the western, southern, and eastern regions of India. GAIL (India) Limited also offers various petrochemical products and services, which primarily include films, injection molding, master batch, rote molding, and extrusion coating; and produces liquefied petroleum gas and allied products, such as propane and pentane. In addition, it offers telecommunications products and services; supplies naphtha tankers; and engages in retail gas business that includes Piped Natural Gas distribution, as well as Compressed Natural Gas (CNG) distribution to transport sector.

Approach and Methodology

• The analysis is based on the study of the existing marketing practice at

GAIL.

• Collection of primary data/information regarding the marketing strategy in the form of interviews.

• Collection of secondary data from reliable internet sites for competitor survey and latest trends in gas marketing.

• Reaching out to GAIL’s branch offices like GPTC, GTI to collect data about GAIL’s current trends.

• The current market trend was compared to the historical data and then the recommendations were given.

• Studying relevant official GAIL documents to understand the organizational functioning.

Analysis of GAIL

GAIL has ambitions to be a highly efficient integrated gas company, with interests from field development and production, through national transmission and imports, to distribution and allied industries such as petrochemicals. These ambitions are not limited to India, as GAIL is building a portfolio of international upstream and downstream gas assets. It dominates domestic infrastructure and gas purchasing from domestic suppliers. With huge potential for growth in Indian gas demand, GAIL should be able to deliver sustained long-term revenues and earnings appreciation.

E XE CUTI VE SUMMARY

GAIL (India) Limited, a Navartna Company is a central PSU under the administrative control of Ministry of Petroleum and Natural Gas, which was incorporated in 1984 for transportation of Natural Gas as core business. As on date, GAIL is operating 8000 Kms of Gas Pipelines across India and has a market share of 85% in India. GAIL expanded its business to LPG, Petrochemicals, Telecom, City Gas Distribution, Power and Exploration of Oil& Gas. Turnover to the company for the year 2010-11is Rs.32,459 Crores.In India there is demand of about 280 MMSCMD of Natural Gas and supply is about 190 MMSCD and there is demand supply gap of about 90 MMSCMD. Therefore there is lot of scope in the growth of Natural Gas transportation business. Having a strong distribution network or in GAIL’s case, a comprehensive pipeline network forms a vital part of its marketing strategy.

Type of business GAIL is in and the dynamic and forward approach of GAIL management & working culture embedded into majority of various working level officers would instill confidence in any stakeholders mind that GAIL will proactively modify course/approach to excel in the upcoming competitive scenario in India.

TABLE OF CONTENTS

Chapter Title Page No.

1 Introduction 3

2 Review of Literature 8

3 Study on GAIL

3.1. Company Analysis 14

3.2. Indian Natural Gas Sector – development & outlook 17

3.3. Global gas market overview 18

3.4. Energy market overview-India 19

3.5. Competitive Landscape 20

3.6. Natural gas demand 26

3.7. Natural gas marketing 27

3.8. Contracts 28

3.9. Gas pricing in India 35

3.10.Gas demand supply projection 52

3.11.GAIL’s pipeline network 59

3.12.Petrochemical marketing 62

3.13.City gas distribution 85

4 Results & Discussion 92

5 Conclusion & Scope of further work 96

6 Recommendations for improvement 99

7 References 101

8 Annexures

Annexure 1 : Gas transportation tariffs in India 102

Annexure 2 : Gas Management System 108

Annexure 3 : Key conversion factors 111

Annexure 4 : List of abbreviations used 119

Chapter-1

Introduction

Company Snapshot

GAIL (India) Limited operates as a gas transmission and marketing company in India. It primarily engages in natural gas marketing and transmission activities. The company operates and maintains approximately8000 kilometers of regional pipelines in the western, southern, and eastern regions of India. GAIL (India) also offers various petrochemical products and services, which primarily include films, injection molding, master batch, rote molding, and extrusion coating; and produces liquefied petroleum gas and allied products, such as propane and pentane. In addition, it offers telecommunications products and services; supplies naphtha tankers; and engages in retail gas business that includes piped natural gas distribution, as well as compressed natural gas fuel for transportation purposes.

Further, the company, through its joint venture, Gujarat State Energy Generation, Ltd., produces power utilizing natural gas. Additionally, GAIL (India) engages in exploration and production activities. It holds participation interests in 12 exploration blocks, including 2 NELP-I blocks,6 NELP-II blocks, 2 NELP-IV blocks, and 2 Farm-in Blocks. These blocks span from on land to deep offshore in West Coast and East Coast of India. It also involves in liquefied natural gas import and re gasification, transportation of re gasified liquefied natural gas (RLNG), and marketing of RLNG.

GAIL (India) has joint venture agreements with Bharat Petroleum Corporation Limited; Government of Delhi; British Gas Plc; Indian Oil Corporation Limited; Hindustan Petroleum Corporation, Ltd.; Government of Maharashtra; and Oil and Natural Gas Corporation Limited.

The company was formed in 1984 under the name Gas Authority of IndiaLimited and changed its name to GAIL (India) Limited in 2002.

Vision, Mission and Objectives of GAIL

Corporate Vision

“Be the leading company in the natural gas and beyond with global focus, committed to customer care, value creation for all stake holders and environmental responsibility.”

Corporate Mission

To accelerate and optimize the effective and economic use of Natural Gas and its infrastructure to the benefit of national economy.

Corporate Objectives

The primary corporate objectives of the company are:

• To focus on all aspects of the gas value chain including exploration, production, transmission, extraction, processing, distribution of natural gas and their related processes, products and leveraged services.

• To achieve all round excellence in endeavor towards services for the nature and the people – The Ultimate Customer.

• To relentlessly strive to exceed the expectations of the customers, both internal and external, and stakeholders by endeavoring to create superior value through the use of best-in-class standards of operations, technologies and practices related to safety, health and environment.

• To use technology stretched to its limit.

• To-e-enable all aspects of business as far as possible.

Gas Marketing

GAIL sells around 51 % (excluding internal usage) of Natural Gas sold in the country. Of this, 37% is to the power sector and 26% to the fertilizer sector.GAIL's vast operations and projects include:

• 8000 kms of Natural Gas high-pressure trunk pipelines. Adding another about 5000 Kms of Natural Gas Pipelines in next 4 years, some are under implementation.

• Trunk Pipelines with the capacity to carry 155 MMSCMD of NaturalGas across India. Adding another capacity of 130 MMSCMD in next 4 years.

• Supplying nearly 70 million cubic meters of Natural Gas per day as fuel to power plants for generation of about 5200 MW of power, as feedstock for gas-based fertilizer plants to produce about 11 MMTPA of urea and to over 500 other small, medium and large industrial units to meet their energy and process requirements.

• GAIL’s 2,800 km long Hazira-Vijaipur-Jagadishpur (HVJ) pipeline and 610 km Dahej-Vijaipur pipeline (DVPL), between them, cater to all the gas based power plants, fertilizer plants, and industries along the entire West-North corridor of India.

They also provide access to their pipelines, to third parties, for the transmission of Natural Gas. Currently GAIL transports about 8 MMSCMD of Natural Gas on behalf of various shippers.

City Gas DistributionGAIL was the first company in India to pioneer City Gas Distribution project. In addition to marketing Natural Gas through Trunk and Regional Transmission systems, GAIL has formed joint venture companies to supply gas to households, commercial users and the transport sector. Within the short span of 10 years, GAIL has expanded its CNG business from one company (Mahanagar Gas Ltd.) in India to eight companies in India and four companies abroad.

Gas supplied by GAIL to retail gas distributors serves more than 7.0 Lakhs automobiles as Compressed Natural Gas (CNG) and over 7.50 Lakhs households as Piped Natural Gas (PNG) in the cities of New Delhi, Mumbai, Vadodara, Vijayawada, Hyderabad, Kanpur, Agra, Lucknow, Pune, Kota, Sonepat, Indore, Bareilly. GAIL's City Gas Distribution initiatives are not confined to India. It has established its presence in the CNG and City Gas arenas in Egypt through equity participation in Fayum Gas, Shell CNG and Natgas; and has acquired a stake in China Gas Holding to pursue CNG opportunities in mainland China. GAIL plans to develop City Gas markets worldwide in collaboration with global oil and gas majors.

PetrochemicalsFor GAIL, petrochemicals were part of its master plan for vertical integration and utilization of every fraction of natural gas - GAIL uses natural gas as the feedstock for the manufacture of HDPE/LLDPE. Instead of setting up its plant in western India (Maharashtra and Gujarat) as was traditionally the case, they opted to base it in northern India, looking at the large consumer base and demand for plastics. In doing so, they were able to provide impetus to the regional petrochemical downstream units to expand their production capacity in view of the proximity of source of raw material.

In view of difficulties being faced by consumers in changing scenario of market liberalization and opening up of economy to global competitions, GAIL has decided to revise and modify in terms of gas supply agreements.

However, in the recent past it was further experienced that with the growing market globalization and competition, further corrective and relief measures required to be extended to other terms and conditions, as the current policy and terms/conditions in the gas supply contract being somewhat one sided is not able to address problems to the actual position of gas supplies and market conditions.

Presently GAIL is the major player in natural gas supplies. However there are other players who have come into the market of natural gas supplies. It would not be long that these players streamlines their contractual terms and conditions which consumers may feel to be more attractive. Due to years old policy being followed by different functional groups as an inflexible set of rules to handle the grievances of the

customers, GAIL’s image is at stake.

Therefore GAIL needs to address the changing scenario in more pro-active manner and at same, address long pending customer grievances. This is how GAIL can endure competition.

Approach and Methodology

• The analysis is based on the study of the existing marketing practice atGAIL.

• Collection of primary data/information regarding the marketing strategy in the form of interviews.

• Collection of secondary data from reliable internet sites for competitor survey and latest trends in gas marketing.

• Reaching out to GAIL’s branch offices like GPTC, GTI to collect data about GAIL’s current trends.

• The current market trends was compared to the historical data and then the recommendations were given.

• Studying relevant official GAIL documents to understand the organizational functioning.

Chapter-2

Review of Literature

Fr o m t h e “ M e m o r a n d u m o f U nd e r s t a n di n g ” b e t w ee n M o P & N G a n d GAIL (Ind ia ) Ltd 08 -0 9, i t wa s fou nd ou t th at:

The maximum realistic Natural Gas Marketing projections have been derived based on domestic gas / RLNG availability trends during the year2008-09 & 2009-10 (anticipated). These are as follows:-

Excellent Very Good Good Fair Poor

TOTAL(Marketing) 87.00 83.47 79.42 75.37 71.32

TOTAL(Transmission) 114.81 110.74 105.34 99.94 94.54

The targets for natural gas will be subject to correction depending upon the actual quantity and quality of Natural Gas received from ONGC / OIL / JV / Petronet LNG Limited/Spot LNG.

GAIL's Customer Satisfaction Index

Customer satisfaction Index aims to translate the customers feedback to improve operational performance, product and service quality. For the purpose of calculating CSI, GAIL's activities have been divided into following five business segments: (i) Natural Gas, (ii) Petrochemicals, (iii) Liquid Hydrocarbons, (iv) LPG Transmission, (v) GAILTEL

CSI Feedback form has been developed for each business segments product- wise. Feedback form is in the form of questionnaires and is released through quarterly campaigns. Customers fill in the feedback form online through internet access.

Average Quarterly CSI of each Business area mentioned is calculated across GAIL. Weighted average is then calculated based on the percentage contribution of each Business area to GAIL's overall turnover. This Weighted Average is reported quarterly as GAIL's over all CSI.

I n t h e r e v i e w r e p or t o f N o v e m b e r 2 0 0 3 b y T C S , t h e b ac k g ro u n d s o f G A I L ’ s ac tiv i ti e s w e r e p rov i d e d a s f o ll o w s :

Gas Authority of India Limited (GAIL), one of India's leading Public Sector Enterprises, is the largest gas transmission and marketing company in the Country. The activities of the company range from gas marketing and distribution through trunk and regional systems, to retailing of natural gas to gas processing for production and marketing of LPG, Liquid Hydrocarbons and Petrochemicals.

Today GAIL owns and operates over 8000 km of pipeline and has about 85% market share in the natural gas business in India. Also, more than half of the total Urea production in India is gas-based, out of which GAIL contributes more than 90%, thus making a significant contribution to India's agriculture sector.

GAIL is one of the largest LPG producers in India, with a liquid hydrocarbon production (including LPG) exceeding 1 million tones per annum, and it operates the country's largest Gas-based LPG extraction plant. GAIL has now introduced the concept of LPG pipelines in India, and is currently operating the world's longest - 1,250 km - exclusive LPG pipeline from Gujarat in western India to Loni near New Delhi in North India. The project cost is Rs 12.5 billion.

GAIL also possesses a vast telecommunication network, which contributes significantly to the high level of system reliability of operations, on-line real time communication and monitoring higher productivity. GAIL project offices have been set up at the places where the plants, complexes etc. are located.

For the past five years the company has been winning the 'Excellent Performance Award' from the Indian Government. GAIL has its Headquarters at New Delhi and the various branch and project offices are located all over India.

GAIL is diversifying in new business areas like wind and solar power and actively scouting for opportunities in gas based power generation projects. GAIL successfully commissioned a wind energy power project of 4.5 MW capacity in Kutch District of Gujarat for captive consumption at Company’s installations at Gandhar, Samakhiali and Kandla in Gujarat. GAIL is planning to set up over 115 MW of wind based renewable power projects at investment of nearly Rs 700 crore in various states.

New Business Initiatives

GAIL has been reorienting its business approaches and strategies in view of the emerging competition and entry of formidable national and international players. GAIL, therefore, is primarily focusing on three major aspects as its short/medium term strategy:

• Sourcing of gas.

• Expansion of existing markets and development of new markets

• Expansion of existing pipeline infrastructure as well as development of new pipeline facilities

• Wind power projects

Operational Excellence

Operations and Maintenance of plant and equipment plays a pivotal role in the growth and development of an industry. In the Gas Industry where millions of cubic meters of gas per day are transported through cross-country pipelines, Operations and Maintenance (O&M) assume significant importance. O&M of pipelines and plants helps ensure a highly reliable and operationally safe system, providing not only un-interrupted supply of gas to consumers, but also maximizing the throughput.

GAIL's emphasis is not only on maximizing production and sale of natural gas but also to achieve this with least consumption of energy. Every effort is centered on energy-efficient operation of the plants, machinery and processes.

The O&M arm of GAIL is constantly making efforts to improve upon its performance in this area. Availability of the best-dedicated telecommunication/SCADA facilities in the country has been fully utilized for on-line monitoring of machine/process parameters along the pipeline. Observe, Detect, Analyze, Compare and Improve are the watchwords for operations on day-to-day basis.

Re v ie w i n g t h e In f r a l i n e j o u r n a l : N at u r a l g a s i n I nd i a 2 0 0 7 , i t w a s f o u n d

t h a t GAI L i s a b o u t t o l a y f i v e n e w N a t u r a l G a s p i p e l i n e s , t h e y a r e :

1. Dadri-Bawana-Nangal.

2. Chainsa-Gurgaon-Jhajjhar

3. Jagdishpur-Haldia

4. Dabhol-Bangalore

5. Kochi-Kootanad-Bangalore/Mangalore.

Implementation/Construction activities have begun in above mentioned pipelines in phases except Jagdishpur-Haldia Pipeline.

Chapter-3

Study on GAIL

3.1. Company Analysis

GAIL has ambitions to be a highly efficient integrated gas company, with interests from field development and production, through national transmission and imports, to distribution and allied industries such as petrochemicals. These ambitions are not limited to India, as GAIL is building a portfolio of international upstream and downstream gas assets. It dominates domestic infrastructure and gas purchasing from domestic suppliers. With huge potential for growth in Indian gas demand, GAIL should be able to deliver sustained long-term revenues and earnings appreciation.

SWOT Analysis

• Strengths:

1. Controls gas transmission infrastructure;

2. Dominates gas processing;

3. Major petrochemicals involvement;

4. Growing international portfolio;

5. Share of LNG import projects.

• Weaknesses:

1. Limited financial or operational freedom;

2. Cost and efficiency disadvantages;

3. Lack of upstream gas exposure.

• Opportunities:

1. Potential for efficiency gains;

2. Transmission system upgrading/expansion;

3. Petrochemicals capacity expansion;

4. Strong domestic energy demand growth.

• Threats:

1. Rising investment requirement;

2. Changes in national energy policy.

Market Position

State-run GAIL is responsible for the operation of India's largest gas transmission network (at 8,000km) and a 1,269km LPG pipeline. The firm is also one of India's most active foreign investors. GAIL owns and operates seven gas processing facilities with an aggregate production capacity of1.3mn TPA of LPG, Propane, Pentane and Sodium Benzene Phosphate (SBP).

GAIL operates the country's largest gas-fired petrochemicals complex, with an installed Polyethylene (PE) capacity of 410,000 TPA. GAIL is setting up another Petro Chemical Complex through subsidiary in Assam with an installed capacity of 280,000 TPA. The firm holds stakes in Compressed Natural Gas (CNG) projects in Mumbai, Delhi, Kanpur, Pune, Bareilly, Lucknow, Agra, Ujjain, Dewas, Kota and Andhra Pradesh as well as two projects in Egypt and one project in China. GAIL is a partner in a 156 MW gas-fired power plant operated by the Gujarat State Energy Generation Ltd, as well as the Petronet LNG consortium that will deliver LNG to the Indian market. Over the past few years, GAIL has diversified into the domestic E&P sector, holding stakes in 11 blocks in India and one in Myanmar.

Strategy

In a recent interview with a news agency, GAIL stated that it planned to invest INR5bn during the next five years to purchase equity stakes in foreign gas companies and overseas exploration work. The Indian firm is interested in picking up an equity stake in Egypt's Nile Valley Corporation and exploration concessions in Brazil, the Philippines and Myanmar. GAIL is also exploring the viability of a subsea gas pipeline link between an offshore gas field in Myanmar to India.

Latest Developments

July 2007 saw GAIL declare its interest in buying an equity stake in the US$10bn Trans-Saharan pipeline. The planned 4,300km gas pipeline, which will run from Nigeria through Niger and Algeria, will have a capacity of 20-30 bcm and is scheduled to come on stream in 2015. GAIL's representatives have already met officials from Nigeria and Algeria in Brussels to discuss involvement in the project. GAIL has also signed a deal with ONGC to pool resources to maximize output, transportation and marketing of gas.

GAIL was due to ink a deal with Shell to gain access to Shell's Hazira LNG terminal for import purposes on a toll basis. The two firms plan to build a US$10mn pipeline that will connect the terminal to GAIL's Dahej-Uran pipeline, thereby rendering Hazira a part of GAIL's nationwide gas grid, the largest transmission network in the country.

Both sides stand to benefit from the proposed project, with India having facilitated access to gas imports and Shell gaining access to GAIL's domestic gas clients, especially those in the northern markets.

3.2. India Natural Gas Sector : Development and Outlook

• Deregulation of domestic gas prices has been gradually gathering momentum with the GoI, after a delay of nearly five years, effecting an increase in prices in July 2005 for core sector consumers and deregulating prices for other consumers. R-LNG has also been successfully marketed by the offtakers, and private/JV producers have been able to revise prices upwards. Because of these developments, nearly 50% of the market today is buying gas at market determined rates—a significant change when compared with the scenario in the recent past.

• The price of R-LNG supplied by PLL, the main supplier in the Indian markets at present, is also expected to undergo a significant change beginning January 2009, when the currently existing cap is lifted and prices get gradually aligned with the JCC prices. The incremental LNG to be sourced in the Indian market is also expected to be available at higher prices than contracted hitherto, given the tight demand-supply levels for LNG current and envisaged in the global market.

• Regulatory policies governing the gas sector are with the appointment of the regulator under the PNGRB.

3.3. Global Gas Market Overview

• The world had 181.46 trillion cubic meters (tcm) of proven natural gas reserves at end-2006, according to the BP Statistical Review of World Energy, June 2007. Unlike oil, where 61% of global proven reserves are located in the Middle East, there is a broader distribution of gas reserves across the globe, with 41% situated in the Middle East and 35% in Europe and Eurasia. The Asia Pacific and Africa regions have 8% each of the remainder, with North America and Latin America each holding 4%.

• Global gas consumption has grown by nearly 27% over 1996-2006, compared with oil demand growth of 17% over the same period.

• Natural gas is used for several purposes and applications. The two principal sources of demand are the industrial and residential sectors, which accounted for 35% and 33% of global gas consumption in 2005, according to the International Energy Agency (IEA). Demand from the commercial and public services sectors accounts for around 13%, 10% is used as feedstock for the petrochemicals industry and around 6% is used in transportation.

• In addition, as investment in liquefied natural gas (LNG) increases and the global LNG trade develops, the gas market may begin to look more like the oil market over time.

• The worldwide trend observed over recent years of a shift from oil- to gas-fired power stations, the growing use of gas in enhanced oil recovery (EOR) processes and unconventional oil production, and global efforts to reduce gas flaring will underpin rising demand.

3.4. Energy Market Overview: India

• India is the world's fifth-biggest energy consumer and continues to grow rapidly. It is the third-biggest global coal producer, but has limited supplies of oil and natural gas.

• Oil accounts for about 35% of India's total energy consumption, with its share of the mix having risen from 30% earlier this decade. India's 5.69bn bbl of proven oil reserves (BP Statistical Review of World Energy, June2007) represent just 0.5% of the world's total, with Mumbai High being the biggest producing field. The December Oil & Gas Journal survey reports reserves lower at 5.62bn bbl. India's average oil production level (total liquids) for 2006 was 807,000b/d.

• In terms of natural gas, India accounts for 0.4% of global reserves and just over 1% of production. Again, most of the gas resides in Mumbai High. Major natural gas discoveries by a number of domestic companies hold significant medium- to long-term potential, with Reliance Industries, Oil & Natural Gas Corporation (ONGC) and Gujarat State Petroleum (GSPC) all reporting significant deepwater finds.

• The oil and gas sector is dominated by state-owned enterprises, although the government has taken steps in recent years to deregulate the industry and encourage greater foreign participation.

• India's state-owned ONGC is the largest oil company, dominating the up- stream sector and accounting for roughly three-quarters of the country's oil output during 2006, according to Indian government estimates.

• The Indian government has introduced policies aimed at increasing domestic oil production and oil exploration activity. As part of this effort, the Ministry of Petroleum and Natural Gas crafted the New Exploration Licensing Policy (NELP) in 2000, which permits foreign companies to hold 100% equity ownership in oil and gas projects. Very few oil fields are currently being operated by IOCs.

• The Indian Oil Corporation (IOC) is the largest state-owned company in the downstream segment, operating 10 of India's 17 refineries and controlling about three-quarters of the domestic oil transportation network. Reliance Industries, a private Indian firm, opened India's first privately- owned refinery in 1999, and has gained a considerable market share.

• There is a focus on greater gas, nuclear and hydro use in the energy mix, although coal will continue to dominate during the forecast period to 2011.

3.5. Competitive Landscape

Key players- India Oil and Gas Sector

• ONGC Limited

• Oil India Limited

• Indian Oil Corporation Limited

• Bharat Petroleum Corporation Limited

• Hindustan Petroleum Corporation Limited

• Chennai Petroleum Corporation Limited

• Mangalore Refinery and Petrochemicals Limited

• Kochi Refinery Limited

• Cairn Energy

• Reliance Industries Limited

• Petronet LNG Limited

• Shell

• Gujarat State Petroleum Corporation

Shell-Summary

Shell India is active in lubricants, LPG, petrochemicals and solar energy. It has moved into the LNG business and has also received permission to set up a network of 2,000 service stations. Bharat Shell Ltd (BSL) is a 51:49 JV that produces and markets a range of Shell-branded lubricants in India through BPCL's retail outlets, authorized dealers and to industrial customers. BPCL agreed to sell its 49% stake to Shell in February 2007. Shell Gas (LPG) distributes LPG in western and central India, while Shell Solar markets solar- powered home lighting units in rural districts of South India. Shell has also opened the US$600mn LNG terminal in Hazira, Gujarat. Capacity will be doubled to 5mn tpa in two years' time and there is scope for a further expansion to 10mn tpa if the market continues to expand. However, volumes have so far been below expectations as the government seeks to secure cheaper LNG contracts.

Petronet LNG-Summary

Petronet LNG was set up by the government of India to import LNG and set up domestic LNG terminals. The company's major shareholders include GAIL, ONGC, IOC, BPCL and Gaz de France. The JV signed a 25-year SPA with Ras Laffan LNG Ltd (Rasgas) in 1999 for the import of 7.5mn tpa of LNG starting in 2004. Petronet's first LNG terminal, a 5mn tpa facility located in Dahej, Guj arat, started up operations in January 2005. The JV is also planning to construct a second 2.5mn tpa terminal in Kochi, Kerala, but the project has been delayed until the end of 2010. The key partners in Petronet are reportedly seeking to sell their interests or seek a winding up of the Petronet India business.

GSPC- Summary

In August 2007, Gujarat State Petroleum Corporation (GSPC) published a shortlist of eight IOCs that are interested in acquiring a 20-30% stake in KG- OSN-2001/03-the Deen Dayal block-in the Krishna-Godavari (KG) basin. GSPC, wholly-owned by the Gujarat state government, discovered gas in the KG basin in June 2005, where it estimates gas reserves to be around 566bcm, alongside unqualified volumes of crude oil. This is the second time GSPC has shortlisted a number of IOCs to acquire an interest in the project. Currently, GSPC holds an 80% interest in the field, with Canada's Geoglobal Resources and India's Jubilant Enpro owning the remainder.

ONGC S t re n g t h s

• Unrivalled exploration portfolio;

• Leadership in domestic oil and gas supply;

• Growing downstream oil presence;

• Growing international portfolio.

W e a k n e s s e s

• Limited financial or operational freedom;

• Cost and efficiency disadvantages;

• Declining output from mature assets.

O p p o r t un i t i e s

• Huge cost cutting potential;

• Higher recovery rates from existing fields;

• Untapped domestic oil and gas potential;

• Strong domestic energy demand growth.

T h r e at s

• Rising investment requirement;

• Long-term decline in oil production;

• Changes in national energy policy.

Market Position

ONGC is the Indian government's main upstream vehicle in what is a largely state-controlled oil and gas sector. The government owns 74.14% of the company, which accounts for approximately 61 % of India's crude oil output and71 % of natural gas production. It is also diversifying into refining and oil distribution, while attempting to build an international upstream asset base. ONGC now owns 89%of Mangalore Refinery and Petrochemicals Ltd (MRPL), which operates an 194,000b/d refinery in south-western Karnataka State. The company has received authorisation to open a network of 600 service stations, while MRPL was granted approval in February 2004 to set up 500 retail outlets. It is 30% partner to Cairn India in the important new Rajasthan oil discoveries and has made substantial gas discoveries in recent months, located mainly offshore in the KG basin.

Hindustan Petroleum Corporation Ltd (HPCL)

S t re n gt h s

• Strong refining and distribution position;

• Substantial retail expansion planned.

Weaknesses

• Limited financial or operational freedom;

• Cost and efficiency disadvantages;

• Lack of full integration benefits.

Opportunities

• Substantial cost cutting potential;

• Refinery upgrading/expansion;

• Extension of retail network;

• Strong domestic energy demand growth.

T h r e at s

• Rising investment requirement;

• Fuels competition from IOCs and Indian groups;

• Changes in national energy policy.

Market Position

HPCL is the second largest integrated refining and marketing group in India, accounting for around 22%of the country's refining capacity. The Mumbai refinery has an installed capacity of 5.5mn tpa, while the Visakhapatnam facility has a

7.5mn tpa (152,000b/d) capacity. It has a minority stake in the 9mn tpa MRPL, although it recently agreed to sell its stake to the unit's majority owner ONGC, and also has an interest in the Petronet LNG consortium. Products are distributed throughout a network of approximately 7,909 retail outlets.

Indian Oil Corporation Limited (IOCL)

S t re n g t h s

• Country's biggest oil refiner;

• Leading fuels distributor;

• Majority owner of oil infrastructure.

W e a k n e s s e s

• Limited financial or operational freedom;

• Cost and efficiency disadvantages;

• Lack of integration benefits.

O p p o r t un i t i e s

• Substantial cost cutting potential;

• Refinery upgrading/expansion;

• Extension of retail network;

• Strong domestic energy demand growth.

T h r e a t s

• Rising investment requirement;

• Fuels competition from IOCs and Indian groups

• Changes in national energy policy.

Market Position

State-run IOC is the country's largest commercial enterprise. It holds a 30% share of the refinery sector, the country's largest retail and oil pipeline networks and a 56%share of the fuels segment. The company owns and operates 10 of the country's 15 refineries with a total processing capacity of 1.2mn b/d, equal to an approximate 40% market share.

It also operates the country's largest retail network of over 8,000 service stations,

92 aviation fuel stations and 78 LPG bottling plants, which are served by 182 bulk storage terminals, installations and depots. Market share in the fuels segment is approximately 56%, with the inclusion of the 2,765 service stations belonging to its affiliate IBP. IOC also operates the country's largest network of crude and product pipelines (7,000km) with a total transport capacity of 43.45mn tpa.

Competitors in the petrochemicals business are:

1. Reliance Petrochemicals

2. Haldia Petrochemicals Ltd.

3. Imports

3.6. Gas Supply And Demand

In terms of natural gas, the region in 2007 consumed an estimated 441bcm, with demand of 677bcm targeted for 2012, representing the strongest growth globally (65.27% between 2006 and 2012). Production of an estimated 350bcm in 2007 should reach 501bcm in 2012, but implies net imports rising from an estimated91bcm per annum in 2007 to 176bcm in 2012. This is in spite of many Asian gas producers being major exporters. Japan's share of gas consumption in 2007 was an estimated 19.84%, while its share of production is minimal. By 2012, its share of gas consumption is forecast to be 15.37%.

3.7. Natural Gas Marketing

Natural gas marketing is a relatively new addition to the natural gas industry, beginning in the mid-1980's. Prior to the deregulation of the natural gas commodity market and the introduction of open access for everyone to natural gas pipelines, there was no role for natural gas marketers. Producers sold to pipelines, who sold to local distribution companies and other large volume natural gas users. Local distribution companies sold the natural gas purchased from the pipelines to retail end users, including commercial and residential customers. Price regulation at all levels of this supply chain left no place for others to buy and sell natural gas. However, with the newly accessible competitive markets introduced gradually over the past fifteen years, natural gas marketing has become an integral component of the natural gas industry. In fact, the first marketers were a direct result of interstate pipelines attempting to recoup losses associated with long term contracts entered into as a result of the oversupply problems of the early 1980s.

The role of natural gas marketers is quite complex, and does not fit exactly into any one spot in the natural gas supply chain. Marketers may be affiliates of producers, pipelines, and local utilities, or may be separate business entities unaffiliated with any other players in the natural gas industry. Marketers, in whatever form, find buyers for natural gas, ensure secure supplies of natural gas in the market, and provide a pathway for natural gas to reach the end-user.Essentially, marketers are primarily concerned with selling natural gas, either to resellers (other marketers and distribution companies), or end users. On average, most natural gas can have three to four separate owners before it actually reaches the end-user. In addition to the buying and selling of natural gas, marketers use their expertise in financial instruments and markets to both reduce their exposure to risks inherent to commodities, and earn money through speculating as to future market movements.

3.8. Contracts

Physical trading contracts are negotiated between buyers and sellers. There exist numerous types of physical trading contracts, but most share some standard

specifications including specifying the buyer and seller, the price, the amount of natural gas to be sold (usually expressed in a volume per day), the receipt and delivery point, the tenure of the contract (usually expressed in number of days, beginning on a specified day), and other terms and conditions. The special terms and conditions usually outline such things as the payment dates, quality specifications for the natural gas to be sold, and any other specifications agreed to by both parties.

At GAIL, there are three different types of contracts for the Gas to be marketed:

1. APM Contract

2. R-LNG Contract

3. PMT Contract

PMT contract-FeaturesSALE AND PURCHASE OF GAS

Sellers agree to deliver, on a Daily basis, to the Buyer one hundred percent (100%) of the Deliverable Volume of Sales Gas at the Delivery Point and the Buyer, provided the Gas is made available and tendered for delivery by the Sellers, agrees to take and purchase, on a Daily basis, one hundred percent (100%) of the Deliverable Volume of Sales Gas provided, however, that Sellers, at Sellers’ sole discretion

The Deliverable Volume on the date of execution of this Contract is 17.3 MMSCMD equivalent to [617,857 MMBTU/ Day] which Deliverable Volume shall vary every Quarter based on the Delivery Profile. The use of MMSCMD in this Clause 2.1(c) is for the purpose of reference only.

Each of the Sellers shall, severally sell their respective Participating Interest share of Sales Gas to the Buyer in the quantities set forth in this Contract and the Buyer shall purchase from each Seller that Seller’s Participating Interest share of Sales Gas and pay for such Sales Gas in accordance with the terms of this Contract.

During the Contract Period, if there is any Additional Gas from the Panna-Mukta and Mid & South Tapti Fields that becomes available for sale then the Sellers shall use reasonable endeavours to sell and deliver such Additional Gas to the Buyer and the Buyer shall use reasonable endeavours to purchase and receive the same, at the Delivery Point at the Sales Gas Price.

On any Day, the Buyer may nominate for delivery at the Delivery Point a quantity of Sales Gas up to the Deliverable Volume.

In the event that the Sellers are compelled to shutdown the Sellers’ Facilities or curtail production for reasons arising out of the Buyer’s inability to take Sales Gas at the Delivery Point due to any unforeseen circumstance or an event of

Force Majeure, then the Sellers shall not only be discharged of its obligation to deliver Nominated Daily Quantity on such Day(s)

Quarterly Take or Pay Quantity

• For each Quarter there shall be a Quarterly Take or Pay Quantity.

• The aggregate of Deliverable Volume for each Day in the Quarter; less Quarterly Shortfall Quantity for that Quarter; less The quantities of Sales Gas which the Sellers were prevented from supplying or the Buyer was prevented from receiving Sales Gas due to Force Majeure during that Quarter; less The quantities of Sales Gas which the Sellers were prevented from supplying or the Buyer was prevented from receiving Sales Gas due to Planned Maintenance during that Quarter; less The quantities of Sales Gas which the Buyer rejects as being Off - Specification Gas.

Quarterly Take or Pay Obligation

If in any Quarter the ac t u a l quantity of Sales Gas including Make Up Gas less Additional Gas taken by the Buyer (the “Actual Quarterly Quantity” or “AQQ”) is less than the Quarterly Take or Pay Quantity (such deficit being the “Deficit Quantity”), the Buyer shall pay to the Sellers an amount equal to: (Quarterly Take or Pay Quantity * Sales Gas Price) minus (AQQ * Sales Gas Price) For the purposes of calculation of Quarterly Take or Pay obligation, the applicable Sales Gas Price shall be the Tapti Gas Price.

PRICE AND BILLING

The Buyer shall pay each of the Sellers for each MMBTU of Gas on NHV basis delivered and taken hereunder from the Mid & South Tapti Fields, a price calculated on a Quarterly basis of the Mid & South Tapti PSC (the “Tapti Gas Price”), which is incorporated by reference in this Contract, at a price not exceeding US $5.57/MMBTU being the ceiling price under the terms of the Mid and South Tapti PSC and price not exceeding US$5.73/MMBTU under the terms of the Panna-Mukta PSC.

The Sales Gas Price is calculated excluding taxes and levies. The Buyer shall reimburse each of the Sellers any tax (inclusive of sales tax and/or VAT) payable by each of the Sellers to the Government, a State Government or local authority, on account of the sale and /or transfer of title of Sales Gas to the Buyer at the Delivery Point. For the avoidance of doubt, royalty payments under the PSCs shall be borne by the Sellers. All costs downstream of the Delivery Point shall be borne by the Buyer.

FORCE MAJEURE

R e l i e f : If by reason of Force Majeure, the Sellers or the Buyer are/is rendered unable wholly or in part to carry out their or its obligations under this Contract, then the liability for failure to meet the obligations of the Party concerned, as long as and to the extent that the obligations are affected by such Force Majeure, shall be excused.

If such event or series of events of Force Majeure is not remedied or mitigated pursuant to discussions between the Sellers and Buyer within 30Days of the meeting between the Sellers and the Buyer, then the Contract may be terminated at the discretion of the Party not claiming Force Majeure, following a 30 days notice prior to termination, which notice may only be given after 30 Days of the aforesaid meeting.

D u t y t o M i ti g a t e E ff ec t s o f F o r c e M a j e u r e : A Party claiming Force Majeure shall exercise reasonable diligence to seek to overcome the Force Majeure event and to mitigate its effect on the performance of its obligations under this Contract and resume performance of obligations as soon as practicable once the effect of the event of Force Majeure ceases to exist. The Party affected shall promptly notify the other Parties as soon as the Force Majeure event has been removed and no longer prevents it from complying with the obligations, which have been suspended and shall thereafter resume compliance with such obligations as soon as possible.

SUSPENSION AND TERMINATION

The Sellers have not received from the Buyer due payment in accordance with the terms of this Contract towards the Sales Gas and/or the Quarterly Take or Pay Quantity in full (and not merely in part) within the periods specified. IF ANY OF THE PARTIES Commits any breach of a material term of this Contract, and, if that breach is capable of remedy, fails to remedy that breach within thirty (30) Days of notification from the Sellers of that breach. Fails to pay to the Sellers a sum due and payable under this Contract, within 30 Days from the date it was due for payment. Becomes insolvent or bankrupt or makes a composition or arrangements with its creditors. Merges with another entity where the surviving entity has not assumed in full the Buyer’s rights and obligations under the Contract.

APM Contract- Features

• In this type of contract, the prices of gas transmission are regulated by the government of India.

• Shipper pays the transmission charges every fortnight.

• Shipper also pays the charges towards spur line.

• The authorized and the unauthorized overrun charges are also payable for a fortnight.

• As for billing and payment, the transporter shall deliver electronically, an invoice as soon as possible to the shipper.

• Force Majeure remains the same as the PMT Contract.

• These contracts last for more than 10 years.

• Until the termination of the agreement, the amount of the bank guarantee as mentioned above shall be as per the amount given in the exhibit for respective contract years and the shipper shall renew the bank guarantee 15 days before its expiry.

R-LNG Contract- Features

• Either party may propose to extend the agreement beyond the basic period by giving notice one year prior to the expiry of the agreement.

• The agreement duration is generally for 10 years.

• Seller and buyer are aware that gas under this agreement and other gas can be supplied through the same pipeline in a commingled form.

• For each contract year, there is Annual Take or Pay Quantity (ATOPQ) which will be taken and paid for or paid for if not taken by the buyer.

• The ATOPQ shall be 90% of the annual contracted quantity.

• The buyer shall during each contract year, pay for the Actual quantity of gas taken or for 90% of ATOPQ for the relevant contract year.

• The price of the gas includes basic custom duty, purchase tax and exclusive of all other taxes, duties and statutory levies. Sales tax, entry tax, any other taxes and duties shall be payable from time to time.

• The buyer has to pay to the seller within 3 business days after the receipt of the fortnightly payment statement or seven days for the ATOP whichever is applicable.

• Termination occurs if buyer fails to pay a sum for sixty days or fails to take gas for a continuous period of three month.

• The same occurs if the seller fails to supply gas for a period of three months.

In a nutshell, the variables which actually distinguish the contracts are:

1. Name of the contract.

2. Contract effective date.

3. Contract expiry date.

4. Supply pressure

5. Shut down

6. TPT charges

7. Billing

8. Payment duration

3.9. Gas Pricing In India

Natural Gas Pricing

1. At present, there are broadly two pricing regimes for gas in the country, i.e., gas priced under APM and non-APM or free market gas. The price of APM gas is set by the Government. As regards non- APM/free market gas, this could also be broadly divided into two categories, namely, imported LNG and gas produced from JV fields. While the price of LNG imported under term contracts is governed by the SPA between the LNG seller and the buyer, the spot cargoes are purchased on mutually agreeable commercial terms. As regards JV gas, its pricing is governed in terms of the PSC provisions. At present, out of the total gas supply of 95 MMSCMD in the country, approx. 55 MMSCMD is APM gas and rest is non-APM gas (20 MMSCMD JV gas and 20 MMSCMD RLNG). APM gas, which comes from the existing fields of ONGC and OIL given to them on nomination basis by the Government, is on the decline; while it forms about 60% of the total gas available at present, its share is likely to come down to around 15-20% by 2011-12 while the quantities under RLNG and JV production will go up.

2. Background of APM Gas Pricing

2.1 Gas Pricing Prior to 1997

It was decided by the Government to fix the prices of natural gas on cost plus methodology in 1986 the price of natural gap was fixed at Rs.1400/MSCM by Government w.e.f. 30-1-1987. Subsequently, on the recommendation of the committee under the chairpersonship of Dr. Vijay L Kelkar, the price of natural gas was revised to Rs.l,550/MSCM, w.e.f. 1-1-1992, with provision to

increase the gas price by Rs. 100/MSCM p.a. up to Rs. 1850/MSCM by 1995.

2.2 Gas Pricing W.E.F 01.10.1997

2.2.1 On the recommendations of an expert committee on Natural Gas pricing under the Chairmanship of Shri T.L. Sankar, the Government decided to shift gas pricing methodology from cost plus basis to import parity pricing. Accordingly, the following pricing mechanism was put into effect from October 1, 1997.

2.2.2 The gas prices were linked to the cheapest alternative liquid fuel: Fuel Oil basket (Average of four fuel oils, viz.. Cargoes FOB, Med basis, Italy (1% sulphur); Cargoes CIF, NEW basis ARA (1% Sulphur); Singapore, FOB, HSFO 180 cst (3.5% surplus); and Arab gulf, FOB, HSFO, 180 cst (3.5% sulphur)) with progressivelyincreased fuel oil parity as given below:

Year % of Fuel Oil Parity (Other than N.E.)

1997-98 55%

1998-99 65%

1999-2000 75%

2.2.3 The Consumer Price was, however, subject to a ceiling of Rs.2,850 per MSCM and a floor of Rs.2,150 per MSCM. The consumer price of gas was intended to be reviewed after 3 years with a view to achieve 100% Fuel Oil Parity pricing over 4th and 5th year, i.e. in 2000-01 and 2001-02. However, this did not happen and the price of Rs.2,850/MSCM continued till 30.06.2005, which was about34% of the then fuel oil prices.

2.3 Pricing Mechanism w.e.f. 01.07.2005.

2.3.1 The consumer price was revised to Rs.3,200/MSCM for the following categories of consumers. It was also decided that all the APM gas (estimated at around 55 MMSCMD) will be supplied to only these categories.

a. Power sector consumers

b. Fertilizers sector consumers

c. Consumers covered under court orders

d. Consumers having allocations of less than 0.05 MMSCMD.

2.3.2 It was decided that the price of gas supplied to small consumers and transport sector (CNG) would be increased over the next 3 to 5 years to the level of the market price. With effect from 06.06.2006, the APM gas price to small consumers and CNG sector has been increased to Rs.4608 / MSCM.

2.3.3 It was decided that the gas price to the consumers other than those stated in para 2.3.1, which were hitherto getting gas at APM price through GAIL network, would be market determined.

Existing Producer Price & Consumer Price

Majority of Gas produced by ONGC, known as APM gas, is currently sold to GAIL of the price regulated by the Government. This price at which ONGC sells gas to GAIL is known as producer price. The price of this gas does not vary state wise/offshore areas, instead varies for North East Consumers and General Consumers (other than North East Consumers). The price at which GAIL sells the gas procured from ONGC, is called consumer price.

3. Pricing of R-LNG

A contract was signed with Rasgas, Qatar for supply of 5 MMTPA LNG (equivalent to about 18 MMSCMD] by Petronet LNG Limited and supplies were commenced from April 2004. The price for LNG has been linked to JCC crude oil under an agreed formula. However, the FOB price for the period up to December 2008 has been agreed at a constant price of $2.53/MMBTU. This price translates to RLNG price of $3.86/MMBTU ex-Dahej terminal.

In order to make the price of RLNG affordable, EGoM has decided in the meeting held on 11.1.07 for pooling of prices of 5 MMTPA RLNG presently being imported from Qatar with the price of new RLNG being imported on term contract basis. This Ministry accordingly issued orders on 6.3.07, in consultation with Ministry of Law, in compliance with the decision of EGoM. The pool price ex- Dahej of RLNG for various consumers would be about US$4.92/MMBTU.

4. Pricing of Gas under Pre-NELP Production Sharing Contracts - PMT and Ravva JV Gas

4.1 Production Sharing Contracts were executed by GOI with Ravva consortium and PMT consortium on October 28, 1994 and December12, 1994 respectively. PSCs contain the following pricing provisions: (in $/MMBTU)

JV Price formula FloorPrice

CeilingPrice

Commencement of gas supplies

PMT Price linked to a basket of international average of preceding 12 months Fuel Oil prices (Cargoes FOB, Med basis, Italy (1% sulphur); Cargoes CIF, NEW basis ARA

2.11 3.11 June'97-Tapti

Feb'98-Panna-

Mukta

(1% Sulphur); Singapore, FOB, HSFO 180 est (3.5% surplus); Arab gulf, FOB, HSFO, 180 est (3.5% sulphur))

Ravva Price linked to average of Fuel Oil for preceding 12 months (3%/3.5% Sulphur residual fuel oil of Singapore, FOB. Rotterdam Barge and Med FOB)

1.75 3.00 Apr'97

4.2 In terms of PSC for PMT, the ceiling prices are to be revised to

150% of 90% F.O. basket (average of the preceding 18 months), after

7 years from the date of first supply. Thus, the revision was due w.e.f. June 2004 for Tapti and February 2005 for Panna Mukta. The PMT gas prices have since been revised. While PMT sells 4.8 MMSCMD of gas themselves for the balance quantity of about 6 MMSCMD, GAIL paid @ $3.86/MMBTU during 2005-06 and is paying @$4.75/MMBTU w.e.f 1.4.06 based on counter-matching the price offered by prospective consumers in response to the bid floated by the consortium. However, this gas is being supplied by GAIL to power and fertilizers sector consumers along HBJ at APM price and adjustments being made through the gas pool account mechanism in terms of the pricing order of 20.6.2005. This pricing order states that owing to the existing supply linkages and operational requirements, it may well happen that the customers entitled for APM gas get physical supplies of gas produced by the joint venture or from suppliers other than ONGC/OIL at market price and vice versa. With a view to operationalise the aforesaid decision, the Gas Pool Account mechanism would be utilized, with the inflow into the pool account coming from APM gas sales to consumers not entitled for APM gas at market price and outflow would be for purchase of non-APM gas to supply to the consumers entitled for gas at APM

price. This arrangement would be subject to the ceiling of existing available APM gas from ONGC and OIL (about 55 MMSCMD).

4.3 In case of Ravva, the revision of ceiling price is due after 5 years from the date of supply and the revised ceiling price is to be negotiated between the Buyer and the Seller in good faith. The price revision for Ravva was due w.e.f. April 2002. The price revision has been effected w.e.f. July 1, 2005 and GAIL has been paying @$3.50/MMBTU since then. The share of this gas going to APM consumers is being charged by GAIL at APM price, with adjustment through gas pool account mechanism. The total quantity of this gas is around 1 MMSCMD.

The following table sums up the prices of some of the most important fields in the country (mostly short-term and in small quantities):

Prevailing gas prices under various PSCs (July 2007)

The prevailing prices as per signed contracts under various PSCs are:

Name ofBuyer Approximate quantity Price Basis

Panna-Mukta & Tapti

GAIL5.7 MMSCMD from1.4.2005 $ 3.86/MMBTU Fixed Price

5 MMSCMD from $ 4.75/MMBTU

1.4.2006 for 2 years

GSPC, GGCL, IPCL, RII

4.6 MMSCMD from1.4.2005 to March 2006 $ 4.08/MMBTU Fixed Price

GSPC, GGCL, IPCL, RIL

1.8 MMSCMD from1.4.2006 to March 2008 $ 5.70/MMBTU Fixed Price

TorrentPower

0.9 MMSCMD from New revised plan of development (NRPOD) Gas scheduled from September 2007 (total expected gas production from NRPOD is 5.5MMSCMD) $ 4.75 MMBTU Fixed Price

RUVUNL

1.5 MMSCMD from NRPOD Gas scheduled from September 2007 $ 4.60/MMBTU Fixed Price

GGCL

1.65 MMSCMD from NRPOD Gas scheduled from September 2007 $ 5.70/MMBTU Fixed Price

Ravva

GAIL

1.10 MMSCMD from existing discoveries of Ravva1 MMSCMD fromSatellite field

$ 3.50/MMBTU effective from 1st July 2007$ 4.30/MMBTU effective from September 2006

Fixed Price

Lakshmi & Gauri

GSPC 0.15 MMSCMD$ 5.50/MMBTU - June'07 Fixed Price

GPEC 0.9 MMSCMD$4.75/MMBTU- Nov'06 Fixed Price

GGCL 0.5 MMSCMD$ 4.60/MMBTU- June'06

Floor price is$3.11/MMBTUand ceiling is$4.60/MMBTU Price linked up with 95% crude basket and 5% with Naptha

Bheema- CB-ONN-2000/02 0.3 MMSCMD

$ 4.50/MCF which is equivalent to$4.50/MMBTU Fixed Price

The only long term contract in the country was the 7 year contract

with Panna Mukta Tapti fields as detailed below:

Gas price (USD/ mmbtu)

Terms of sale

Natureof Gas price

Quantity(MMSCMD)

Contract term

Buyer : GAIL (for various power, fertilizer and industrial users)

2.11 to 3.11 Floor -2.11Cap-3.11

10 7 years (upto2004-05)

It said that as can be seen, from the above tables, gas prices are much lower for long term contracts and with larger volumes than short term contracts with small quantities.

5. Pricing of Gas With Reference to NELP Provisions:

As per the provisions of PSC under NELP, the price of natural gas for sale to consumers shall be market driven. Prior approval of MoPNG has to be obtained for the formula or the basis on which the price is fixed. It has been provided that the Contractor shall sell all Natural Gas produced and saved from the Contract Area by arms-length transactions.

Gas Pool Account

In 1992, the Government established the Gas Pool Account in order to encourage the development of the gas industry in India and to compensate the companies involved in the exploration, development and marketing of gas for the low margins on the development and sale of gas at prices fixed by oil ministry. The landfall price and producer price is credited to the gas pool account. GAIL maintains the Gas Pool Account on behalf of the government.

Under the current pricing mechanism, GAIL collects Rs. 2.5 billion every year from natural gas consumers on behalf of the gas pool account. This sum is used for the following purposes:

i. Payment of higher international gas prices for the new joint-venture companies;ii. Compensation to Oil India Limited (OIL) for subsidizing prices in the North-East;iii. Compensation to GAIL/OIL for increases in operating cost; andiv. Exploration and development of smaller fields.

The balance is transferred to the Central Exchequer. Gas Pool Account has now been dismantled.

Options for gas pricing policy

The Production Sharing Contracts (PSCs) provide for pricing of gas on the basis of sale on arms-length basis. The role of the Government is to approve the valuation of gas for the purpose of determining Government take. In order to provide transparency in approving valuations, the Government formed a Committee in August 2006 to formulate guidelines for approving natural gas price formula / basis for giving Government approval under the Production Sharing Contracts.

The Committee was headed by Joint Secretary & Financial Advisor, Ministry of Petroleum & Natural Gas and had Director General, Directorate General Hydrocarbons and concerned Joint Secretaries as other members. The Committee held extensive consultations with various stakeholders, including the producers as well as the consumers, besides other expert organizations, before finalizing its report. The Committee has recommended that in all situations where a price discovery through competitive bidding is possible, there should be no need to apply any other principle for valuation of gas. Once a market-determined price has been discovered between the suppliers and customers through a transparent competitive bidding process, there should be no need for the Government to interfere with the same.

Further, it has said that in the absence of a market determined price discovered through a transparent bidding process, where valuation of gas has to be necessarily done by Government, it may be done based on the price in the most recent competitively determined contract in the region duly indexed to the present. Indexation is to be done as per provisions of the market determined reference contract, as each market-determined contract sets out various terms and conditions of supply, including the price review mechanism.

The Committee has noted that each contract, normally, has a price review clause every five years. If the price stands reviewed as per the reference contract, that may become the new reference price. For interim periods, the Committee has recommended that indexation may be linked to percentage increase in price of cheapest liquid fuel, i.e., Furnace Oil (FO), which is not only the cheapest liquid fuel but has also shown least price volatility in recent years. It was of the view that the above valuation may be applied only when actual supply has commenced and the price has not been discovered through the market mechanism. However, if the actual price, at which any producer supplies to any consumer, is higher than the one arrived at by the above methodology, then the higher price is to be reckoned for Government take. It would be ideal if the Committee's approach had never to be applied, but if the eventuality does arise, DG DGH and Director, PPAC will do the calculations based on Committee's recommendations. It would be DGH's responsibility to ensure that the Producer remits the Government's take accordingly.

The Government has since issued orders for constitution of an Empowered Group of Ministers to consider issues pertaining to pricing of natural gas produced in the country.

The EGoM has held two meetings, which were inconclusive. A sub-committee of senior brass from the Ministries of Finance, Law, Power, Petroleum, Planning Commission and EAC is currently looking into the pricing formula proposed by RIL for pricing its gas for D6 block in KG basin. The recommendation of this sub-committee are likely to be submitted shortly to the EGoM, expected to meet on September 12, 2007.

Issues related to supply and pricing of natural gas (July 2007)

• Natural Gas meets only 8.5% of the total energy requirement of the country as against 56% share of coal. The country has natural gas reserve of 37 TCF which is about is 0.6% of the world natural gas reserve. The fertilizer and power sectors are the major consumers of natural gas used in the country. While 79% of the gas requirement of the fertilizers plants is being met presently, another 7.73 MMSCMD of gas is required for meeting the shortage of existing gas based plants. For conversion of Naphtha and FO/LSHS based fertilizer units, about 40 MMSCMD would be required. Thus, the total requirement for the fertilizer sector would be about 86 MMSCMD. Against the projected demand of gas of 279.43 MMSCMD in 2011-12, total conservative estimate of supply is 191.42 MMSCMD, leaving shortfall of about 88 MMSCMD. This would need to be met through imports and expeditious action on the exploration and development of discoveries in the domestic area.

• On the gas pricing front, the MoP&NG informed that the system of

100% Government controlled pricing mechanism is being replaced by free market pricing through de-regulation. Before 1997 Government fixed the price of natural gas on cost plus methodology. Shri T.L.

Shankar Committee recommended to shift gas pricing methodology from cost plus basis to import parity pricing. However, consumer price continued to be regulated at 34% of then fuel oil prices till 2005. The pricing mechanism of gas under pre-NELP production sharing contract is determined by linking it to a basket of international average of preceding 12 month fuel oil prices with a floor and ceiling.

• Under NELP regime, the contractor makes an upfront commitment of risk money without any liability on the Government. The full development cost is recoverable in the event of discovery. The cost recovery limit and profit petroleum sharing split are biddable parameters. The management committee works as approval body for the development plan submitted by the contractor. Profit share is determine by pre-tax investment multiple (PTIM) formula which rewards the Government only at higher levels of revenues.

• Under the Production Sharing Contract (PSC), the contractor is free to market gas in the domestic market subject to the policy of the Government on gas utilization. Article 21.6.1 allows contractor to sell all natural gas from the contract area at arms length prices to the benefits of parties to the contract. Under Article 21.6.3, the Government has the right to approve the gas price formula keeping in view the prevailing gas pricing policy including the policy, if

any, on linkage of gas prices with liquid fuels. Ministry of Petroleum & Natural Gas have drawn up a set of guidelines for approving gas price/ formula for the purpose of determining Government take under NELP contracts. These provide for valuation based on the most recent competitively determined price in the region duly indexed to the present.

• KG-DWN-98/3 PSC provides for the Government to take its share of profit petroleum in cash or kind by exercising such an option on an annual basis. So far the Government has not exercised its option to take any gas in kind separately and entire profit petroleum has flowed to the Government in cash in all PSCs. In case the Government decides to take its share in kind, the following issues would need to be settled first:

i. The Government would have to designate a Government nominee,ii. The price of such gas would have to be at par with the price of gas fixed

by the contractor in order to avoid financial losses accruing in the consolidated fund of India,

iii. In view of the uncertainty in estimation of profit gas, the Government nominee may have to keep its infrastructure idle in the years when profit gas level fluctuates to a lower level.

• Ministry of Power stated that the construction of pipeline is linked to the production centre unlike the transmission part in the power sector which is insulated from the power production entities. As opposed to tariff based bidding in the power sector, the producer linkage for the construction of pipeline makes the system monopolistic. In reply, Ministry of Petroleum and Natural Gas stated that the risk taking is discouraged by providing advance tie-up with producer agencies before granting NOC for the construction of pipeline. However, the tariff for transportation would be regulated.

• Department of Fertilizer stated that the Govt. had directed that fertilizer sector should get priority in natural gas allocation. The Govt. had also approved the conversion of non-gas based fertilizer plants to gas based. It added that India could emerge as the potential hub for urea manufacture, which would require additional 95 MMSCMD of gas by the year 2011-12. It also suggested that certain equalization of gas prices would be necessary so that fertilizer availability at all places could be ensured.

• Planning Commission enquired whether the Indian fertilizer companies would be able to compete in the international market as they function under protected environment. It also opined that the freight equalization for natural gas may not be possible. In reply to his query on optimal production profile, DGH informed that the production profile determine the quantum of output technically possible over the life cycle of the source and the contractor cannot change the production without prior approval.

• DGH informed that the year-wise activity and development plan are approved by the Management Committee. DGH also undertakes audit of the technical plan, production profile and costs.

• It was observed that Ministry of Petroleum and Natural Gas should firm up demand and supply projections and draw up action plans with timelines for ensuring that the projected supplies become available. These may be included in the revised agenda note for ECC along with issues, if any, requiring decisions. It was also observed that the following issues would require further discussions with stakeholders before firming up the recommendations on pricing formula/basis for the gas from KG-DWN-98/3 :

i. the PSC stipulation relating to CAPEX, the system of approval of the developmental plan, production profile, technical plan, the system of audit by the Government and the need to make the system more transparent;

ii. the details and methodology for the administration of the provisions of PSC providing sale of natural gas produced from the contract area at competitive arms length prices;

iii. the gas utilization and pricing policy;

iv. the gas price formula and steps of the bid process submitted by M/s Reliance India Ltd to the Ministry for their approval including the rule for market clearing;

v. Whether to exercise the option for taking profit gas in kind or cash ?

The Consumer Price of Natural Gas, R-LNG and HVJ / DVPL / DUPL Transmission Tariff and Marketing Margin, adopted for computing the financial targets are given in the following table:-

(Rs./'OOO SCM)

Item PriceDomestic Gas - APM 3200Domestic Gas - APM (<50000 SCMD etc.) 4608Domestic Gas - Market Driven 7596Domestic Gas - NE Region - APM 1920Domestic Gas - NE Region - (Small Consumers) 2765Domestic Gas - NE Region - Market Driven 3200Panna - Mukta - Tapti JV Gas 7596Ravva JV Gas 5597Ravva Satellite 6877R-LNG (Pooled) - Outside Gujarat 8232

R-LNG (Pooled) - Inside Gujarat 7915Transmission Tariff (HVJ / DVPL) 954Transmission Tariff (DUPL) 1037Marketing Margin - R-LNG (Levelized) 224

3.10. Gas Demand Supply Projection

Petrochemicals/Refineries/Internal Consumption and Sponge Iron/Steel and other industries The current demand as per the industry estimates in the Petrochemicals/Refineries and Internal Consumption (of Gas Industries) sectors is about 25.37 MMSCMD in 2005-06. An annual growth rate of about 7 percent is assumed during the XI plan period, which would result in a demand of 33.25 MMSCMD by the terminal year of the XI Plan.

Similarly, the sponge iron/steel sector is also expected to grow at the same rate of 7 percent from the current level of 6 MMSCMD, reaching a level of7.86 MMSCMD by the terminal year of the XI plan.

The demand from various sectors has been compiled in the Report by

Working Group as given below:-

Sector Wise Gas Demand Projections (2007-2012)

2007-08 2008-09 2009-10 2010-11 2011-12

Power 79.70 91.20 102.70 114.20 126.57

Fertilizer 41.02 42.89 55.90 76.26 76.26

City Gas 12.08 12.93 13.83 14.80 15.83

Industrial 15.00 16.05 17.17 18.38 19.66

Petrochemicals/Refineries/InternalConsumption

25.37 27.15 29.05 31.08 33.25

Sponge iron/Steel 6.00 6.42 6.87 7.35 7.86

Total 179.17 196.64 225.52 262.07 279.43

140

120

100

80

60

40

20

0 2007-08

2008-09

2009-10

2010-11

2011-12

Power

Fertilezer

City Gas

Industrial

Petrochemicals/Refi neriesSponge iron/Steel

Overall Gas Supply projections during XI Plan

The supply projected by ONGC and OIL in the Plan period is expected to fall from 57.28 MMSCMD in 2007-08 to 51.08 MMSCMD in 2011-12. Supply from Private players/JVs is expected to increase from 23.26 MMSCMD to about 57.22 MMSCMD in 2011-12. This increase from private players, considered in the Working Group report, is primarily due to the 40 MMSCMD gas supply addition from RIL from 2008-09 onwards. DGH had then projected expected additional supplies of 20, 30 and 40 MMSCMD from RIL fields in 2009-10, 2010-11 and 2011-12 respectively and 54 MMSCMD from GSPC in each of the above years. However, later DGH has increased the expected availability of natural gas from KG D/6 blocks to 80 MMSCMD. DGH has also indicated that the anticipated availability of gas from GSPC fields would be 4.5 MMSCMD by 2011-12.

In the table below, the gas availability which is confirmed by DGH is shown as (B) and is the basis of the conservative scenario. The gas availability expected, but which is yet to be certified by DGH, is shown as (C) and is the basis of the optimistic scenario in the table below:

Source 2007-08 2008-09 2009-10 2010-11 2011-12

ONGC + OIL (A) 57.28 58.42 55.69 54.67 51.08

Pvt./JVs (As per DGH) (B) 23.26 61.56 60.28 58.42 57.22

Projected Domestic Supply(A+B)

80.54 119.98 115.97 113.09 108.30

Additional Gas Anticipated(C)

74 84 94

Total Projected Supply Conservative Scenario (A+B)

80.54 119.98 115.97 113.09 108.30

Total Projected Supply Optimistic Scenario (A+B+C)

80.54 119.98 189.97 197.09 202.30

250 ONGC + OIL (A)

200

150

100

50

02007-

082008-

092009-

102010-

112011-

12

Pvt./JVs (As perDGH)(B)Projected Domestic supplyAddtnl Gas Supply

Total proj SupplyCons. ScenarioTotal proj SupplyOpt. Scenario

Looking at the overall demand projections and even the optimistic scenario of expected domestic supplies, it is very clear that there would be a supply shortfall. Therefore, there is a need to step up imports in the coming 5 years. There is already an import of LNG to the tune of 18 MMSCMD by PLL at Dahej. The 5 MMTPA Dahej terminal of PLL is operating at full capacity.

The Hazira terminal of Shell with a capacity of 2.5 MMTPA is also operational. The Dahej terminal is set to expand to 10 MMTPA by 2010-11. Besides, the planned Kochi terminal of PLL with a capacity of 2.5 MMTPA (expandable to 5 MMTPA) is expected by 2010-11. The 5 MMTPA Dabhol terminal is projected to be fully operational by 2009-10. To begin with, the supplies would be 1.2 MMTPA, which would increase to 2.1 MMTPA in2008-09 to cater to the Dabhol Power Plant. This terminal would also enable a merchant sale volume of 2.9 MMTPA in 2009-10 when long term LNG is contracted. When LNG terminal at Mangalore is taken up, 1.25 MMTPA imports could be expected by 2011-12. Given this scenario, the LNG supply is projected to reach a level of 23.75 MMTPA by the year 2011-12

(Potentially it can add up 83.12 MMSCMD supplies at full capacity). The overall LNG projections are given below:-

LNG Supply Source 2007-08

2008-09

2009-10

2010-11

2011-12

Dahej 5.00 5.00 7.5 10.00 10.00

Hazira 2.50 2.50 2.50 2.50 2.50

Dabhol 1.20 2.10 5.00 5.00 5.00

Kochi - - - 2.50 2.50

Mangalore - - - - 1.25

Total LNG Supply(MMTPA)

8.70 9.60 15.00 20.00 23.75

Total LNG Supply(MMSCMD)

30.45 33.60 52.50 70.00 83.12

Assumption 1) Hazira expansion to 5.0 MMTPA is not considered in

XI Plan.

2) Mangalore terminal is expected to be partially commissioned in

2011-12

908070605040302010

0

2007-08

2008-09

2009-10

2010-11

2011-12

Dahej

Hazira

Dabhol

Kochi

Mangalore

TOTAL TPA

TOTAL SCMD

The LNG option would to a great extent augment the indigenous supplies to meet the demand shortfall. Given the two scenarios of indigenous supply, the total supply, including LNG, is expected to increase from 110.99 MMSCMD in 2007-08 to a level of 191.42 MMSCMD in 2011-12 under conservative scenario. Under the Optimistic Scenario, the total gas supply is expected to increase from 110.99 in 2007-08 to 285.42 MMSCMD in 2011-12.

Demand - Supply Gap for Natural Gas

It is expected that there would be a demand - supply gap (shortfall in supply) to the extent of 68.18 MMSCMD in 2007-08 which would fall to 43.06 MMSCMD in 2008-09 in both the scenarios. From this level, the gap would increase steadily to 88.01 MMSCMD by 2011-12 in the conservative scenario, whereas under the optimistic scenario, the gap would by and large be bridged from 2009-10 onwards and there is expected to be a demand- supply balance during the last 3 years of the XI Plan period. The overall demand-supply balance is presented below:

Overall Gas Demand Supply projection during XI Plan

Supply 2007-08 2008-09 2009-10 2010-11 2011-12

Total Supply ConservativeScenario

110.99 153.58 168.47 183.09 191.42

Total Supply OptimisticScenario

110.99 153.58 242.47 167.09 285.42

Demand (MMSCMD) 179.17 196.64 225.52 262.07 279.43

Demand Supply Gap I 68.18 43.06 57.05 78.98 88.01

Demand Supply Gap II 68.18 43.06 -16.95 -5.02 -5.99

300

250

200

150

100

50

0

-50

2007-08

2008-09

2009-10

2010-11

2011-12

Total-Cons. Scene Total-Opt. Scene. Demand MMSCPD Demand Gap I Demand Gap II

Projections for the next decade

PMO has desired that estimates of demand and supply of natural gas for the next decade should be made. While some reasonable projections have been

made for the 5 year period, it has not been feasible to make projections regarding indigenous production and demand for the next decade.

3.11. GAIL’s Pipeline Network

Having a strong distribution network or in GAIL’s case, a comprehensive pipeline network forms a vital part of its marketing strategy. Increasing the customers and retaining the existing ones can be achieved by having a good pipeline network. Good pipeline network caters to the needs of the customers and they become brand loyal.

Since inception, GAIL has been the undisputed leader in the marketing, transmission and distribution of Natural Gas in India. As India's leading Natural Gas Major, it has been instrumental in the development of the Natural Gas market in the country.

GAIL has a market share of 87% of the gas transmission business and 73% of the gas marketing business in India. GAIL's vast operations and projects include:

• 8000 kms of Natural Gas high-pressure trunk pipelines

• Trunk Pipelines with the capacity to carry 130 MMSCMD of Natural Gas across India

• Supplying nearly 70 MMSCM of Natural Gas per day as fuel to power plants for generation of about 5200 MW of power, as feedstock for gas-based fertilizer plants to produce about 11 MMTPA of urea and to over 500 other small, medium and large industrial units to meet their energy and process requirements.

• GAIL's 2,800 km long Hazira-Vijaipur-Jagadishpur (HVJ) pipeline and 610 km Dahej-Vijaipur pipeline (DVPL), between them, cater to all the gas based power plants, fertilizer plants, and industries along the entire West-North corridor of India.

GAIL also provide access to other pipelines, to third parties, for the transmission of Natural Gas. Currently GAIL transports about 8 MMSCMD of Natural Gas on behalf of various shippers.

GAIL has plans to construct National gas grid by connecting various pipelines but the development of the concept is taking time. GAIL had already completed the

Dahej - Vijaipur pipeline in 2004 for evacuation of RLNG from PLL Dahej LNG terminal, Kelaras - Malanpur pipeline in July 2006 to supply gas near Gwalior in Madhya Pradesh, Vijaipur -Kota pipeline in Jan 2007 for supply of natural gas to the customers in Rajasthan Region and Jagoti - Pithampur pipeline network in March,2007 for supplying gas to customers in M P region near Indore.

Details of Gas Pipelines in various states:

Length in Kms. DIA.

Gujarat 1553 42" TO 8"

Tripura 61 12" TO 4"

Assam 8 24" TO 3"

Tamilnadu 259 18" TO 4"

Andhra Pradesh (AP) 834 18" TO 4"

Madhya Pradesh (MP) 1421 42" TO 18"

Rajasthan 500 36" TO 4"

Uttar Pradesh (UP) 1482 36" TO 1"

Maharashtra 1300 30" TO 4"

Haryana 86 14" TO 4"

Delhi 96 18" TO 4"

Total Natural Gas Pipelines 8000

Recent Projects Commissioned

1. Dahej - Uran Pipeline

2. Dabhol - Panvel pipeline Project

Major Projects Under Execution

GAIL has also submitted the proposal for Expression of Interest (EOI) for laying following pipelines for transportation of gas to meet the gas demand of customers.

• Dadri-Bawana- Nangal Pipeline

• Chainsa-Gurgaon- Jhajjar- Hissar Pipeline

• Jagdishpur - Haldia pipeline

• Kochi- Kanjikkod- Mangalore / Bangalore Pipeline

• Dabhol- Bangalore Pipeline

• Kakinada-Haldia Pipeline

3.12. Petrochemical Marketing

GAIL made an entry into the petrochemicals market on April 19, 1999. Since then, polymer sales have increased nearly three-fold in volume, from110 KT in the Financial Year 1999-2000 to 311 KT in the Financial Year

2005-2006, and nearly four fold in value, from Rs 479 crore in the Financial Year 1999-2000 to Rs.1842 crore in the Financial Year 2005-2006. Out of a total Gross Margin of Rs. 3953 crore, polymers have contributed 22% in 2005-06.

For GAIL, petrochemicals were part of its master plan for vertical integration and utilization of every fraction of natural gas - GAIL uses natural gas as the feedstock for the manufacture of HDPE/LLDPE. Instead of setting up its plant in western India (Maharashtra and Gujarat) as was traditionally the case, GAIL opted to base it in northern India, looking at the large consumer base and demand for plastics. In doing so, they (GAIL) were able to provide impetus to the regional petrochemical downstream units to expand their production capacity in view of the proximity of source of raw material.

• Today, more than one-fifth of the polymers (HDPE, LLDPE) consumed in India are produced and marketed by GAIL.

• GAIL's polymer products are environment-friendly and fully recyclable.

• GAIL has established North India's only gas based integrated petrochemical complex in Pata, District Auraiya, Uttar Pradesh, about350 km from Delhi. This ISO 9000 and ISO 14000 certified facilityhas a capacity of 3,00,000 TPA of Ethylene and 3,10,000 TPA ofPolymers (HDPE & LLDPE).

• Capacity expansion to 4,40,000 TPA (Ethylene) is under way.

• An additional HDPE plant with 1,00,000 TPA capacity is being set up, with technology from Mitsui, Japan.

• GAIL’s polymer products include wide range of HDPE grades from plant of 100 KTA capacity based on technology from Mitsui, Japan, and wide range of HDPE and LLDPE grades from its swing plant of 210 KTA capacity based on technology from NOVA chemicals, Canada.

• GAIL markets its LLDPE and HDPE under the brand names G-lene and G-lex.

GA IL’s p et ro ch emic al Ma rke ting can b e e xp la in ed b y th e 4 P ’s of Ma rk etin g

Products

GAIL offers a wide range of grades to cater to diverse applications.

• Strategically located stockiest centers.

• Multiple delivery modes, supply from production sites as well as stock points.

• Efficient supply chain management ensure customer needs are met on time, with products that are of consistent quality.

The combination of GAIL’s wide range of Polyethylene grades based on internationally proven technologies, professional services from the Petrochemical Marketing Group (PMG), Zonal Offices and GAIL Polymer Technology Centre (GPTC) and commitment to customer value provides GAIL the ideal base to nurture a long term business relationship with the customers.

• G-lex high density polyethylene manufactured by GAIL is based on the slurry polymerization process of Mitsui, Japan.

• It provides a variety of grades. Its high molecular weight grades are suitable for a wide range of applications, including HM films, Pipes and Blow moldings.

Product Length of G-lex:

Blow Molding: G-lex blow molding grades have excellent processability, impact strength, stiffness and ESCR. The application includes small to medium size containers like Lube oil, shampoo, cosmetic, pesticide, Vanaspati and Edible oil containers.

Pipe: G-lex high molecular weight pipe grade is bi-modal and has excellent processability, chemical resistance and mechanical properties. Major usages are in the potable water system, sprinkler and sewerage. It conforms to hydrostatic pressure requirement as per PE 80 classification of IS 4984 . G- lex E52A003/E52U003(with UV stabiliser)are suitable for Optical Fiber Cable duct applications .

Film: G-lex HM film grade is bi-modal in nature with excellent processability, and an optimum balance of toughness and impact strength. It has an excellent drawdownability for making thin gauge film. Major usages are carry bags, industrial liners, grocery bags, shopping bags, and multilayer packaging film for edible oil packaging etc.

Monofilament: G-lex monofilament grade has an excellent extrudability and good balance between linear strength and knot strength. Major usage is in ropes and twines.

Product Length of G-lene:

Raffia : G-lene raffia grade has an excellent process ability and superior mechanical properties, making it excellent choice for processors demanding high strength tapes . The grade is well accepted in the market in manufacturing of woven sacks for fertilizer, sugar, food grains, chemicals packaging etc.

Injection moulding : G-lene Injection Molding grades are available in both UV stabilized and Non UV stabilized versions. The grades have an excellent processability. These are widely used in Industrial crates, vegetable crates, milk crates, soft drink crates, and household articles.

Film : G-lene film grades are tailor made with various additive packages to meet the packaging requirements of various end use sectors. The grades have excellent toughness and tensile strength in its class (butene) .Its low gel count and pinholes, excellent optical properties and sealing characteristics makes it excellent choice for consumers in Industrial packaging /liquid packaging .

Rotomoulding : G-lene rotomolding grade has an optimum balance of process ability, stiffness and impact strength. The grade finds application in water tanks, chemical tanks, & toys.

Extrusion coating/Lamination : G-lene extrusion lamination grade has an processability and drawdown ability. The grade is widely used by raffia processors in lamination of woven fabric and tarpaulin.

Pipe coating : G-lene pipe coating grade is designed for coating on steel pipes for transportation of oil and natural gas. The grade has excellent processability, ESCR, abrasion resistance, and adhesion characteristics.

Wire and cable : G-lene wire and cable grades are designed for poly Jelly filled cables as per DOT specification. The grades have an excellent processability, thermal resistance and electrical properties.

G-lene range of HDPE and LLDPE grades are based on the 'Sclairtech' solution process technology of NOVA Chemicals, Canada. Customers can achieve better profitability, through process and material efficiencies, by using these grades.

HDPE Raffia grade has excellent process ability and superior mechanical properties, making it ideal for high strength tapes.

Blow molding grades have excellent stiffness and impact properties, making them perfect for a number of applications in the lube oil, edible oil, cosmetics & detergent sectors.

LLDPE grades are designed with various additive packages to suit the stringent packaging norms of various end use sectors. They are used for heavy duty & liquid packaging applications where good physical properties are desired.

Injection moulding grades are available in both UV stabilized and Non UV stabilized

versions. These are widely used in soft drink crates, luggage shells, industrial moulding, and household articles.

Rotomoulding grade is designed to balance stiffness and impact strength. The grade has superior process ability, and finds applications in chemical tanks, water tanks, automotive components & toys.

GAIL has also introduced pipe coating HDPE grade for coating on steel pipes for transportation of oil and natural gas. The grade has excellentprocessability, abrasion resistance, and adhesion characteristics.

Price

• Import Parity Pricing is followed at GAIL. This is done due to several reasons, the primary reason being its dominant position in the petrochemical market.

The Fundamentals of Import Parity Pricing

Import Parity Price of a product means the price that the same product would have attracted had that been imported. The major constituents ofthe Import Parity Price are:

FOB Price Landed Cost/Import Parity

Price/Refinery Transfer Price/Refinery Gate Price/Ex-Refinery Price

+Premium+Ocean Freight+Insurance+Custom Duty+Ocean Loss+WharfageLanded Cost Ex-Storage Point Price+Marketing Cost

+Marketing Margins+Freight Equalization+Stock Loss+Working Capital

• There are two sources to the petrochemical prices:

1. Platts Report (revised every Wednesday)

2. ICIS – London Oil Report (revised every Friday)

• Along with these prices the other charges such as Octroi, sales tax, excise, freight charges are added wherever applicable.

• The pricing also depends upon the petrochemical Demand and Supply scenario.

Below is the product price report of both G-lex and G-lene (sample report). Both basic price and freight charges are charged in accordance to the location. This

price report is effective from the 13th of June, 2008.

PRODUCT PRICE – REPORT

Location Product Product NameEffectiv

e CurrencBasic

Price FreightBANGALO B52A003A B52A003A G-LEX 01/10/201 INR 69,940. 3,347.0BANGALO B52A003AS B52A003AS G-LEX 01/10/201 INR 69,440. 3,347.0BANGALO B52A003B B52A003B G-LEX 01/10/201 INR 69,440. 3,347.0BANGALO B52A003BS B52A003BS G-LEX 01/10/201 INR 68,940. 3,347.0

BANGALO B52A003NAB52A003NA G-LEX HDPE-2 01/10/201 INR 69,940. 3,347.0

BANGALO B52A003NBB52A003NB G-LEX HDPE-2 01/10/201 INR 69,440. 3,347.0

BANGALO B52A003NOGB52A003NOGG-LEX HDPE-2 01/10/201 INR 65,940. 3,347.0

BANGALO B52A003OGB52A003OG G-LEX HDPE 01/10/201 INR 66,940. 3,347.0

BANGALO B52A003OGSB52A003OGS G-LEX HDPE 01/10/201 INR 66,440. 3,347.0

BANGALO B55HM0003AB55HM0003A G-LEX HDPE 01/10/201 INR 74,580. 3,347.0

BANGALO B55HM0003AB55HM0003AS G-LEX HDPE 01/10/201 INR 74,080. 3,347.0

BANGALO B55HM0003BB55HM0003B G-LEX 01/10/201 INR 74,080. 3,347.0

BANGALO B55HM0003BB55HM0003BS G-LEX 01/10/201 INR 73,580. 3,347.0

BANGALO B55HM0003NB55HM0003NA G-LEX 01/10/201 INR 74,580. 3,347.0

BANGALO B55HM0003NB55HM0003NA G-LEX HDPE-2 01/10/201 INR 74,080. 3,347.0

BANGALO B55HM0003NB55HM0003NA G-LEX HDPE-2 01/10/201 INR 71,580. 3,347.0

BANGALO B55HM0003OB55HM0003OG G-LEX HDPE 01/10/201 INR 71,580. 3,347.0

BANGALO B55HM0003OB55HM0003OGS G-LEX HDPE 01/10/201 INR 71,080. 3,347.0

BANGALO B63A003A B63A003A G-LEX 01/10/201 INR 69,940. 3,347.0BANGALO B63A003AS B63A003AS G-LEX 01/10/201 INR 69,440. 3,347.0BANGALO B63A003B B63A003B G-LEX 01/10/201 INR 69,440. 3,347.0BANGALO B63A003BS B63A003BS G-LEX 01/10/201 INR 68,940. 3,347.0

BANGALO B63A003NAB63A003NA G-LEX HDPE-2 01/10/201 INR 69,940. 3,347.0

BANGALO B63A003NBB63A003NB G-LEX HDPE-2 01/10/201 INR 69,440. 3,347.0

BANGALO B63A003NOGB63A003NOG G-LEX HDPE-2 01/10/201 INR 66,940. 3,347.0

BANGALO B63A003OG B63A003OG G-LEX 01/10/201 INR 66,940. 3,347.0HDPE

BANGALO B63A003OGSB63A003OGS G-LEX HDPE 01/10/201 INR 66,440. 3,347.0

BANGALO C43D006AC43D006A G-LENE HDPE 01/10/201 INR 73,470. 3,347.0

BANGALO C43D006ASC43D006AS G-LENE HDPE 01/10/201 INR 72,970. 3,347.0

BANGALO C43D006B C43D006B G-LENE 01/10/201 INR 68,530. 3,347.0

BANGALO C43D006BSC43D006BS G-LENE HDPE 01/10/201 INR 68,030. 3,347.0

BANGALO C43D006OGC43D006OG G-LENE HDPE 01/10/201 INR 70,470. 3,347.0

BANGALO C43D006OGSC43D006OGS G-LENE 01/10/201 INR 69,970. 3,347.0

BANGALO E20AN009AE20AN009A G-LENELLDPE 01/10/201 INR 68,000. 3,347.0

BANGALO E20AN009ASE20AN009AS G-LENE LLDPE 01/10/201 INR 67,500. 3,347.0

BANGALO E20AN009BE20AN009B G-LENE LLDPE 01/10/201 INR 67,500. 3,347.0

BANGALO E20AN009BSE20AN009BS G-LENE LLDPE 01/10/201 INR 67,000. 3,347.0

BANGALO E20AN009OGE20AN009OG G-LENE LLDPE 01/10/201 INR 65,000. 3,347.0

BANGALO E20AN009OGE20AN009OGS G-LENE LLDPE 01/10/201 INR 64,500. 3,347.0

BANGALO E36A060AE36A060A G-LENE LLDPE 01/10/201 INR 70,030. 3,347.0

BANGALO E36A060ASE36A060AS G-LENE LLDPE 01/10/201 INR 69,530. 3,347.0

BANGALO E36A060BE36A060B G-LENE LLDPE 01/10/201 INR 69,530. 3,347.0

BANGALO E36A060BSE36A060BS G-LENELLDPE 01/10/201 INR 69,030. 3,347.0

BANGALO E36A060OGE36A060OG G-LENELLDPE 01/10/201 INR 65,530. 3,347.0

BANGALO E36A060OGSE36A060OGS G-LENE LLDPE 01/10/201 INR 65,030. 3,347.0

BANGALO E45A003A E45A003A G-LENE 01/10/201 INR 69,030. 3,347.0

BANGALO E45A003ASE45A003AS G-LENE HDPE 01/10/201 INR 68,530. 3,347.0

BANGALO E45A003B E45A003B G-LENE 01/10/201 INR 68,530. 3,347.0

BANGALO E45A003BSE45A003BS G-LENE HDPE 01/10/201 INR 68,030. 3,347.0

BANGALO E45A003OGE45A003OG G-LENE HDPE 01/10/201 INR 66,030. 3,347.0

BANGALO E45A003OGS E45A003OGS G- 01/10/201 INR 65,530. 3,347.0HDPE

BANGALO E52A003A E52A003A G-LEX 01/10/201 INR 71,160. 3,347.0BANGALO E52A003AS E52A003AS G-LEX 01/10/201 INR 70,660. 3,347.0BANGALO E52A003B E52A003B G-LEX 01/10/201 INR 70,660. 3,347.0BANGALO E52A003BS E52A003BS G-LEX 01/10/201 INR 70,160. 3,347.0

BANGALO E52A003NAE52A003NA G-LEX HDPE-2 01/10/201 INR 71,160. 3,347.0

BANGALO E52A003NBE52A003NB G-LEX HDPE-2 01/10/201 INR 70,660. 3,347.0

BANGALO E52A003NOGE52A003NOG G-LEX HDPE-2 01/10/201 INR 66,660. 3,347.0

BANGALO E52A003OGE52A003OG G-LEX HDPE 01/10/201 INR 68,160. 3,347.0

BANGALO E52A003OGSE52A003OGS G-LEX HDPE 01/10/201 INR 67,660. 3,347.0

BANGALO E52U003A E52U003A G-LEX 01/10/201 INR 74,940. 3,347.0BANGALO E52U003AS E52U003AS G-LEX 01/10/201 INR 74,440. 3,347.0BANGALO E52U003B E52U003B G-LEX 01/10/201 INR 74,440. 3,347.0BANGALO E52U003BS E52U003BS G-LEX 01/10/201 INR 73,940. 3,347.0

BANGALO E52U003NAE52U003NA G-LEX HDPE-2 01/10/201 INR 74,940. 3,347.0

BANGALO E52U003NBE52U003NB G-LEX HDPE-2 01/10/201 INR 74,440. 3,347.0

BANGALO E52U003NOGE52U003NOG G-LEX HDPE-2 01/10/201 INR 69,940. 3,347.0

BANGALO E52U003OGE52U003OG G-LEX HDPE 01/10/201 INR 69,940. 3,347.0

BANGALO E52U003OGSE52U003OGS G-LEX HDPE 01/10/201 INR 69,440. 3,347.0

BANGALO F20S009AF20S009A G-LENELLDPE 01/10/201 INR 68,000. 3,347.0

BANGALO F20S009ASF20S009AS G-LENELLDPE 01/10/201 INR 67,500. 3,347.0

BANGALO F20S009BF20S009B G-LENE LLDPE 01/10/201 INR 67,500. 3,347.0

BANGALO F20S009BSF20S009BS G-LENE LLDPE 01/10/201 INR 67,000. 3,347.0

BANGALO F20S009OGF20S009OG G-LENE LLDPE 01/10/201 INR 65,000. 3,347.0

BANGALO F20S009OGSF20S009OGS G-LENE LLDPE 01/10/201 INR 64,500. 3,347.0

BANGALO F55HM0003AF55HM0003A G-LEX HDPE 01/10/201 INR 71,130. 3,347.0

BANGALO F55HM0003AF55HM0003AS G-LEX HDPE 01/10/201 INR 70,630. 3,347.0

BANGALO F55HM0003BF55HM0003B G-LEX HDPE 01/10/201 INR 70,630. 3,347.0

BANGALO F55HM0003BF55HM0003BS G-LEX HDPE 01/10/201 INR 70,130. 3,347.0

BANGALO F55HM0003NF55HM0003NA G-LEX HDPE-2 01/10/201 INR 71,130. 3,347.0

BANGALO F55HM0003NF55HM0003NB G-LEX HDPE-2 01/10/201 INR 70,630. 3,347.0

BANGALO F55HM0003NF55HM0003NOG G-LEX 01/10/201 INR 66,630. 3,347.0

BANGALO F55HM0003OF55HM0003OG G-LEX 01/10/201 INR 68,130. 3,347.0

BANGALO F55HM0003OF55HM0003OGS G-LEX 01/10/201 INR 67,630. 3,347.0

BANGALO I50A180A I50A180A G-LENE 01/10/201 INR 70,000. 3,347.0

BANGALO I50A180ASI50A180AS G-LENE HDPE 01/10/201 INR 69,500. 3,347.0

BANGALO I50A180B I50A180B G-LENE 01/10/201 INR 69,500. 3,347.0

BANGALO I50A180BSI50A180BS G-LENE HDPE 01/10/201 INR 69,000. 3,347.0

BANGALO I50A180OGI50A180OG G-LENE HDPE 01/10/201 INR 67,000. 3,347.0

BANGALO I50A180OGSI50A180OGS G-LENE HDPE 01/10/201 INR 66,500. 3,347.0

BANGALO I50A250A I50A250A G-LENE 01/10/201 INR 69,600. 3,347.0BANGALO I50A250B I50A250B G-LENE 01/10/201 INR 69,100. 3,347.0

BANGALO I50A250OGI50A250OG G-LENE HDPE 01/10/201 INR 66,600. 3,347.0

BANGALO I60A080A I60A080A G-LENE 01/10/201 INR 71,160. 3,347.0

BANGALO I60A080ASI60A080AS G-LENE HDPE 01/10/201 INR 70,660. 3,347.0

BANGALO I60A080BI60A080AB G-LENE HDPE 01/10/201 INR 70,660. 3,347.0

BANGALO I60A080BSI60A080BS G-LENE HDPE 01/10/201 INR 70,160. 3,347.0

BANGALO I60A080OGI60A080OG G-LENE HDPE 01/10/201 INR 65,160. 3,347.0

BANGALO I60A080OGSI60A080OGS G-LENE HDPE 01/10/201 INR 64,660. 3,347.0

BANGALO I60U080A I60U080A G-LENE 01/10/201 INR 72,690. 3,347.0

BANGALO I60U080ASI60U080AS G-LENE HDPE 01/10/201 INR 72,190. 3,347.0

BANGALO I60U080B I60U080B G-LENE 01/10/201 INR 72,190. 3,347.0

BANGALO I60U080BSI60U080BS G-LENE HDPE 01/10/201 INR 71,690. 3,347.0

BANGALO I60U080OGI60U080OG G-LENEHDPE 01/10/201 INR 65,690. 3,347.0

BANGALO I60U080OGSI60U080OGS G-LENE 01/10/201 INR 65,190. 3,347.0

BANGALO I68A070NAI68A070NA G-LEX HDPE-2 01/10/201 INR 71,160. 3,347.0

BANGALO I68A070NBI68A070NB G-LEX HDPE-2 01/10/201 INR 70,660. 3,347.0

BANGALO I68A070NOGI68A070NOG G-LEX HDPE-2 01/10/201 INR 65,660. 3,347.0

BANGALO P41A004A P41A004A G-LENE 01/10/201 INR 68,140. 3,347.0

BANGALO P41A004ASP41A004AS G-LENE HDPE 01/10/201 INR 67,640. 3,347.0

BANGALO P41A004B P41A004B G-LENE 01/10/201 INR 67,640. 3,347.0

BANGALO P41A004BSP41A004BS G-LENE HDPE 01/10/201 INR 67,140. 3,347.0

BANGALO P41A004OGP41A004OG G-LENEHDPE 01/10/201 INR 65,140. 3,347.0

BANGALO P41A004OGSP41A004OGS G-LENE 01/10/201 INR 64,640. 3,347.0

BANGALO P52A003A P52A003A G-LEX 01/10/201 INR 76,840. 3,347.0BANGALO P52A003B P52A003B G-LEX 01/10/201 INR 76,340. 3,347.0

BANGALO P52A003NAP52A003NA G-LEXHDPE-2 01/10/201 INR 76,840. 3,347.0

BANGALO P52A003NBP52A003NB G-LEXHDPE-2 01/10/201 INR 76,340. 3,347.0

BANGALO P52A003NOGP52A003NOG G-LEX HDPE-2 01/10/201 INR 73,840. 3,347.0

BANGALO P52A003OGP52A003OG G-LEX HDPE 01/10/201 INR 73,840. 3,347.0

BANGALO P54A001A P54A001A G-LEX 01/10/201 INR 75,840. 3,347.0BANGALO P54A001AS P54A001AS G-LEX 01/10/201 INR 75,340. 3,347.0BANGALO P54A001B P54A001B G-LEX 01/10/201 INR 75,340. 3,347.0BANGALO P54A001BS P54A001BS G-LEX 01/10/201 INR 74,840. 3,347.0

BANGALO P54A001NAP54A001NA G-LEXHDPE-2 01/10/201 INR 75,840. 3,347.0

BANGALO P54A001NBP54A001NB G-LEX HDPE-2 01/10/201 INR 75,340. 3,347.0

BANGALO P54A001NOGP54A001NOG G-LEX HDPE-2 01/10/201 INR 72,840. 3,347.0

BANGALO P54A001OGP54A001OG G-LEX HDPE 01/10/201 INR 72,840. 3,347.0

BANGALO P54A001OGSP54A001OGS G-LEX HDPE 01/10/201 INR 72,340. 3,347.0

BANGALO PB48A004APB48A004A G-LENE HDPE 01/10/201 INR 77,140. 3,347.0

BANGALO PB48A004ASPB48A004AS G-LENE HDPE 01/10/201 INR 76,640. 3,347.0

BANGALO PB48A004BPB48A004B G-LENE HDPE 01/10/201 INR 76,640. 3,347.0

BANGALO PB48A004BS PB48A004BS G- 01/10/201 INR 76,140. 3,347.0HDPE

BANGALO PB48A004OGPB48A004OG G-LENE HDPE 01/10/201 INR 74,140. 3,347.0

BANGALO PB48A004OGPB48A004OGS G-LENE HDPE 01/10/201 INR 73,640. 3,347.0

BANGALO R35A042AR35A042A G-LENE LLDPE 01/10/201 INR 69,730. 3,347.0

BANGALO R35A042ASR35A042AS G-LENE LLDPE 01/10/201 INR 69,230. 3,347.0

BANGALO R35A042BR35A042B G-LENELLDPE 01/10/201 INR 69,230. 3,347.0

BANGALO R35A042BSR35A042BS G-LENELLDPE 01/10/201 INR 68,730. 3,347.0

BANGALO R35A042OGR35A042OG G-LENE LLDPE 01/10/201 INR 66,730. 3,347.0

BANGALO R35A042OGSR35A042OGS G-LENE LLDPE 01/10/201 INR 66,230. 3,347.0

BANGALO R35U042AR35U042A G-LENE LLDPE 01/10/201 INR 71,090. 3,347.0

BANGALO R35U042ASR35U042AS G-LENE LLDPE 01/10/201 INR 70,590. 3,347.0

BANGALO R35U042BR35U042B G-LENE LLDPE 01/10/201 INR 70,590. 3,347.0

BANGALO R35U042BSR35U042BS G-LENE LLDPE 01/10/201 INR 70,090. 3,347.0

BANGALO R35U042OGR35U042OG G-LENE LLDPE 01/10/201 INR 68,090. 3,347.0

BANGALO R35U042OGSR35U042OGS G-LENE LLDPE 01/10/201 INR 67,590. 3,347.0

BANGALO S56A010A S56A010A G-LENE 01/10/201 INR 64,280. 3,347.0

BANGALO S56A010ASS56A010AS G-LENE HDPE 01/10/201 INR 63,780. 3,347.0

BANGALO S56A010B S56A010B G-LENE 01/10/201 INR 63,780. 3,347.0

BANGALO S56A010BSS56A010BS G-LENEHDPE 01/10/201 INR 63,280. 3,347.0

BANGALO S56A010OGS56A010OG G-LENEHDPE 01/10/201 INR 59,780. 3,347.0

BANGALO S56A010OGSS56A010OGS G-LENE HDPE 01/10/201 INR 59,280. 3,347.0

BANGALO W50A009AW50A009A G-LENE HDPE 01/10/201 INR 77,280. 3,347.0

BANGALO W50A009ASW50A009AS G-LENE HDPE 01/10/201 INR 76,780. 3,347.0

BANGALO W50A009BW50A009B G-LENE HDPE 01/10/201 INR 76,780. 3,347.0

BANGALO W50A009BSW50A009BS G-LENE HDPE 01/10/201 INR 76,280. 3,347.0

BANGALO W50A009OGW50A009OG G-LENE HDPE 01/10/201 INR 69,780. 3,347.0

BANGALO W50A009OGSW50A009OGS G-LENE HDPE 01/10/201 INR 69,280. 3,347.0

BANGALO W52A009A W52A009A G-LEX 01/10/201 INR 74,280. 3,347.0

BANGALO W52A009ASW52A009AS G-LEX HDPE 01/10/201 INR 73,780. 3,347.0

BANGALO W52A009B W52A009B G-LEX 01/10/201 INR 73,780. 3,347.0

BANGALO W52A009BSW52A009BS G-LEX HDPE 01/10/201 INR 73,280. 3,347.0

BANGALO W52A009NAW52A009NA G-LEX HDPE-2 01/10/201 INR 74,280. 3,347.0

BANGALO W52A009NBW52A009NB G-LEXHDPE-2 01/10/201 INR 73,780. 3,347.0

BANGALO W52A009NOW52A009NOG G-LEX 01/10/201 INR 69,780. 3,347.0

BANGALO W52A009OGW52A009OG G-LEX HDPE 01/10/201 INR 69,780. 3,347.0

BANGALO W52A009OGSW52A009OGS G-LEX HDPE 01/10/201 INR 69,280. 3,347.0

BANGALO W52ASR009AW52ASR009A G-LEX HDPE 01/10/201 INR 74,280. 3,347.0

BANGALO W52ASR009AW52ASR009AS G-LEX HDPE 01/10/201 INR 73,780. 3,347.0

BANGALO W52ASR009BW52ASR009B G-LEX HDPE 01/10/201 INR 73,780. 3,347.0

BANGALO W52ASR009BW52ASR009BS G-LEX HDPE 01/10/201 INR 73,280. 3,347.0

BANGALO W52ASR009NW52ASR009NA G-LEX HDPE-2 01/10/201 INR 74,280. 3,347.0

BANGALO W52ASR009NW52ASR009NB G-LEX HDPE-2 01/10/201 INR 73,780. 3,347.0

BANGALO W52ASR009NW52ASR009NOG G-LEX 01/10/201 INR 69,780. 3,347.0

BANGALO W52ASR009OW52ASR009OG G-LEX 01/10/201 INR 69,780. 3,347.0

BANGALO W52ASR009OW52ASR009OGS G-LEX HDPE 01/10/201 INR 69,280. 3,347.0

BANGALO W52U009A W52U009A G-LEX 01/10/201 INR 66,230. 3,347.0

BANGALO W52U009ASW52U009AS G-LEX HDPE 01/10/201 INR 65,730. 3,347.0

BANGALO W52U009B W52U009B G-LEX 01/10/201 INR 65,730. 3,347.0

BANGALO W52U009BSW52U009BS G-LEX HDPE 01/10/201 INR 65,230. 3,347.0

BANGALO W52U009OGW52U009OG G-LEX HDPE 01/10/201 INR 61,730. 3,347.0

BANGALO W52U009OGSW52U009OGS G- 01/10/201 INR 61,230. 3,347.0HDPE

BANGALO W55A004A W55A004A G-LEX 01/10/201 INR 75,280. 3,347.0

BANGALO W55A004ASW55A009AS G-LEX HDPE 01/10/201 INR 74,780. 3,347.0

BANGALO W55A004B W55A009B G-LEX 01/10/201 INR 74,780. 3,347.0

BANGALO W55A004BSW55A009BS G-LEX HDPE 01/10/201 INR 74,280. 3,347.0

BANGALO W55A004NAW55A004NA G-LEX HDPE2 01/10/201 INR 75,280. 3,347.0

BANGALO W55A004NBW55A004NB G-LEX HDPE2 01/10/201 INR 74,780. 3,347.0

BANGALO W55A004NOW55A009NOG G-LEX HDPE2 01/10/201 INR 70,780. 3,347.0

BANGALO W55A004OGW55A009OG G-LEXHDPE 01/10/201 INR 70,780. 3,347.0

BANGALO W55A004OGSW55A009OGS G-LEX 01/10/201 INR 69,780. 3,347.0

BANGALO W56A010AW56A010A G-LENEHDPE 01/10/201 INR 64,280. 3,347.0

BANGALO W56A010ASW56A010AS G-LENE HDPE 01/10/201 INR 63,780. 3,347.0

BANGALO W56A010BW56A010B G-LENE HDPE 01/10/201 INR 63,780. 3,347.0

BANGALO W56A010BSW56A010BS G-LENE HDPE 01/10/201 INR 63,280. 3,347.0

BANGALO W56A010OGW56A010OG G-LENE HDPE 01/10/201 INR 59,780. 3,347.0

BANGALO W56A010OGSW56A010OGS G-LENE HDPE 01/10/201 INR 59,280. 3,347.0

Place

An important decision when trying to determine the overall competitive marketing strategy is place. Place includes company activities that make the product available to target consumers. Effective distribution decisions will make sure that the product is available for the target market once GAIL has demand for it. Although there are many issues involved in this including inventory control, logistics, channel relationships, the factors GAIL is most concerned with in marketing are choosing the right channels.

There are four major divisions in GAIL’s Petrochemical Marketing

Network.

1. Petrochemical Marketing Group

GAIL(INDIA) LIMITED

GAIL BHAWAN , 16,BHIKAIJI CAMA PLACE R K PURAM ,NEW DELHI-110066

2. Petrochemical Unit at GAIL, PATA

GAIL(India) Limited

PO-PATA Distt. Auraiya (UP) 206241

3. GAIL Polymer Technology Center

GAIL (INDIA)LTD.

B35736, Sector -1 NOIDA -201401(UP) INDIA

4. Zonal Offices

Modes of selling

Direct selling: In this type of selling, the raw material i.e. the petrochemical is sold to the customer directly from the petrochemical plant at Pata. In this type of selling no intermediaries are involved.

Stock transfer to Consignment Stockiest (CS): GAIL has its zonal offices at strategic locations so that the market potential of petrochemicals can be identified and tapped. After the customers are identified, a strong distribution network in the form of CS is formed and the raw material is transferred to them from whom the industries procure the petrochemical as raw material.In this third type of selling, the customers from various zones procure the raw materials from the zone specific consignment stockiest but instead of paying the CS, they pay GAIL directly.

Basically, the CS acts as intermediaries between GAIL and the customer and helps in strengthening the distribution network and maintain good industrial relations. They help GAIL understand the customer trends of a specific region and also in the retention of actual customers.

• The Consignment Stockiest s are elected through “tenders”.

• The desiring CS should show a bank guarantee of Rs 1 Crore to GAIL and only after that can GAIL give the CS raw materials worth Rs 2.5 Crores.

• This is mandatory so as to choose the best out of the tenders and averting losses.

Packaging

25 kilograms bags each of G-lene and G-lex are available to the customer to choose from. It is limited to 25 kilograms in accordance to the international standards. The other reason being, it is easy to handle and can be transported safely. While shipping or loading the petrochemicals in truck, the standard 25 kilograms bag can be easily transported from the warehouse to the customer’s site.

Promotion

1. Participation in plastic/petrochemical Trade Fairs. This is done so as to promote the GAIL brand among the customers.

2. Advertisements in magazines and journals related to natural gas or petrochemicals. This helps them to create awareness among the industry end customers.

3. Also, the GAIL website in which every single detail is given regarding the business portfolios which helps the customer choose GAIL as their supplier.

4. The consignment stockiest are given attractive discounts so as to retain them and practice the correct business process

Considerations for the right product mix

1. The demand and supply scenario.

2. The feedback received by GAIL every month after the sales and production planning meet.

3. The plans for the next month for all the zones after the zonal representatives express their requirements for their customers.

4. The limitations of the plant along with the stock available.

5. The production capacity.

6. Production additives. Their supply and availability.

7. Price of each grade. The grade which generates maximum revenue is preferred.

In a nutshell, we can say that the right product is a compromise between operations and marketing.

3.13. City Gas Distribution

This is another sector which has a high growth potential. World-wide, city gas distribution has grown hand in hand with the gas sector development in terms of supply infrastructure and transmission infrastructure. With the expected growth in the gas supply and the simultaneous creation of gas inter-state transmission infrastructure in India, this sector is bound to grow in the XI Plan period. With the emphasis on clean environment, this sector would get the necessary thrust in the coming years. In line with this, various players, primarily led by GAIL, have drawn up ambitious plans to roll out city gas infrastructure across a number of cities in the country. The current demand estimate in this sector is about 11 MMSCMD in 2006-07 and 12.08MMSCMD in 2007-08. Assuming a conservative annual growth of 8 percent, the demand would go up to about 12.93 MMSCMD, 13.83 MMSCMD, 14.8 MMSCMD and 15.83 MMSCMD in 2008-09, 09-10, 10-11 and 11-12 respectively.

GAIL was the first company in India to pioneer city gas distribution project. In addition to marketing Natural Gas through Trunk and Regional Transmission systems, GAIL has formed joint venture companies to supply gas to households, commercial users and the transport sector. Within the short span of 10 years, GAIL has expanded its CNG business from 1 company (Mahanagar Gas Ltd.) in India to 8 in India and 4 abroad.

Background of City Gas Projects

The use of Natural gas as a fuel was in vogue for quite some time in India but was limited to industrial applications only. The main driver for the realization of the importance of city gas projects in the initial stage was due to environmental concerns. The rapid growth in urbanization and increasing vehicular emissions in India in the last 10 - 15 years resulted in significant rise in environmental pollution. This has been a major cause of concern in important cities. Based on the ambient air quality monitored in a study in the late nineties, it was found that the contribution from vehicles to the ambient air pollution was as high as 65% of total air pollution. This was also taken cognizance of by the judiciary at various levels.

All this while, GAIL took many initiatives to introduce Piped Natural Gas (PNG) for households and Compressed Natural Gas (CNG) for the transport sector to address the rising pollution levels. Pilot projects were launched by GAIL in two big cities namely Delhi & Mumbai in early nineties leading to start of commercial operation of city gas projects in Mumbai and Delhi through Joint venture mode. Thus GAIL successfully established natural gas as an eco-friendly, economical and safe alternative to gasoline and LPG in transport sector. The results of these ventures are quite visible through improvement in air quality in these cities. As such, GAIL played a role model for introduction of CGD projects in the country.

With the gain of experience and expertise GAIL has replicated City Gas projects in

other cities where gas is available along with pipeline connectivity. Going ahead with its plan, GAIL has so far implemented City gas projects in 13 cities independently/through JV route and has formed 8 joint ventures for this purpose. Further, with a planned network expansion of more than 12,000 Kms of high pressure trunk pipelines by 2011-12, GAIL is hopeful that as many as 200 cities are likely to be on city gas distribution map of India in due course connecting the cities and towns falling in the catchment areas of its gas pipelines. These cities would span across 15 states and are estimated to have a population of about 160 million. Similarly, a large number of vehicles including public transport will run also on CNG.

INITIATIVES TAKEN BY GAIL

GAIL has taken initiatives to introduce Piped Natural Gas (PNG) to reduce pollution from conventional fuels and Compressed Natural Gas (CNG) as clean burning fuel to curb the vehicular emission and launched projects in the cities namely Delhi, Mumbai & Vadodara in nineties. GAIL has successfully established natural gas as eco-friendly, economical and safe alternative to gasoline in transport sector and LPG in domestic, commercial and industrial sector.

DRIVERS OF CNG

• Economics

• Emissions

• Safety

JOINT VENTURE COMPANIES IN INDIA

To enhance the usage of Natural Gas, Government of India has entrusted GAIL to play leading role in Joint Venture Companies for implementation of City Gas Projects for supply of PNG and CNG in various cities of India. So far GAIL formed eight Joint Venture companies namely –

S. No.

State Cities Company JV Partner Status

1. Maharashtra

Mumbai, Thane

Mahanagar Gas

GAIL, British Gas PNG/ CNG being

supplied.

Maharashtra

2. Maharashtra

Pune

Maharashtra Natural Gas

GAIL, BPCL Govt. of Maharashtra.

Supply of PNG/ CNG under implementation. The 1st CNG supply likely by the end of

3. Delhi DelhiIndraprastha Gas

GAIL, BPCL Govt. of NCT, Delhi.

PNG/CNG being supplied..

4.Uttar

PradeshNoida

Indraprastha Gas

GAIL, BPCL Govt. of NCT, Delhi.

CNG being supplied.

5.Uttar

Pradesh

Lucknow

AgraGreen Gas Limited

GAIL, IOCL Govt. of Uttar Pradesh

CNG being supplied.

6.Uttar

PradeshKanpur

Central Up Gas

GAIL, BPCL Govt.of Uttar

CNG being supplied.

7.Andhra

Pradesh

Vijayawada , Hyderaba

Bhagyanagar Gas

GAIL, HPCL Govt. of Andhra

CNG being supplied. .

8. Tripura Agartala

Tripura Natural Gas Company

GAIL, Govt. of Tripura & Govt. of Assam.

PNG/ CNG being supplied

9.Madhya

PradeshIndore

Aavantika Gas

GAIL, HPCL & Govt. of Madhya

Supply of PNG/CNG is under implementation.

Current Co-ordinates

In the view of the emerging changes in the Hydrocarbon Sector and with the formation of PNGRB, it is essential for GAIL's growth that the business strategy be amended suitably and action plan with time frame is quickly firmed up. Accordingly a detailed City Gas Strategy Roadmap has been prepared for implementation of City Gas Projects in 230 cities identified contiguous to existing and proposed pipeline in a phased manner in 5 years horizon.

GAIL’s main strategy for city gas distribution is through Joint Ventures.

This helps in infrastructure development and gives a systematic approach to the project.

Retail Gas: Market Presence

PNG:

GAIL’s Progress: Under its City Gas Distribution project in Delhi, Indraprastha Gas Ltd, a JV of GAIL (India) Ltd, Bharat Petroleum Corporation and the Government of NCT of Delhi, is supplying Piped Natural Gas (PNG) to 2.35Lacs Domestic and 500 Commercial Consumers.

Mahanagar Gas Ltd a JV of GAIL (India) Ltd, British Gas and the Government of Maharashtra, is supplying PNG to 5.1 Lacs Domestic and 1200 Commercial Consumers and 40 Industrial consumers in Mumbai, Navi Mumbai, Thane, Mira Bayandar.

In addition to above, GAIL has implemented City Gas Projects through its Joint Venture Companies its subsidiary (GAIL Gas Limited) and for supply of PNG in cities of Pune, Hyderabad, Vijayawada, Kakinada, Kanpur, Bareilly, Agra, Lucknow, Agartala, Dewas, Sonepat, Indore, Kota having a customer base of about 9000 Domestic and 2300 Commercial and Industrial Customers.

GAIL's Future Plans: GAIL has drawn plans to execute the City Gas Distribution Project in various cities, which are falling enroute of its Transmission Pipelines.

CNG:

GAIL Progress: At present GAIL is supplying CNG through its joint venture companies and subsidiary company (GAIL Gas Limited) in Delhi, Mumbai, Vadodara, Pune, Hyderabad, Vijayawada, Kakinada, Kanpur, Bareilly, Agra, Lucknow, Agartala, Dewas, Sonepat, Indore and Kota.

GAIL has set up 209 CNG stations in Delhi and adjoining areas to cater to

26000 buses & mini buses, 2.77 Lacs cars / taxies and 1.2 Lacs autos. In Mumbai 148 CNG stations are constructed to cater to 6,800 buses, 65,000 cars/taxies and 1.40 Lacs Autos.

In addition to above, GAIL has set up 64 CNG Stations through its Joint Venture Companies its subsidiary (GAIL Gas Limited) and for supply of PNG in cities of Pune, Hyderabad, Vijayawada, Kakinada, Kanpur, Bareilly, Agra, Lucknow, Agartala, Dewas, Sonepat, Indore, Kota having a customer base of about 7000 Cars/Taxies, 58000 Autos and 2700 Buses & Mini buses.

The City Gas Opportunity

The emerging change in City gas/CNG consumption pattern in India is evident through its growth from 1% of total gas usage in 2000 to 4-5% currently. In fact, the consumption in India’s domestic sector is substantially low as compared to that in developed economies like USA and UK where the domestic and commercial consumption of natural gas is over 40% of total consumption. This only demonstrates the potential for huge expansion and growth in this area. The higher expected availability of gas and aggressive growth plans of various players are likely to boost the supply, and as a result, demand in household and transport sector. It is projected that CGD projects would account for nearly 20 MMSCMD of gas in the long run as against the current consumption of 5-6 MMSCMD. In addition to these, the demand from commercial and industrial sectors like glass, ceramics, tea plantation etc also is expected to grow at a fast pace. Thus, the CGD segment in India is an opportunity waiting to be tapped.

Chapter-4

Results and Discussion

The following are the results of the study:

• Development / Modifications of Polymer Grades

GAIL owns a large Petrochemical Complex at Pata (UP), where different grades of polymers are developed / modified depending upon customer requirement.

• Setting of Joint Venture Agreements for City Gas Projects in India

• Acquisition of 2D Seismic Data in E&P Blocks

GAIL has varying Equity Partnership in 27 E&P Blocks in India & Abroad. GAIL aims to undertake (alongwith the Consortium Partners) activity of Acquisition of Seismic Data in E&P Blocks.

• The Deregulation: A Paradigm Shift

Administered Pricing Mechanism Deregulated Pricing MechanismFixed Parameters Flexible ParametersRare Revisions in Prices Frequent Revisions in PricesCost Plus Pricing Market Determined PricingAssured Returns No Assured ReturnsSupplier-Customer Linkages CompetitionAveraging Effect Accent on Logistic efficiency

• India currently operates 11 gas processing plants. These plants prepare the gas for transportation in the transmission system and extract valuable LPGs.

• Forms of Market Risk

• Gas Price Risk

■ Short term volatility vs. Long term price trends

■ Structural changes in the market

■ Geopolitical issues

• Gas Supply Risk

■ Competition from other supplies Reservoir and facility risk

•Gas Marketing Risk

■ Competition from other marketers Marketing strategy and alignment

■ Gas Price Risk

No direct control of prices

►The first major means of mitigation is by minimizing construction costs

■ Gas sales contracting strategy or strategies

■ Financial hedging tools; futures, options

■ Design/plan for access to multiple markets

■ Risk vs. Opportunity

Gas Marketing Risk

■ Competition from other marketers

■ Ability to attract proper mix of buyers/contracts

■ Ability to obtain transport needed

Strategy and alignment

Value-adding vs. risk averse strategy Organizational alignment to meet strategy

"Accretive" business relationships

■ Joint ventures

■ Managing Contracted Asset Managers

■ Roles of the State's Gas Marketer

1. Manage Capacity in accordance with their contracts.

2. Manage daily variations in gas deliveries.

3. Monitor delivery forecasts using information provided by producers and accessible elsewhere.

4. Manage transportation capacity

5. Prepare for and participate in Open Seasons

6. Sell State's Gas. In-State & Export sales.

7. Manage the mix of sales contracts, financial tools and markets to minimize risk and maximize returns in accordance with established policy.

■ GasMarketing Options

1. Early long term gas sales

2. Spot sales at first market

3. Firm contracting for gas sales

4. Contracted asset managers5. Joint ventures

• GAIL is not exploiting the market affordability of a large proportion of their gas.

Chapter-5

Conclusion & Scope for further work

GAIL has ambitions to be a highly efficient integrated gas company, with interests from field development and production, through national transmission and imports, to distribution and allied industries such as petrochemicals. These ambitions are not limited to India, as GAIL is building a portfolio of international upstream and downstream gas assets. lt dominates domestic infrastructure and gas purchasing from domestic suppliers.

With its diverse business portfolios, GAIL is one of the highest profit making Navartnas and with its strategic alliances with the other key players, it is quite sure of GAIL to retain its dominant position.

It is India’s largest gas transmission company and holds an enormous customer base with its quality assured service.

GAIL operates the country's largest gas-fired petrochemicals complex, with an installed polyethylene (PE) capacity of 260,000tpa. The variety of grades offered by GAIL to cater to its customer needs, shows its customer focus approach.

GAIL, probably would not face any threats from the competitors or from the imports as the demand of petrochemicals is going to rise up and the imports would be a help to sustain the increased requirements. It is beyond contention that City Gas project implementation is definitely going to play a significant role in the growth of Indian economy. The next decade is going to be the decade of City Gas Distribution in India. For GAIL, this would be a continuing journey of creating new economic and social opportunities and developing business competencies.

With recent developments in natural gas sector, some players have advantage on the supply side while others are strong on the distribution part. It is time of cooperation and competition.

India needs to put in place policies, incentives and infrastructure to prepare for rising consumption of natural gas to 400bcm in 2030, according to a study released in January 2007. 'Assuming that each additional bcm of gas will cost about US$ lbn to develop, this would imply an investment of more than US$35bn by2030,' the study by Petroleum Secretary M S Srinivasan said.

Importance of effective regulation cannot be overemphasized. The gas industry in India is still at a nascent stage and the regulator's role would be crucial in ensuring good customer service and stimulating investments by ensuring a level playing field for all players. The Government needs to be complimented for timely enactment of the PNGRB Act 2006, due to which the Petroleum & Natural Gas Regulatory Board is a reality now. Regulation is crucial to ensure that the natural monopolies vested in distribution companies is not abused while also allowing for an adequate rate of return on their investment. The Regulator will oversee the

construction of new distribution networks and proposed additions to the network while disallowing unnecessary duplication of investment and effort.

The Regulator can also ensure that Standards & Code of Practice are followed to take care of human safety & consumer interest at large.

Scope for further work

1. Analysis of the scenario pre and post NELP.

2. Competitive scenario and pricing of GAIL’s LHC products.

3. The role of regulators in gas transmission.

4. Likely impact of key Government Policies and Acts on competition.

Chapter-6

Recommendations for Improvement

The outcomes of the research and the analysis conducted, resulted in recommendations for GAIL (India) Ltd. which deserves management attention. The points are as follows:

1. Gas sales agreements should be made more flexible vis-à-vis competitors.

2. Revision of methodology for fixed transmission tariffs.

3. Needs to improve door to door service through transportation arrangement for petrochemicals.

4. GAIL is not exploiting the market affordability of large proportion of their gas.

5. Domestic gas connection needs to be augmented.

6. GAIL should exploit the northern belt and tie up with companies located near the belt.

7. In gas marketing, the eastern belt (Bihar, West Bengal) should be tapped as there is tremendous potential as well as opportunity which can be harnessed.

8. GAIL has its legs stretched till KG Basin and the Kochi-Kanjirkkod- Bangalore/Mangalore pipeline has been laid. This calls for the customer tapping who are located in the vicinity of the pipelines.

9. Naphtha cracker unit should be installed following which successful diversification into chemicals can be made possible.

10.The emergence of new players and extent of market liberalization may pose a threat to GAIL and the essence to combat the creeping competition is by retaining the existing customers and creating sound prospects. This can be done by creating both tangible and intangible benefits.

11.In market lot of potential is there but resourcing is lacking hence

optimization of resourcing is a must.

12.Gas sourcing needs to be improved.

13.Transportation of polymers is not full proof; it needs to be adequate/comprehensive.

14.For city gas distribution, opportunities should be explored in domestic cities only.

15.Prioritized network to be developed for the industry clusters.

16. The CRM module should be enhanced and improved.

17.GAIL should be prompt in reaching out to customers falling near upcoming gas pipelines.

18.Customer’s preparedness should be aligned with pipeline projects.

19.Customer meets and education should be organized by Zonal offices.

Conclusion

• Type of business GAIL is in and the dynamic and forward approach of GAIL management & working culture embedded into majority of various working level officers would instill confidence in any stakeholders mind that GAIL will proactively modify course/approach to excel in the upcoming competitive scenario in India.

Chapter-7

References

1. BP statistical Review of World Energy, June 2007

2. Business Monitor International Journal

3. GAIL sponsored Infraline Research – 2006

4. GAIL (India) Ltd.’s 09-10 Annual Report

5. GAIL official presentations of strategies

6. The oil & gas journal, March-08

Websites

1. w w w . bu s i n e s s m on it o r o n li n e . c o m

2. w w w . g a il o n li n e . c o m

3. w w w . h a l d i a p e t r o c h e m i c a l s . c o m

4. w w w . i n fr a li n e .c o m

5. w w w. r il . c o m