Press Releases

[New Delhi, February 16, 2005]

GAIL inks pact with NPC, Iran
A 1.5 Billion US $, 1 Million Tonne Ethylene Cracker in South Pars, Iran on the anvil

(Sl. No. ND/CC/05/16)

GAIL (India) Limited signed a Production Development Agreement (PDA) with NPC International Limited for joint development and investment in a Gas Cracker Project in Iran. Mr. Proshanto Banerjee, Chairman and Managing Director, GAIL and Mr. M. H. Rahbari, Member of the Board, NPC International, signed the agreement on the 15th of February 2005 during the 3rd Asia Gas Buyers’ Summit in New Delhi.

The two companies have decided to set up a global-scale 1 Million Tonnes Per Annum (MMTPA) Ethylene Cracker in South Pars in Iran, which would involve investment to the tune of US $ 1.5 Billion. The products would include Low Density Polyethylene (LDPE), Linear Low Density Polyethylene (LLDPE), High Density Polyethylene (HDPE) and Poly Vinyl Chloride (PVC).

The project would get low cost feedstock from the giant South Pars Gas Fields in Iran and with this, in line with the global trend, GAIL would be moving close towards the upstream end of the petrochemical value chain.

As per the agreement, GAIL will carry out a feasibility study based on readily available data and technical inputs from the NPC. After ascertaining the feasibility, which is expected to be completed in two-months time, GAIL and NPC would be forming a 50 : 50 % Joint Venture Company to jointly invest and develop the project. GAIL will provide the JV Company with certain senior management staff with operational and technical expertise for the project and NPC will be responsible for all statutory approval / clearances required for the project from Government of Iran. The marketing of petrochemical will be done in direct proportion to the shareholding of NPC and GAIL in the Joint Venture Company.

The signing of the Production Development Agreement in February 2005 in New Delhi is a significant milestone after the two companies entered into a Memorandum of Understanding (MoU) in Tehran in November last year, focusing on cooperation in gas based petrochemical opportunities in Iran.

The signing of the PDA is also an important step in the direction of growing relationship between India and Iran, especially in the oil and gas sector. Iran is the second largest producer of natural gas in the world and holds 15% of the world gas reserves. Iran has more than 10 Million Tonnes per annum of Petrochemicals production capacity and has taken a strategic decision to develop more global-scale petrochemical plants located in close proximity to its gas fields. With these projects, Iran is expected to emerge as the largest producer of petrochemical product in the world by 2010 and GAIL would be taking an important position in one of the biggest sources of petrochemicals in the world.