GAIL - HPCL JVA and MoU for City Gas and Upstream projects

New Delhi, November 16, 2005: GAIL (India) Limited and Hindustan Petroleum Corporation Limited (HPCL) have signed Memoranda of Understanding (MoU) today for pursuing Exploration & Production (E&P) opportunities in India and abroad and for formation of separate Joint Venture Companies for implementation of City Gas Projects in the states of Madhya Pradesh, Rajasthan and Gujarat for supply of Piped Natural Gas (PNG) to Domestic, Commercial and Industrial Consumers and Compressed Natural Gas (CNG) and Auto LPG to automobiles. GAIL and HPCL also signed Joint Venture Agreement (JVA) for implementation of City Gas Projects in the state of Madhya Pradesh.

The JVA was signed by Mr. Proshanto Banerjee, Chairman and Managing Director, GAIL and Mr. M.B. Lal, Chairman & Managing Director, HPCL.

The MoU for E & P was signed by Mr. B. S. Negi, Director (Business Development), GAIL and Mr. C. Ramulu, Director (Finance), HPCL. The MoU for city gas projects was signed by Dr. U D Choubey, Director (Marketing), GAIL and Mr. S Roy Choudhury, Director (Marketing), HPCL.

Exploration and Production

GAIL and HPCL recognize the potential of adding value to their businesses by a co-operative approach based on their complementary skills and strengths to jointly exploit E&P opportunities. As part of the Memorandum of Understanding, GAIL and HPCL will jointly prepare a “Blue Print” for E&P Business Model for India and Overseas Ventures. They will jointly identify and evaluate E&P opportunities in India as well as Countries in South/South East Asia, Middle East, West and East Africa, Australia, Russia and CIS.

The two companies will also jointly bid for E&P Blocks under NELP and CBM Bidding Rounds in India as well as bidding rounds of exploration blocks in target countries. Further, they also jointly secure “Farm-In” option in already awarded exploration blocks and study acquisition of producing assets, reserves as well as E&P Companies

As a step forward, a Joint Team of GAIL and HPCL is being formed which shall systematically undertake the evaluation / identification of the project opportunities. In respect of identified project(s) for joint participation, GAIL and HPCL shall enter into Specific Consortium MoU / Joint Bidding Agreement and / or form consortia / SPV / JVs for implementing the projects on case to case basis.

The cooperation between two companies has already started yielding results through its joint participation in Australia E&P Bidding Round in October, 2005. GAIL and Prize Petroleum, subsidiary company of HPCL, have joined together and submitted bids for two E&P blocks in Australia alongwith GSPC (India) and Oilex NL (Australia).

It is expected that the cooperation between GAIL and HPCL would also help in getting special dispensation from Government of India / Ministry of Petroleum & Natural Gas (MoP&NG) for securing approvals for overseas investments in E&P projects in line with ONGC Videsh Limited (OVL) / IOC – OIL combined.

City Gas Projects

GAIL and HPCL have already formed Bhagyanagar Gas Limited for implementation of City Gas Project in the state of Andhra Pradesh.

In the JV companies, GAIL and HPCL shall be having equity of 22.5% each and 5% equity shall be offered to the respective State Governments and the equity balance shall be offered to Financial Institutions/Strategic Partners/Public.

In Madhya Pradesh, the City Gas Projects shall be set up initially in the cities of Indore, Gwalior and Ujjain, in view of the upcoming Jagoti-Pithampur and Kailaras-Malanpur Pipelines.

In Rajasthan, the City Gas Project shall be set up initially in the city of Kota, in view of the upcoming Vijaipur-Kota-Mathania Pipeline.

In Gujarat, GAIL is already supplying CNG in Baroda city and HPCL is setting up infrastructure in Ahmedabad for supply of CNG.

.