GAIL ventures into Coal Gasification in China

New Delhi, September 5, 2005 GAIL (India) Limited is set to venture into the coal gasification activities in China. GAIL plans to invest in Coal – to Methanol – to Petrochemical plant in the Shaanxi province.

During the recent visit of a high level GAIL team led by Shri Proshanto Banerjee, Chairman and Managing Director; GAIL had fruitful discussions and has agreed to enter into a Memorandum of Understanding with Shaanxi Huashan Chemical Industry group to carry out the feasibility study for setting up a coal – gasification based petrochemical plant for production of polyolefins and other products in Shaanxi province in China where abundant quantity of coal at competitive price is available. During the meeting with GAIL team, His Excellency Mr. Pan Liansheng, Vice Governor, Shaanxi province has assured all possible help to GAIL for setting up the plant. The two companies will subsequently consider setting up of a joint venture for implementation of the proposed project and to set up distribution and marketing network in China. Shaanxi Chemical is already operating a fertilizer plant based on old coal gasification technology and is willing to adopt the modern Shell coal gasification technology to upgrade their plant. It may be mentioned that the Shaanxi province is endowed with large deposits of coal as well as oil and gas reserves.

Sinopec, the major Oil and Gas Company of China, is working on the application of Shell technology for coal gasification for production of ammonia which is eventually used for production of urea. During discussions, Mr. Chen Qi, Director General, Sinopec has agreed to share their experiences with GAIL regarding the construction, operation and commercialisation aspects of coal gasification based projects. Sinopec also agreed to develop a cooperation framework with GAIL for coal gasification projects, apart from gas transmission and distribution business after detailed discussions and identification of projects for implementation jointly.

In China, 12 plants based on Shell Gasification Process are under different phases of construction and will be operations during the year 2006 onwards. The synthesis gas produced from these plants will be used for manufacturing fertilizers, methanol and hydrogen. There are strong similarities between India and China as both have large coal deposits and would need growing quantities of fertilizer and chemicals / petrochemicals for the growing domestic markets.

GAIL is taking initiative to bring modern technology to unlock the potential value of coal acreage suitable for coal gasification in India. The technology helps in reducing manufacturing costs besides replacing existing, older and environment unfriendly facilities.

GAIL will be using domestic coal to produce synthesis gas or ‘syngas’ by using Shell Coal Gasification Process (SCGP), which will used for the first time in India. SCGP has an inherent capacity of handling high ash content and hence is suitable for Indian coals.

GAIL plans to set up a Rs. 750 crore coal gasification project in Eastern India with coal handling capacity of 2000 tonnes per day to produce 3.4 MMSCMD of syngas. The industries in the eastern India which run on liquid fuel for their feedstock / fuel will save huge costs when they use synthesis gas which can be made available at US$ 3 per mmbtu.

GAIL’s focus in eastern India is primarily due to the availability of abundant amount of coal in West Bengal, Bihar, Jharkhand and Orissa. The identified locations for setting up the project are Haldia, Durgapur and Talcher. West Bengal Government is also very keen to revive the fertilizer plants and Chief Minister of West Bengal has assured GAIL of full support for setting up plants based on coal gasification technology.

Shell has carried out an initial Screening Study for GAIL, based on data of Indian coal which has high ash content and the outcome is encouraging. A Detailed Feasibility Report (DFR) by Uhde India Ltd. in collaboration with their parent company M/s Uhde Gmbh, Germany is expected to be ready by October 2005. The DFR will look into various possible end uses of the synthesis gas, availability, proximity of source and quality of coal and will facilitate a commercial decision for investment in coal gasification project.

GAIL is also in talks with Coal India Limited for jointly evaluating various Overground Coal Gasification Technologies/clean coal technologies available in the industry and for examining the suitability of these technologies for Indian coal. GAIL and CIL will evaluate the possibility of utilizing the product of Overground Coal Gasification for use in various industries as fertilizer, chemicals including but not limited to the production of petrochemicals.