September 28, 2008

Nepal-India Oil Pipeline Project to Reduce Petroleum Prices

Text of report by Sangam Prasai headlined "Pipeline project to reduce petroleum prices in Nepal" published by Nepalese newspaper The Rising Nepal on 28 September

Kathmandu, 27 September: Nepal-India oil pipeline project, which was mooted four years ago, is expected to gain momentum if Nepal government released funds to Indian Oil Corporation to prepare a Detail Project Report (DPR) of the scheme.

"The project which will reduce oil transportation cost to Nepal by as much as 50 per cent has been left in limbo due to a confusion on who will push the project ahead," said engineer Suresh Kumar Agrawal, Director of Engineering and Project Department at Nepal Oil Corporation (NOC).

The project will take a maximum of 18 months for the construction with a total estimated outlay of Rs.1.6 billion. The estimated payback period is seven years if the government starts the project on its own expenditures, he said.

"The project plans are at a preliminary stage without a concrete decision and the government of Nepal have to come up with a decision either requesting Indian Oil Corporation (IOC) for full investment or carry out the project on its own," he said.

He noted that IOC was waiting for a green signal from the government of Nepal to carry out the DPR of the project. The IOC has demanded 5m rupees to conduct the initial survey and prepare a report.

He said that the project proposes to link an IOC facility from Raxaul with NOC's main terminal 40 km away at Amalekhgunj. He pointed out that more than 200 oil tankers mobilised to import oil to Nepal were causing congestion at the border. "With the completion of the project, Nepal will benefit in terms of environment, finance and time," he said.

He said that a Memorandum of Understanding (MoU) was signed between the NOC and IOC four years back for a joint venture. There was an understanding that Nepal would foot 60 per cent cost and India the rest but the a formal agreement remained pending, and NOC decided to commence the project itself.

However, 'Live Mint', an Indian online news agency, quotes SV Narasimhan, Indian Oil director of finance that the Indian Oil, India's top refiner has decided to give a push to the project as a confidence-building measure. "Indian Oil will invest in setting up the pipeline. The plans are at a preliminary stage."

Agrawal, responding to a question regarding Indian Oil investment in the project, said that it was still not fixed who would invest in the project. "The oil pipeline project will be started this year if the government of Nepal gives a green signal for the project survey, but still there is confusion about the investment," he added.

He said that Nepal and India being close neighbours, if the government of Nepal formally requested the IOC to implement the project it would start any time.

Nepal has an annual demand of 580,518 million tons of petroleum products. It is incurring monthly loses of 760m dollars and NOC's dues to IOC amount to 850m dollars.

Originally published by The Rising Nepal, Kathmandu in English, 28 Sep 08, p 1.

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