State-run Gail (India) Ltd on Monday said it will hive off its gas trading business into a separate company by 2008, by when the ambitious Rs 20,000 crore (Rs 200 billion) national gas pipeline grid will be in place.

"For Gail to become a national gas transmission company and develop confidence of producers and users, we plan to separate the trading business by creating a Chinese wall between transmission and marketing functions," Gail chairman and managing director Proshanto Banerjee said at a press conference in New Delhi.

Hiving off gas trading business into a separate company would be achieved in stages beginning with separation of accounts, creation of strategic business unit (SBU) and finally a separate corporate entity that becomes listed on major bourses, he said adding separation of accounts has begun from 2003-04.

While the new entity, whose name is yet to be decided, would be responsible for purchasing gas from producers and importers and selling to consumers, Gail (India) would retain business such as pipeline transportation, LPG production, petrochemicals and telecom.

Banerjee said a separate company needs to be created so that there is no conflict of interest between the owner of the pipeline infrastructure, which would also be used for other firms to transmit gas, and its interest of selling gas.

Gail executive director (business development) Rajeev Khanna said the 7900-km National Gas Grid would be ready by 2008.

Gail keeps focus on exploration

Gail (India) Ltd said it will more than double the investment in oil and gas exploration to Rs 254 crore (Rs 2.54 billion) in 2004-05 to expand its presence in the upstream business of the hydrocarbon value chain.

"(Exploration and production) being an important area, the company has earmarked an investment of Rs 101 crore (Rs 1.01 billion) for current fiscal and Rs 254 crore for the year 2004-05," Banerjee said.

Gail, which holds interest in 10 exploration blocks, is expecting two more onland blocks in Tripura and Cauvery basin. Besides, it hopes to bag one of the coal bed methane blocks that it bid for.

Banerjee said Gail is talking to Royal Dutch/Shell for a 15 per cent stake in an offshore medium-sized gas field in Egypt.

The company is evaluating participation in natural gas exploration and production and planning city gas projects in several countries to expand its international operations.

Gail, which already has a 10 per cent stake in the A-1 gas field off Myanmar's northwestern coast, is also talking to Shell for picking up stake in two city gas distribution companies in Egypt.