Kathmandu, August 24

The long-awaited cross-border petroleum pipeline construction deal between the governments of Nepal and India has been signed here today, which has paved the way to lay down 41-km-long oil pipeline from Raxaul in India to Amlekhganj in Nepal.

The pipeline framework agreement has been signed by Commerce Minister Sunil Bahadur Thapa and Dharmendra Pradhan, minister of state for Petroleum and Natural Gas of Narendra Modi led government in India, at government-to-government (G2G) level. Minister Pradhan had arrived on Sunday with an 11-member delegation to sign the landmark agreement for petroleum pipeline.

The cross-border pipeline project, which also includes re-engineering of Amlekhganj depot, is going to be constructed at a total cost of INR 2.75 billion within 30 months of beginning the construction. Indian government has entrusted Indian Oil Corporation (IOC) to implement the petroleum pipeline project and it is reported that IOC and its counterpart Nepal Oil Corporation (NOC) will soon sign the pipeline construction deal.

NOC will bear INR 750 million of the total cost of INR 2.75 billion for the project and rest of the amount will be mobilised by IOC as grant. NOC and IOC will also sign agreements on engineering contract, supply contract and third-party contract (meaning that a third party can also take advantage of the pipeline).

The framework agreement signed today says that there will be a long-term contract of 15 years — the initial contract will be signed for five years and will be extendable for two terms of five years each — between the IOC and the NOC for supply of petroleum products.

After signing the agreement, Commerce Minister Thapa said, “Our 20-year-old dream of cross-border pipeline project has finally been realised.” He appreciated the generous support of Minister Pradhan in ensuring smooth supply of fuel to Nepal even during the difficult period following the devastating earthquake of April 25 and the subsequent powerful aftershocks.

The proposed pipeline is expected to save Rs 700 million per annum in transporting fuel from Raxaul to Amlekhganj. Subsequently, it will save travel time for tankers as well as minimise pilferages. On the other hand, construction of the pipeline will no longer require tankers to transport fuel across the border, which in turn is also expected to ease congestion at Raxaul-Birgunj customs point and smoothen the import of other goods through India. IOC’s Raxaul depot caters to 60 per cent of the petroleum products imported to Nepal.

IOC has vast experience in construction of pipelines and it has already constructed 11,000-km pipeline across India. The pipeline to be built from Raxaul to Amlekhganj will be environment-friendly and will meet all the international standard safety features of the petroleum pipelines.

Speaking during the agreement signing programme, Minister Pradhan said that he came here to fulfil the promise made by Indian Prime Minister Narendra Modi, who had said he would gift the petroleum pipeline to Nepal while addressing the Parliament of Nepal, during his first visit to the country in August of last year.

“India can also support in construction of liquefied petroleum gas pipeline and in extending the pipeline from Amlekhganj to Kathmandu through the route of Kathmandu-Tarai fast track route,” said Pradhan, adding, “The pipeline can also be extended to other regions of Nepal.”

He expressed his strong commitment for timely completion of the project and informed that he has directed the IOC to complete the project in less than the stipulated time of 30 months.

Meanwhile, Minister Pradhan also met Prime Minister Sushil Koirala and talked about further boosting bilateral cooperation, the petroleum pipeline agreement and expanding cooperation in oil and gas in the future.