Nepal plans Rs 30 billion LPG pipeline and storage project to end supply shortages

Kathmandu, October 26

Nepal Oil Corporation (NOC) is accelerating plans to build a cross-border LPG pipeline and a large storage facility in Sarlahi to address recurring cooking gas shortages caused by natural disasters, road blockages and transportation disruptions.

The proposed project involves laying an approximately 131-kilometre LPG pipeline from Motihari in India to Sarlahi in Nepal and constructing a 50,000-tonne storage facility capable of meeting the country’s LPG demand for about a month.

The project would mark a major shift in Nepal’s LPG infrastructure, where the government’s direct presence in large-scale gas storage has so far been almost negligible.

According to Binit Mani Upadhyaya, head of NOC’s LPG and Aviation Department, the project received in-principle approval at the fifth meeting of the Nepal-India Joint Working Group (JWG) at the ministerial level in New Delhi.

Following the meeting, NOC and Indian Oil Corporation (IOC) formed a business-to-business committee to advance the project. Technical discussions have been held, documents exchanged and the preparation of a detailed project report (DPR) initiated.

Three major components

NOC’s proposal to IOC outlines three main components for the proposed facility in Sarlahi.

These include a 50,000-tonne LPG storage facility, a bottling plant capable of filling 25,000 cylinders a day, and a tanker lorry filling (TLF) facility capable of loading at least 100 LPG tankers daily.

“We have included these three major components in the proposal sent to IOC,” Upadhyaya said, adding that the infrastructure could bring a significant transformation in Nepal’s LPG supply management.

He said the storage facility would help address shortages that frequently occur when disasters damage roads or transport routes are disrupted for even a few days.

The damage to hydropower projects and highways caused by the disaster in Bhotekoshi on August 26 highlighted the need for more reliable energy storage and supply infrastructure, he said.

LPG pipeline route and land

The proposed LPG pipeline will originate in Motihari, India, and enter Nepal, following the route of the existing Motihari-Amlekhgunj petroleum pipeline as far as Pathlaiya in Bara before extending eastwards to Sarlahi.

The total pipeline length is estimated at around 131 kilometres, with the Pathlaiya-Sarlahi section covering approximately 60 to 62 kilometres.

NOC plans to lay the pipeline along the left side of the road on the stretch from Pathlaiya to Sarlahi. Horizontal directional drilling (HDD) technology is proposed for crossing rivers and other waterways, allowing the pipeline to pass safely beneath them.

Land availability, a key requirement for the project, has already been addressed, according to NOC. The corporation owns more than 14 bighas of land in Sarlahi, which IOC is currently assessing for the design and placement of the proposed infrastructure.

Project enters technical study phase

NOC and IOC have already held virtual meetings through their joint business-to-business committee and exchanged technical documents.

IOC initially submitted a preliminary report examining whether an eight-inch or 10-inch LPG pipeline would be more suitable. NOC subsequently submitted its requirements, including the proposed storage capacity and other facilities.

IOC also requested a soil-testing report for the land in Sarlahi, which NOC has provided. The Indian corporation has since sought an updated survey report containing the site’s geographical coordinates.

“We have prepared the fresh survey report and will send it to IOC shortly,” Upadhyaya told Onlinekhabar.

IOC is expected to prepare a detailed design based on the survey report and NOC’s requirements, paving the way for the project to reach the next stage of technical planning.

Estimated cost of Rs 25-30 billion

The total investment required for the LPG pipeline, storage facility and associated infrastructure is provisionally estimated at Rs 25 billion to Rs 30 billion.

However, the financing arrangement has not yet been finalised. NOC said discussions on the financial model would begin after the DPR establishes the project’s design and more precise cost estimates.

The Nepal and Indian governments will then decide how to finance the project, including whether India could provide grant assistance or whether another funding arrangement would be adopted.

Given its scale and strategic importance, the final decision is expected to be made at the higher political and administrative levels of both countries.

Cutting transportation costs and delays

Nepal currently imports LPG from several Indian refineries, transporting it by road in specialised tanker trucks known as bullets.

Barauni is among the nearest refineries, while supplies from Durgapur, Mathura and Paradip must travel considerably longer distances. Depending on the refinery, transportation can take between three or four days and a week.

Traffic congestion, customs procedures, road accidents and highway disruptions can further delay deliveries.

NOC estimates that it currently spends around Rs 6 billion annually on LPG transportation alone.

“Once gas is transported directly to Sarlahi through the LPG pipeline and stored there, long-distance transportation costs can be saved,” Upadhyaya said.

The proposed automated facility would also allow tankers to be loaded more quickly and dispatched to bottling plants across Nepal, including those supplying the Kathmandu Valley.

Opportunities for Nepali transporters and jobs

The project could also reduce Nepal’s dependence on Indian LPG transporters and create opportunities for domestic businesses.

An estimated 600 to 700 Indian LPG tankers are currently used to transport gas to Nepal from Indian refineries.

With a pipeline delivering LPG directly to Sarlahi, NOC expects Nepali transport operators to play a greater role in distributing gas from the storage facility to bottling plants nationwide.

This could create direct and indirect employment while retaining more transportation expenditure within Nepal.

At present, 58 privately operated LPG bottling and refilling plants distribute cooking gas across the country. More than 15 million household cylinders, each with a capacity of 14.2 kilograms, are in use in the Nepali market.

NOC estimates that between 100 and 120 LPG tankers need to be loaded daily to supply these plants. The proposed Sarlahi facility would be designed to support this level of demand.

If implemented as planned, the Motihari-Sarlahi LPG pipeline and 50,000-tonne storage facility could strengthen Nepal’s energy security, improve the reliability of cooking gas supplies and reduce dependence on long-distance road transportation.

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