India grants Rs 15 bn for landmark petroleum pipeline and fuel storage project in Nepal

KATHMANDU: In a significant boost to Nepal’s energy infrastructure, India has committed approximately Rs 15 billion in grants for the construction of a petroleum pipeline and fuel storage facility in Nepal. The agreement, signed between Nepal Oil Corporation (NOC) and Indian Oil Corporation (IOC) on Thursday in New Delhi, paves the way for new projects that will enhance the country’s fuel supply network.

The NOC confirmed the agreement for the construction of two vital petroleum pipelines and a fuel storage terminal, marking a historic collaboration between the two neighboring countries. As per the agreement, a new petroleum pipeline will be built from Siliguri, India, to Jhapa, Nepal. Additionally, the existing pipeline from Amlekhgunj (Bara) will be extended to Chitwan. Furthermore, the Indian Oil Corporation will construct a fuel storage facility in Jhapa with the grant.

Agreement Signing and Project Overview

Dr. Chandika Bhatta, Managing Director of NOC, and Senthil Kumar, Managing Director of IOC, signed the agreement for the pipeline and storage facility project. The total project encompasses three main components: two petroleum pipelines and a storage terminal.

According to Dr. Bhatta, the grant from India will cover the cost of the three projects, while NOC will independently finance an additional fuel storage facility in Chitwan with an estimated investment of Rs 9.5 billion. With the agreement signed, all projects are set to move into the implementation phase.

NOC Deputy MD Birendra Goit explained that the projects funded by the Indian grant, as well as those backed by NOC’s investment, will now proceed as part of a comprehensive strategy to ensure an organized and efficient fuel supply across the country. The key infrastructure developments include the Amlekhgunj-Chitwan petroleum pipeline, the Siliguri-Jhapa petroleum pipeline, and greenfield fuel storage terminals at Charali in Jhapa and Lothar in Chitwan.

Government-to-Government Agreement

The groundwork for these projects was laid during the state visit of former Prime Minister Pushpa Kamal Dahal to India. During the visit, a government-to-government (G2G) agreement was signed, under which India committed to funding the construction of two pipelines and one storage terminal. The agreement was formalized by the then Minister for Industry, Commerce, and Supplies Ramesh Rijal and India’s Petroleum Minister Hardeep Singh Puri, witnessed by PM Dahal and Indian Prime Minister Narendra Modi.

Strategic Importance and Benefits

The construction of the Siliguri-Jhapa petroleum pipeline will cater to the growing energy demands of eastern Nepal, particularly in the Koshi Province. The Motihari-Amlekhgunj petroleum pipeline, which is currently operational, has been insufficient to meet Nepal’s growing fuel needs. The new 50 km pipeline, with 35 km on the Indian side and 15 km in Nepal, will reduce transportation costs, improve fuel purity, and curb leakage, theft, and adulteration. Moreover, it will resolve traffic congestion caused by oil tankers and reduce environmental pollution.

The extension of the Amlekhgunj-Chitwan pipeline is expected to significantly reduce transportation costs to Kathmandu and Pokhara, the two largest consumers of petroleum products in Nepal. The infrastructure will also improve the long-term management and distribution of petroleum products, ensuring smoother operations and addressing fuel demands across the country.

This landmark project marks a new chapter in Nepal-India cooperation and is expected to provide lasting benefits for both countries, particularly in energy security and economic efficiency.