Essar Oil Ltd is in negotiation with Petronet India to gain control over the 1,760 km Central India Pipeline project, which will connect Jamnagar on the west coast to the interior town of Ratlam. The current cost of the project is an estimated US$347.8 million.

Essar is expected to take both a foreign partner and debt financing in order to fund the project that it will use for transporting the output of its 12 million tonne Vadinar refinery.

Before this can happen, though, Essar has to buy Petronet's share in the project - worth an estimated US$86.9 million - and purchase the shares held by the Indian Oil Corp, Reliance Industries and Bharat Petroleum Corp Ltd, a process already underway.

There are two hurdles to Essar's plans. Firstly, it is believed that Petronet has no desire to sell. Secondly, the viability of the project is being jeopardised by Reliance Industries' plans to build a 2,450 km project in the region that would overlap the Central India Pipeline.

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