State-run gas firm Gas Authority of India Ltd said on Thursday that it will invest around Rs 12,000 crore (Rs 120 billion) in the next 7-8 years in laying a 6,400-km gas grid in the country.

"We have planned a 6,400-km gas grid inter-connecting the demand centres with supply sources across the country," Gail chairman and managing director Proshanto Banerjee said.

The gas grid would link the eastern offshore to the markets in the south and western India, he said.

Besides, the grid would also link southern markets to eastern India, which in turn would be connected to markets in the north.

Gail would lay 1,250-km Uran-Hyderabad-Kakinada gas pipeline to connect the eastern coast to west and a 1,700-km pipeline from Kolkata in West Bengal through Orissa and Andhra Pradesh to Chennai, Banerjee said.

Besides, Gail also plans to lay 1,000-km gas pipeline from Kolkatta via Bihar and Uttar Pradesh to Jagdishpur, the terminating point of the existing HBJ (Hazira-Bijaipur-Jagdishpur) natural gas pipeline.

Gail would also lay 1,290-km Hazira-Uran-Bangalore pipeline, 450-km Kochi-Kasargod-Mangalore pipeline, 370-km Mangalore-Hasan-Bangalore pipeline and 340-km Bangalore-Chennai pipeline, he said adding Gail could finance the entire cost of around Rs 12,000 crore on its own.

Banerjee said currently domestic natural gas production was around 67 million standard cubic meters per day as against the demand potential of 151 million standard cubic meters per day.

"This demand is likely to rise to 145 mmscmd by 2006-07 and to 225 mmscmd by 2011-12. Domestic production on the other hand is likely to increase only to 85 mmscmd by 2006-07 and 120 mmscmd by 2011-12," he said adding 60 mmscmd of gas would have to be imported from 2006-07 to meet the demand.

The mismatch between demand and supply would give new discoveries (like the find by Reliance Industries off the east coast), imported LNG and cross border pipeline a share. "India can absorb additional gas availability, new discoveries, LNG and cross border pipeline gas as the demand-supply gas is widening," he said.

Besides, cost of production from deep water finds would determine trends, he added.