India to let Qatar pick stake in Petronet LNG, with riders

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SummaryState-run GAIL is one of the four promoters of Petronet and has expressed interest in acquiring ADB’s equity.

India will permit Qatar to pick up 5.2 per cent equity in Petronet LNG Ltd provided the Gulf nation gives an extra two million tonnes of LNG at a price lower than what it charges Japan.

At a meeting called by Prime Minister’s Office last month, GAIL India agreed to waive its right of first refusal to acquire Asian Development Bank’s 5.2 per cent if Qatar agreed to a delivered price of $12.5 per million British thermal units for the additional LNG. It charges $14 per mBtu from Japan.

State-run GAIL is one of the four promoters of Petronet and has expressed interest in acquiring ADB’s equity. The other three — Indian Oil Corporation, ONGC and Bharat Petroleum — waived their rights after the oil ministry blocked their move saying it would turn Petronet into a public sector company.

GAIL is keen to turn Petronet into a public sector company so that it would become “more accountable and open to scrutiny by government institutions”.

But the oil ministry, whose secretary chairs Petronet, says that the private entity would lose its agility to take quick decisions.

The four public sector oil firms together hold 50 per cent stake in the private company. ADB holds 5.2 per cent.

India initiated discussions with Qatar’s RasGas in February 2010 for an additional three million tonnes of LNG — one million each for Dahej, Dabhol and Kochi terminals. But RasGas said it could supply 2 MT more on an immediate basis from 2013-14 but at $14 per mBtu.

RasGas last October changed its stance following news that GAIL had signed cheaper imports from US Sabine Pass Liquefaction and Russia’s Gazprom. It indicated that it was willing to soften its prices, reflecting its fear of losing Petronet which buys 7.5 MT annually.

Sources say the equity to Qatar Petroleum International (QPI) would raise a conflict of interest as it will give the energy firm a vantage position in India’s largest fuel importer.

QPI, which holds majority in RasGas and Qatar Gas, would get a board position in Petronet with an undue advantage over other Petronet suppliers as it will be privy to price and other negotiations.

Another sweetener for the Qataris, who plan to visit India next month to probe various investments in the country, would be 10 per cent equity in Petronet LNG’s proposed 5 million tonne LNG terminal at Gangavaram in Andhra Pradesh.

“It is proposed to have a strategic partner with 10

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