The equity of Petronet LNG is being recast with a view to accommodate the National Thermal Power Corporation (NTPC) which has been seeking a 26 per cent stake in the company for a while now. Petronet LNG is a consortium of IOC, BPCL, Gas Authority of India and the Oil and Natural Gas Corporation who hold 12.5 per cent each in the equity of the company.

This will now change to 16.66 per cent apiece to be shared equally among ONGC, GAIL and NTPC. Both IOC and BPCL will, however, be offered equity in the subsidiaries -- Petronet Dahej and Petronet Cochin -- but are, reportedly, not too happy with this option.

"This is the second time this kind of reshuffling is being envisaged in Petronet LNGand all with a purpose of ensuring a berth for NTPC in the company," sources said. The first time around, there was a proposal within the petroleum ministry to drop ONGC and BPCL from the holding company but this met with some resistance. The four oil PSUs reiterated that in no way they were going to either step down from or dilute their stake in Petronet LNG at the expense of NTPC.

However, this time around, reports indicate that the petroleum ministry will not change its stance as NTPC's inclusion makes strategic sense given that it will be the biggest consumer of LNG. Both BPCL and IOC are believed to very unhappy with the state of affairs, but there is really little hope for them unless the equity pattern is completely recast so that five PSUs, inclusive of NTPC, hold 10 per cent each.

"This, again, is impossible as NTPC has all along wanted a lion's share of the equity in Petronet LNG. It is equally imperative that ONGC and GAIL stay on as they have natural synergies with LNG," sources said. Theequity component of the PSUs will have to be confined to 50 per cent if Petronet should remain a non-government company. Hence, if NTPC is given the largest stake of 16 per cent, the four other oil companies will have to be content with 8.5 per cent each, clearly an impossible option.

The truth is that despite objections coming in from both BPCL and IOC, it is apparent this time around that the petroleum ministry has made up its mind.

The two companies will now have to decide if they will participate in the equity of Pertonet's subsidiaries. Indications are that, if they do, they will insist on stakes of at least 26 per cent each in Petronet Dahej and Petronet Cochin.

It is also obvious by now that there has been tremendous pressure from the power ministry on the Government to ensure a berth for NTPC in Petronet LNG.

The fallout of this has been the axing of BPCL and IOC which is bound to cause some heartburn among industry circles. Whether the petroleum ministry agrees to compromise will be knownduring the next few weeks.