In an interesting turn of events, the Andhra Pradesh government has obtained natural-gas equity in the future production from the highly potential Pranahita-Godavari basin.

The State is all set to sign an MoU with Hindustan Oil Exploration Company (HOEC), which has the license for exploration and production of natural gas from the basin, a senior official told FE.

As per the agreement, expected to be signed shortly between Infrastructure Corporation of AP (INCAP) and HOEC, the State will have a share in the future natural gas production from the Pranhita-Godavari basin. Further, the government has ensured all help, support and protection to the company during the course of exploration and production from the basin.

It (the MoU) also is categorical that, ?the government has no financial commitment in the exploration and production activity. Also the company has to meet all the expenditure on providing the requisite police protection and clearances during the course of the exploration and production operations.?

Though HOEC had obtained the exploratory license from ONGC in 1993, the company had to withhold the exploration work, since the area was troubled with the extremist movement, the official said. The company had approached the government for support in 2007 and the officials had brokered the deal.

Elaborating the deal, the official said that the company will offer 25% of natural-gas equity from the possible production from the project, besides the State will also have the first right-of-rejection. Further, the company has agreed to sell the natural gas at 65% of the sale price.

Sources said that the government has already issued orders in favour of Infrastructure Corporation of Andhra Pradesh (INCAP) to enter into a MoU with the HOEC.

HOEC has exploration rights on 29,200 sq kms on-shore area in the Pranhita-Godavari basin covering Andhra Pradesh and Maharashtra for a period of 25 years and extendable for another 10 years. In AP, it has about 14,400 sq kms covering four Telangana districts – Khammam, Karimnagar, Warangal and Adilabad.