Three MNC Partners May Opt Out Of GSPL Gas Project

Ahmedabad, May 24: | Updated: May 25 2002, 05:30am hrs
The state-owned Gujarat State Petronet Limited’s (GSPL) ambitious Rs 2,500- crore gas grid project has run into rough weather, with three out of four multinational companies which had evinced interest in picking up equity in the project, having second thoughts about the project. According to highly placed sources, at a meeting held here on Wednesday last, French gas major Gaz de France (GDF) as well as British Gas and its subsidiary Gujarat Gas voiced reservations about certain pre-conditions which have been set by GSPL for picking up equity. Foremost among these is the pre-condition that the state’s contentious Gas Act, which was passed through an ordinance in December 2002 by the state government but has since then assumed dimensions of a Centre-state discord, is "absolutely non-negotiable."

Sources said that this pre-condition has been set because as far as GSPL is concerned, the agency is firmly committed to the gas grid project, irrespective of the fate of the Gas Act. However, the MNCs had started dragging their feet over picking up equity in the project following the controversy over the Act. "And since their indecisiveness was delaying the project, we have inserted non-negotiability of the Act as a pre-condition," GSPL sources said.

However, despite this, at least one of the foreign companies, namely GDF is still sticking to the stand that it would pick up equity only once the fate of the Gas Act is decided. "Since GDF is a government-owned company itself, it is slightly more sensitive to such issues," said a source.

Apart from the pre-condition concerning the Gas Act, GSPL has also made it abundantly clear that only those interested in picking up equity should strictly abide by the "non-compete clause" whereby they cannot compete with GSPL in setting up pipelines on the same routes where the gas grid would be laid in line with the "common carrier" principle. "Moreover, the clause has been inserted as a measure of abundant precaution since all those who sign up would be privy to all our plans, including pricing etc and can very well use this to set up rival independent lines," revealed a GSPL source. It is this clause which insiders say is not very palatable to both British Gas and Gujarat Gas which have their own plans for the LNG market. Gujarat Gas already has a pipeline of its own too between Surat and Ankleswar. Given the situation, GSPL has issued a virtual ultimatum to the companies interested in picking up equity to get back to them at the earliest possible. On its part, GSPL is not unduly perturbed even in the eventuality of most of the MNCs backing out of the project.

"Large PSUs like IOC, BPCL, GAIL and Kribhco have already conveyed their willingness to pick up equity in the project and of the MNCs, Shell seems to be an interested party as well," said a senior GSPL official. That being the case, even if GDF, BG and Gujarat Gas finally opt out, we’ll distribute the equity evenly among the remaining equity partners." This is against its earlier stand of not offering more than 11 per cent equity to any given company. It may be mentioned that GSPL has already decided on offering 60 per cent equity both to domestic and foreign companies and is even contemplating an IPO of not less than Rs 200 crore at some stage down the line.