Shell, BG may review India LNG operations

‘Grappling with the confusion over the ongoing Centre-State tussle over jurisdiction of the gas sector, the proposed gas policy is being perceived as the proverbial last straw which would ensure that no FDI flows into the energy sector which is already bearing the negative fallout of the Dabhol imbroglio,’ sources said.

According to a senior executive at one of the MNCs, the proposed gas policy, which would be based on a pooled-price principle wherein prices of domestically produced natural gas and re-gasified LNG (R-LNG) to be imported at Dahej would be taken together and consumers would be offered gas on weighted average basis, blatantly provides the PSU joint venture Petronet LNG Ltd (PLL)project coming up at Dahej an unfair advantage over those being set up by Shell at Hazira and BG at Pipavav.

‘It shatters the notion of level-playing field which the government wants to project,’ said the incensed executive. That’s because pooling the price of R-LNG imported by PLL would, in effect, tantamount to cross-subsidising it with domestic gas thereby lowering its price compared to that of LNG imported by the MNCs.

Questions are also being raised about the dual role being played by Chaturvedi. ‘How can the Secretary hold the position of chairman of a private company (PLL is registered as a private company),’ queried an industry insider, adding: ‘He can either hold the brief for the Government of India with the primary responsibility of governance and ensuring fair competition among the players or he can, as chairman of PLL, do business like all of us. But he definitely cannot perform two conflicting tasks simultaneously’.

The proposed gas policy has also stirred a hornet’s nest over the plank on which it is being pushed—namely to encourage its usage as feedstock for fertiliser units. ‘If the government is planning to subsidise the cost of R-LNG to promote its use in the fertiliser industry alone, it is obviously not going to go down well with other users, the largest of them all being the power sector. So, if you’re cross-subsidising for one industry, you’ll have to do it for all other users as well,’ said industry source. It is reliably learnt that top guns of both affected MNCs are planning to work out a collective strategy to stall the proposed gas policy, which is still to be accorded Cabinet clearance, and may even take recourse to approaching the WTO for violation of the MFN clause by India as a last resort in case no other democratic or legal recourse is available. On the flip side, however, the proposed gas policy would come as a windfall for those pumping investments into the gas distribution business including the state-owned Gujarat State Petronet Ltd and companies like the Rs 4,000 crore Adani group which has submitted a proposal for entry into the gas distribution arena.

‘For us, more affordable LNG would obviously mean more consumers and more business,’ said Sanjay Gupta CEO, infrastructure projects for the Adani group.