The Hindu Business Line : Private firms against Govt taking gas profit in kind

THE Government is under pressure to review its decision to take profit petroleum/gas in kind as part of the New Exploration Licensing Policy Round V (NELP-V), following strong opposition from potential investors.

The Gas Industry Group (GIG), an informal group of like-minded private companies in the gas sector, has also come down heavily on the Government's proposal to take profit gas in kind in the draft pipeline policy.

"This clause will restrict the marketing rights of contractors and result in them being unable to commit volumes to customers," Mr Nigel Shaw, Convenor of GIG, told newspersons on Wednesday.

During road shows for NELP V, potential investors have told the Government that it would be difficult to implement the clause to take the profit petroleum in kind.

"The Government is seized of the problem and is examining it. We are hopeful that it would be revised. Otherwise, NELP V will be the same as NELP 3 and 4 where no MNC worth its name participated in the bidding process," said Mr R.P. Sharma, President (LNG Business), Reliance Industries Ltd.

Stating that the system of taking profit petroleum/gas in kind has no parallel anywhere in the world, GIG said that the proposal was a "thoroughly bad idea" that has to be removed to attract investments into the petroleum/gas sectors.

"If this clause is to be implemented, it would be very difficult to predict what share of the gas the operator/producer would get from the field year after year for marketing. The Government should continue to take the profit gas in cash rather than in kind," said Mr M.L. Cessna, CEO of Exxon Mobil Gas (India) Pvt Ltd.

In the case of all pre-NELP blocks, the Government had taken the profit petroleum/gas in kind and had nominated State-owned companies to market the fuel.

However, during the first four rounds of NELP bidding, the Government had changed this system and took the profit petroleum/gas in cash by allowing the producers/operators to market the fuel.

According to Mr Shaw, taking profit gas in kind does not serve any interests at all.

"There is a very tenuous link between meeting social obligations and taking profit gas in kind. There are many other ways to do this without disturbing the gas business. We definitely want it removed from the draft pipeline policy."

In its submission to the Government on the Petroleum and Natural Gas Regulatory Board Bill, 2004 and the draft policy for Development of Natural Gas Pipeline Networks, GIG said that natural gas should be separated from petroleum product regulation as the two commodities are at different stages of development in India.

Further, it has opposed the mandatory retail service obligations proposed in the Bill on the grounds that such obligations should be judged on an economic basis.

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