Gas producers oppose move to pay profit gas in kind

Vol 8, PW 21 (26 Jan 05) People & Policy

Government attempts to receive profit gas in kind from NELP-V blocks have been met with vocal criticism by leading gas producers.

Private upstream players feel the move is detrimental to the development of a natural gas market in India. British Gas and Reliance are the most critical of the government move.

On 12th January BG India chief Nigel Shaw made a public display of his companys disapproval of the NELP-V provision in his presentation to investors in Gujarat. The proposal to take petroleum and gas production share in kind is retrogressive, he said.

Such steps create uncertainty for investors and stifle the vibrancy of the gas market. We also learn that the recently formed Gas Industry Group (GIG) strongly opposes this particular NELP-V provision.

This gives an unfair advantage to GAIL, says a member of the GIG. You are giving extra gas to the incumbent (GAIL) who is also the government nominee for marketing all the gas produced in the country.

We understand that the GIG will soon register a formal protest with the government. Reliance, which like BG is also a member of the GIG, believes sharing profit gas in kind is wrong.

Why should the government take profit gas in kind questions a Reliance source. The government should follow the Panna, Mukta and Tapti model.

Gas production differs on a year-to-year basis. How are we supposed to determine how much gas is to be given to GAIL every year A source from Hardy Exploration agrees with BG and Reliance.

This move is not in the interest of exploration companies, he said. It will slow down projects and hurt gas sales agreements which are long term in nature.

Another gas producer said: Its like telling your buyer that his requirement is being axed by a particular percentage because the government wants the gas instead.