Countdown to 8th March judgement against Niko

Vol 5, PW 3 (28 Mar 01) People & Policy

23rd September 1994: Niko signs Production Sharing Contract with Gujarat State Petroleum Corporation and Government of India for the Hazira gasfield.

5th December 1994: Niko and GSPC sign Joint Operating Agreement. 8th January 1999: Meeting of Niko and GSPC 'Operating Committee' decides to proceed with construction of a 14-km, 36-inch gas pipeline from Hazira to village Mora.

Also agreed that Niko will supervise coordination of project and operate pipeline after completion. 13th January 1999: GSPC writes to Niko asking it to execute construction of the pipeline at the earliest.

23rd March 1999: GSPC informs Niko that it has spent Rs18.11cr ($3.984m) on procurement of pipeline materials and that Niko should pay equivalent of 33.3% cost, or ($1.326m). 6th August 1999: Upstream regulator Directorate General of Hydrocarbons warns GSPC and Niko in a letter that there is "no justification" for construction of 36-inch Hazira-Mora pipeline under 'Hazira Development Project'.

9th August 1999: GSPC tells Niko of DGH view and unilaterally decides that the pipeline is no longer a GSPC-Niko joint venture. 4th January 2000: Niko writes to GSPC complaining about Economic Times article reporting transfer of Hazira-Mora pipeline to Gujarat Gas Grid.

7th January 2000: GSPC refunds $1.326m investment of Niko in the pipeline project. 29th January 2000: GSPC hands over control of Hazira-Mora pipeline to Gujarat State Petronet.

30th January 2000: GSPC informs Niko of above development. 5th February 2000: GSPC tells Niko the joint decision made on 8th January 1999 (see above) to construct pipeline under a JV is "null and void" because: JV did not have clearance from the Foreign Investment Promotion Board and was not authorised to operate assets outside the scope of the PSC.

17th July 2000: Gujarat State Petronet writes to Niko informing it that the pipeline has been commissioned. 24th July 2000: Niko writes to GSPC saying it does not recognise authority of Gujarat State Petronet and still considers the pipeline to be a Niko-GSPC joint venture.

28th July 2000: Financial Express reports Gujarat State Petroleum is inviting foreign companies to take equity in the pipeline.Niko complains to GSPC.

8th March 2001: High Court dismisses Niko demand for injunction on transfer of Hazira-Mora pipeline to Gujarat State Petronet. 6--Niko judgement good news for 'Gas Grid' Had Niko won this case, there's little doubt it would have acted on its threat to sue Gaz de France and others negotiating with Gujarat Petroleum for a stake in Gujarat State Petronet, among them Shell, British Gas and GAIL.

In a letter dated 26th September last year - and seen by this report - Niko threatens Gaz de France with legal action if it took equity in Gujarat State Petronet. Now this chapter has closed, the gas grid story can move on.

And it has. On Friday 23rd March, the Gujarat state assembly finally passed the infamous Gujarat Gas (Regulation of Transmission, Supply and Distribution) Bill, 2001, despite objections from Delhi.

A careful reading of the draft - obtained by this report - reveals a surprising revision, likely to be of immense benefit to shareholders of Gujarat State Petronet. Section 23 reads:"Chapter VITRANSMISSION OF GAS23 (1) (a) No person other than a specified company and a person referred toin sub-section (1) of section 55 shall carry on the business oftransmission in the State.

(b) Subject to the rules, if any, a specified company shall carry on thebusiness of transmission in the State."A correspondent reports that the term specified Company is surprising. In an earlier Gas Ordinance issued by the state government, the reference was to a specified government company.

According to highly-placed sources, removal of the word government is highly significant and could mean the following: Gujarat government is keeping its future divestment options open Gujarat government may in future announce even private companies as a specified company It would enable Gujarat Petronet to hire the best professionals around, impossible if it were a government company