'Honest Broker' role for Gujarat State Petroleum (GSPCL)

Vol 4, PW 2 (01 Mar 00) Midstream & Downstream

When it comes to buying gas, officials at Gujarat State Petroleum (GSPCL) freely admit they intend to play the role of 'Honest Broker' between foreign suppliers and buyers.

It is not clear how this news will be received by foreign multinationals. In practice it means GSPCL will represent a cartel of 10-15 state-owned companies, which it believes will consume up to 85% of the LNG that lands on the shores of Gujarat.

Among this group are 'The Big Six' shareholders in Gujarat State Petronet Ltd, which is building the grid: Gujarat Narmada Fertiliser Corporation Gujarat State Fertiliser Corporation Gujarat Industrial Power Corporation Gujarat Electricity Board Gujarat Power Corporation Gujarat State Petroleum Corporation (lead promoter) Behind the new strategy is fear that Gujarati companies, inexperienced in the technicalities of complex Gas Supply Agreements, will not get the best deal if they act alone. "It will give us negotiating strength if we act as a group", a senior official tells Petrowatch, "If each of us employs separate consultants and legal staff the cost will increase - this way we are saving money." To grasp the technicalities of the LNG business, GSPC intends to hire a consultant with a three-fold mandate: To assess the readiness of LNG suppliers on available data To prepare a negotiating model and a purchase strategy To prepare a draft Heads of Agreement (HOA) and Gas Supply Agreement (GSA) The aim is to enter negotiations fully prepared: "We won't take them at face value!" quips a senior official, "We will cast a critical eye on all their projects".

GSPC has already prepared a separate 'Gas Transmission Contract', presently undergoing a 'trial run' in negotiations with the company's power plant at Hazira.

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