Too much آ‘Red Tapeآ’ at Petronet-LNG

Vol 3, PW 17 (15 Sep 99) Midstream & Downstream

A major problem faced by Petronet-LNG is its perception as a government-owned company.

An inability to resolve the shareholder agreement between promoters and attract private investors has compounded the problem. Today Petronet-LNG has just Rs2,000 ($46) in share capital.

A more serious problem, however, lies at the heart of the organisation itself. All major decisions at Petronet-LNG need the approval of a five-man committee made up of the chairmen of the four oil and gas companies behind the project (IOC, ONGC, Bharat Petroleum and GAIL) plus the chairman of Petronet-LNG.

Insiders tell this report this committee is time-consuming and responsible for many of the bad decisions at Petronet-LNG. "Some people on that committee know nothing about the gas industry", Petrowatch learns.

"It has had its day and should be dismantled". One controversial decision pointed out to this report was Petronet-LNGs decision to opt for a Freight On Board (FOB) price for LNG from Qatar over a Cost Insurance Freight (CIF) price - a decision made because of "political pressure from above".

Observers point out Petronet-LNG has no experience in the construction of LNG carriers or transportation of the gas but will now have to learn - fast. That means organising shipping, re-gassification, Reserve bank of India (RBI) approval, financing, EPC tenders, and most annoying, a signature from the committee mentioned above.

Conditions laid down by RasGas are clear: implementation of the SPA must happen by 31st July 2000; delay will not be tolerated; and RasGas must be kept regularly informed about progress. "It will be a major challenge for us to deliver a good price to the customer", this report learns.