Vol 2, PW 24 (23 Dec 98) Midstream & Downstream

Nowhere is the need for an independent gas regulator in India more evident than in the current storm sparked by Totals possible alliance with the Gas Authority of India (GAIL).

In the latest twist to this messy saga, Petrowatch learns that Mohammed Pathan, Chairman of the Indian Oil Corporation (IOC), has written to TS Vijayaraghavan, Secretary, Ministry of Petroleum & Natural Gas, formally complaining about the prospect that GAIL could end up supplying an estimated 2.2m tonnes a year (t/y) of LNG brought in by Total from the Middle East. Pathan argues that an alliance between GAIL and Total would compromise GAILs 12.5% stake in Petronet-LNG, a potential rival.

The story has its roots in an MOU signed in September 1997 between Total and the Tata Electric Company (TEC) for the supply of 0.8m t/y of LNG for TECs 1,350-MW power plant at Trombay, near Bombay. Total plans a 3m t/y LNG import terminal at Trombay, rising later to 6m t/y.

In the short term, Total needs a distributor for 2.2m t/y of surplus LNG. Enter GAIL, with its existing gas pipelines and customers, an obvious choice.

Unfortunately, not everyone see it so. In his letter to the oil ministry, Pathan argues GAIL will suffer a conflict of interest if it ties up with Total.

Arguments for and against a GAIL alliance with Total both have merit. That, however, is not the issue.

The real issue is: who has the power to decide if it will happen Answer, sadly: the company with the strongest lobbying power in the oil ministry. A gas regulator is clearly needed.

LNG Summit