At a time when energy security concerns are at their absolute peak, a show of indecision on account of the government can possibly affect the way Petroleum and Natural Gas operators function and run a sustainable business. Case in point, the government had authorized setting up of two pipelines, one by Reliance Industries Limited (RIL), which will stretch from Kakinada to Haldia and the other by GAIL, slated to extend from Jagadishpur (in Howrah district) to Haldia, West Bengal earlier in 20009. These pipelines were to be put in place within 36 months from the issue of RoU (right of use) notification. What government failed to do was allocate appropriate gas acreage to both RIL and GAIL. Without knowing how much gas acreage they are to work with, RIL and GAIL are unable commence on their respective projects. This concern was shared by the chairman of the Petroleum and Natural Gas Regulatory Board, L Mansingh, who, in agreement, opined that if the ministry is not telling how much they will allocate, how can operators put up a pipeline which can cost anywhere between Rs. 1 lakh to Rs. 12 crore?
What remains to be done now is that both these operators will have to apply for an extension of the deadline to the P&NG board. However, as L Mansingh shares, whether the board can extend the deadline or cancel that authorization altogether, given government has issued the authorization, is an issue that remains to be addressed. In this situation, not only will the operators stand to lose out on a project, due to the lack of proper dissemination of the project on account of the government, much delay will be rendered to the prolific development of the gas region altogether.
With reference to the debt regarding the pricing of gas, a government committee has suggested introduction of the concept of ‘pooled pricing’ in gas, i.e., linking the high price gas with the low price gas in order to so average out the price. This, however, does not bear well with either the operators or the PPNGRB Act and the Competition Act. Not only will this adversely affect LNG terminals that are slated to come up, it will lead to much distortion in the market, as said by L Mansingh. Giving KG-D6 as an example, he also noted that out of the profit, Reliance Industries stakes only 15 per cent share while the rest goes to the government. By fixing a lower price for its gas, the operator is stringently affected while the government remains to pocket huge profits; which can further be subsidized to a large extent.
As the demand for energy products escalates, the onus lies on the government’s shoulder to roll out and allocate projects to operators with a clear purview, while safeguarding their business modules as far as possible.
Labels: Mukesh Ambani, Reliance, Reliance Industries, RIL