The
BP-Reliance Industries Ltd (RIL) move to form a joint venture (JV) for transporting and marketing natural gas in India could spell trouble for public sector oil major Gas Authority of India Ltd (GAIL).
Senior GAIL officials are worried that a new player backed with the financial muscle of multinational giant BP could end up taking a neat chunk of the pipeline transportation business from them.
GAIL is in the process of implementing a huge investment plan for increasing the company's natural gas pipeline network from 8,000 km at present to 14,000 km by 2013-14 . "If another big player comes up with its own plans to set up pipeline infrastructure, GAIL is likely to get less gas for transportation, which would affect the rate of return on these projects," a GAIL official told Mail Today.
A gale that could hit gail
- GAIL is worried that a new player backed with the financial strength of BP could take a chunk of its pipeline transportation business
- GAIL is likely to get less gas for transportation, affecting the rate of return on its projects
- GAIL, ONGC and OIL are also burdened by a huge subsidy bill on selling petroleum products below market price
- GAIL, ONGC and OIL have to foot Rs 25,200 crore subsidy bill of the total Rs 75,600 crore
- The company's share in the marketing of natural gas would also take a hit if the BP-RIL duo enters this segment in a big way
- Former GAIL head feels the 30% stake in RIL's assets should have been offered to the PSU oil firms
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GAIL, being a public sector company, does not function purely on the profit motive and has to set up pipelines to meet the requirements of far flung areas as well. This would prove to be a handicap while competing with a private company, which has no such compulsions and will go for projects that ensure high returns, a senior official explained.
GAIL, along with Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) also shoulders the socio-economic responsibility of footing as much as onethird of the country's huge subsidy bill on petroleum products, such as LPG, kerosene, diesel and even petrol when international crude oil prices shoot up. During the current financial year the subsidy bill has been estimated at Rs 75,600 crore, for which these three companies will have to shell out Rs 25,200 crore.
Similarly, GAIL's share in the marketing of natural gas would also take a hit if the BP-RIL duo enters this segment in a big way, which would further limit the business opportunities for the public sector company, a senior official remarked. Standing Conference of Public Enterprises (SCOPE) director-general and former GAIL chairman and managing director (CMD) U.D. Chaube is of the view that if the 30 per cent stake in RIL's gas and oil assets was up for sale it should have been offered to the public sector oil and gas companies, which could have easily raised the $7.2 billion as a consortium.
"The BP-RIL deal is good as foreign investment coming to India shows the confidence in Indian exploration companies. But at the same time I would have been happy if public sector enterprises (PSE) like ONGC, GAIL and OIL would have taken the 30 per cent stake in Reliance because they have the required experience and expertise,'' Chaube told Mail Today.
"Reliance could have explored the possibility of offering the stake to these public sector enterprises as the $7.2 billion could have been easily mobilised by them," he added. "The deal may not be as simple as it appears because the consequences will gradually come out with time. Public sector enterprises in the oil and gas sector must be very cautious of such deals," he said.
Courtesy: Mail Today
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