India has offered Qatar the 5.2 per cent stake that Asian Development Bank (ADB) held in Petronet LNG Ltd, the nation's largest liquefied natural gas (LNG) importer. Petronet LNG, which is registered as a private company even though public sector oil firms hold a 50 per cent stake and the oil secretary is its chairman, has approached Qatar Petroleum International (QPI) offering ADB's 5.2 per cent stake.
The PSUs – Indian Oil Corp Ltd (IOCL), Oil & Natural Gas Corp (ONGC), Bharat Petroleum Corp Ltd (BPCL) and GAIL India – had previously evinced interest in buying the ADB stake but the Oil Ministry blocked the move as it would have turned Petronet LNG into a public sector company.
Qatar's Minister of Energy & Industry Mohammed bin Saleh Al-Sada wrote to Oil Minister M Veerappa Moily on November 4, acknowledging Petronet LNG's approach and said, 'QPI and ADB with Petronet support have already engaged in preliminary evaluatory discussions.'
'I have personally endorsed QPI to move forward as it will be a milestone for strengthening mutual cooperation between our countries,' he wrote. IOC, ONGC and BPCL quickly retracted from their efforts to buy the ADB stake after the Oil Ministry diktat but GAIL has continued to stick to its guns that the promoters should be allowed to buy the 5.2 per cent stake.
'In light of GAIL's stance, there might be a possibility that ADB will not be able to proceed further in selling its shares to QPI,' the Qatari Minister wrote.
'I urge the Indian government and look forward to your excellency's assistance to help materialise this deal at the earliest in the interest of the mutual business relations between our nations,' he told Moily. The ADB had on August 23 last year offered to sell its 5.2 per cent stake in Petronet, in which GAIL, IOC, BPCL and ONGC hold a 12.5 per cent stake each as well as the right of first refusal.
Last year the boards of all the four promoter companies approved exercising the pre-emption right over the ADB stake and proposed cash buyout of the multilateral lending agency's interest. However, the Oil Ministry, whose secretary is ex officio chairman of Petronet LNG, vetoed the proposal at a March 26 meeting of the Petronet LNG board, said sources. 'Keeping in view the specific approval of the Cabinet on restricting the aggregate Government/ PSU participation to 50 per cent of paid up capital for providing the desired flexibility to Petronet LNG Ltd to operate in a dynamic LNG import market, the existing shareholding structure in the context of PSU participation, should be retained,' the minutes of the March 26 meeting had stated.
If the ADB stake goes to state-owned firms, Petronet LNG would come under scrutiny of official auditor CAG and the Central Vigilance Commission (CVC) because of the PSU holding exceeding 50 per cent, something that the company and the ministry are opposed to.
The ministry, instead, asked the PSUs to offer the ADB stake to a strategic investor like an LNG supplier, they said.
Qatar currently sells 7.5 million tonnes (mt) of LNG to Petronet LNG on a long-term contract. The Ministry feels that the stake can be used as a bait to get an additional 5 million tonnes a year of LNG.
GAIL, however, is opposed to the idea unless Qatar agrees to sell LNG at a discount to its current asking price of an equivalent to 14.5 per cent of the ruling global oil price, which translates into over four times the predominant domestic price of $4.2 per million British thermal unit.
Gaz de France International (GDFI) holds 10 per cent in Petronet LNG and it too has a right of first refusal over ADB's stake. But the French energy giant has decided to waive this right off.
ADB had, in fact, first proposed to exit Petronet LNG in 2008 but then company CEO Prosad Dasgupta was in favour of a third party like Chevron or steel baron Lakshmi Mittal's group buying the stake instead of the four promoters.
The PSUs – Indian Oil Corp Ltd (IOCL), Oil & Natural Gas Corp (ONGC), Bharat Petroleum Corp Ltd (BPCL) and GAIL India – had previously evinced interest in buying the ADB stake but the Oil Ministry blocked the move as it would have turned Petronet LNG into a public sector company.
Qatar's Minister of Energy & Industry Mohammed bin Saleh Al-Sada wrote to Oil Minister M Veerappa Moily on November 4, acknowledging Petronet LNG's approach and said, 'QPI and ADB with Petronet support have already engaged in preliminary evaluatory discussions.'
'I have personally endorsed QPI to move forward as it will be a milestone for strengthening mutual cooperation between our countries,' he wrote. IOC, ONGC and BPCL quickly retracted from their efforts to buy the ADB stake after the Oil Ministry diktat but GAIL has continued to stick to its guns that the promoters should be allowed to buy the 5.2 per cent stake.
'In light of GAIL's stance, there might be a possibility that ADB will not be able to proceed further in selling its shares to QPI,' the Qatari Minister wrote.
'I urge the Indian government and look forward to your excellency's assistance to help materialise this deal at the earliest in the interest of the mutual business relations between our nations,' he told Moily. The ADB had on August 23 last year offered to sell its 5.2 per cent stake in Petronet, in which GAIL, IOC, BPCL and ONGC hold a 12.5 per cent stake each as well as the right of first refusal.
Last year the boards of all the four promoter companies approved exercising the pre-emption right over the ADB stake and proposed cash buyout of the multilateral lending agency's interest. However, the Oil Ministry, whose secretary is ex officio chairman of Petronet LNG, vetoed the proposal at a March 26 meeting of the Petronet LNG board, said sources. 'Keeping in view the specific approval of the Cabinet on restricting the aggregate Government/ PSU participation to 50 per cent of paid up capital for providing the desired flexibility to Petronet LNG Ltd to operate in a dynamic LNG import market, the existing shareholding structure in the context of PSU participation, should be retained,' the minutes of the March 26 meeting had stated.
If the ADB stake goes to state-owned firms, Petronet LNG would come under scrutiny of official auditor CAG and the Central Vigilance Commission (CVC) because of the PSU holding exceeding 50 per cent, something that the company and the ministry are opposed to.
The ministry, instead, asked the PSUs to offer the ADB stake to a strategic investor like an LNG supplier, they said.
Qatar currently sells 7.5 million tonnes (mt) of LNG to Petronet LNG on a long-term contract. The Ministry feels that the stake can be used as a bait to get an additional 5 million tonnes a year of LNG.
GAIL, however, is opposed to the idea unless Qatar agrees to sell LNG at a discount to its current asking price of an equivalent to 14.5 per cent of the ruling global oil price, which translates into over four times the predominant domestic price of $4.2 per million British thermal unit.
Gaz de France International (GDFI) holds 10 per cent in Petronet LNG and it too has a right of first refusal over ADB's stake. But the French energy giant has decided to waive this right off.
ADB had, in fact, first proposed to exit Petronet LNG in 2008 but then company CEO Prosad Dasgupta was in favour of a third party like Chevron or steel baron Lakshmi Mittal's group buying the stake instead of the four promoters.