Petronet LNG under govt lens over gas purchase agreements

Petronet LNG under govt lens over gas purchase agreements

Petronet LNG Ltd is under investigation for alleged irregularities in gas purchase contracts, the government said.

Petroleum and natural gas minister Dharmendra Pradhan said in a written reply in the Lok Sabha on Monday that the government had received complaints about alleged irregularities in some gas purchase contracts executed by Petronet, India’s leading liquefied natural gas (LNG) receiving and regasification company.

Petronet buys natural gas in liquid form—LNG—from foreign suppliers and converts it to gas before selling it to its Indian customers.

The complaints referred to Petronet’s LNG contracts to import 7.5 million metric tonnes per annum (mmtpa) from Qatar’s RasGas Co. Ltd and 1.44 mmtpa from ExxonMobil Corp.’s Gorgon project in Australia, the minister said, according to a government statement.

“A committee was constituted by the government to enquire into the alleged irregularities and findings of the committee are under examination in consultation with Central Vigilance Commission (CVC),” the statement added.

Four state owned firms—GAIL (India) Ltd, Bharat Petroleum Corp. Ltd, Indian Oil Corp. Ltd and Oil and Natural Gas Corp. Ltd—hold a 12.5% stake each in Petronet, while GDF Suez has a 10% stake. The balance 40% is held by investors and foreign institutional investors. The post of chairman is held by India’s petroleum secretary.

“Government does not hold any equity in PLL (Petronet LNG),” the statement added.

The investigation comes in the backdrop of India struggling to meet its ambitious targets for energy security, with the country having to import as much as 77% of its energy needs. India’s energy import bill of around $150 billion is expected to double to $300 billion by 2030.

“The CVC has made some observations. We have asked Petronet LNG for its response. The matter is under consideration,” said a senior petroleum ministry official requesting anonymity.

Another government official, who also didn’t want to be identified, said: “In the case of supply from Gorgon project, CVC has made an observation on why no back-to-back contract was inked with NTPC for the offtake of that gas. Also, in the case of RasGas, while the contract was for the supply of rich gas, lean gas was given.”

Rich gas has more recoverable liquid hydrocarbon as compared to the lean gas.

A Petronet LNG spokesperson didn’t respond to an emailed query.

Petronet had set up India’s first LNG terminal at terminal at Dahej in Gujarat, and another terminal at Kochi in Kerala with a total capacity of 15 million tonnes per annum (mtpa). Petronet on Friday announced a net profit of Rs.882.5 crore for 2014-15.

With a gas consumption of 51 billion cu. m (bcm), India is world’s 15th largest consumer and the fourth largest LNG importer by sourcing 18 bcm of LNG.

“LNG demand has been picking up of late, including the power sector. With spot LNG prices remaining benign, and the GOI (government of India) taking steps to revive stranded power capacity, we think demand will likely improve further,” Nomura Global Markets Research wrote in a 9 April report.

Petronet LNG is expected to play an important role in the proposed bailout for stranded gas-based power projects and their lenders, under which LNG will be imported and cash-strapped state power distribution companies financially supported to buy electricity from them. The plan, approved by the cabinet committee on economic affairs, will help generate 79 billion units of electricity valued at around Rs.42,000 crore. India has an LNG import capacity of 23 mtpa through four terminals.

According to the Energy Statistics report prepared by the ministry of statistics and programme implementation, estimated domestic reserves of crude oil and gas are at 762.74 million tonnes and 1,427.15 bcm, respectively. India follows the US, China and Russia in energy use, accounting for 4.4% of global energy consumption.

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