A deal between Petronet LNG and Rasgas Laffan , a Qatar based Oil company amounting to a loss to the tunes of Rs 27,000 Crores has recently come into spotlight.
According to Former Secretary to Govt E A Sarma, the officials of Oil Ministry and Petronet LNG Limited violated norms to supply of 7.5 million tonnes per annum of liquefied natural gas (LNG). Ashok Kumar Balyan, the Chairman of Petronet, who also happens to be the oil secretary of India, quietly switched to buying lean gas, which can only be used as fuel, instead of rich gas that can also produce petrochemicals and cooking gas (LPG).
In February, the Ministry of Petroleum and Natural Gas has ordered a fresh inquiry into this scam.
Petronet LNG, which is majority owned by state-owned oil companies, had in 1999 signed a contract with Qatar’s RasGas to buy 7.5 million tonnes a year of natural gas that has been cooled to liquid form (LNG) so that it can be shipped.
The contract was for import of 5 million tonnes of LNG at Petronet’s Dahej terminal in Gujarat and 2.5 million tonnes at its Kochi facility in Kerala. All of the 7.5 million tonnes of LNG to be supplied by RasGas was supposed to be rich gas, which contains compounds like ethane, propane and butane that are building blocks for petrochemicals and LPG.
The shortcomings in the contract forced Petronet to pay $12 per mmBtu for Qatar’s LNG. This is much higher than $2.34 per mmBtu offered by Reliance to NTPC from the KG Basin and $4.20 per mmBtu, the price fixed by the government for the same gas. The loss on this account has been estimated at $56 billion over the life of the contract.
As per the contract, Rasgas was to supply 7.5 million tonnes of rich gas containing compounds like propane and butane from which LPG and other petrochemicals can be produced.
While RasGas gave rich gas in the first tranche of 5 million tonnes beginning 2004, it “violated the contract and started supply (the remaining) 2.5 million tons of ‘lean’ gas without any corresponding change in price of LNG, causing a loss assessed at Rs. 27,000 crore over the life of the contract,” he wrote
In 2005, Petronet entered into negotiations with RasGas to advance the tranche-2 volumes of 2.5 million tonnes. They proposed to buy the entire 7.5 million tonnes a year of contract supplies at Dahej.
Petronet signed a revised deal in 2006 wherein it agreed to take 5 million tonnes of rich gas and for the rest agreed to RasGas condition that the rich gas will be supplied only on best endeavour basis rather than as contractual commitment.
Also according to Sarma, when the Asian Development Bank tried to offload its 5.2 per cent stake in Petronet, the ministry offered it to the Qatar company. “The contract provides the first right to purchase the stake to the PSU equity partners in Petronet, like GAIL.â€