Will sort out higher gas tariff issue for BP, Niko: Moily

Feb 28 2014, 00:35 IST
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SummaryOil ministry babus insist RIL alone is eligible for higher gas price since others are not party to the arbitration

OIL major BP and Niko Resources of Canada may not have to wait longer to know if they could realise the same higher natural gas price of over

$8 per unit that their majority partner Reliance Industries would be charging consumers after the new price takes effect from April 1.

“It is a technical issue and is under review. I shall come back to you soon on this,” petroleum and natural gas Minister Veerappa Moily told FE. Oil ministry sources said that offers from BP and Niko to share bank guarantee to cover such potential liabilities are being examined by legal experts.

The possibility of BP and Niko having to sell gas produced from the fields in Krishna Godavari basin off Andhra coast, in which they together hold 40% stake, at the current price of $4.2 a unit in future as well, looked imminent after the petroleum ministry recently pointed out that only RIL, which owns the remaining stake in the fields, offered a bank guarantee to cover certain potential liabilities.

In the meantime, the finance ministry has said that the decision to increase natural gas price linking it to global prices was passed by the cabinet and it stands. “The revised price would get implemented unless the court strikes it down or grants a stay,” said a person privy to the ministry’s view.

If BP and Niko are not allowed to realise the same price as other producers, it might imply that oilfield developers won’t get to attract foreign partners and technology in return for a stake in the blocks they have licensed.

RIL agreed to give the bank guarantee to cover potential liabilities from allegations of hoarding of natural gas — a charge bitterly contested by the company and is the subject of an arbitration — which stood in the way of raising natural gas price as recommended by a an expert panel chaired by C Rangarajan. Niko and BP are not party to the arbitration.

With the decision to raise natural gas price has becoming an election issue, the government wants to be too cautious on issues concerning commercial contracts and licences in the natural resources sector, which has seen some of the worst scams in the last 10 years of the UPA regime. It wants to be legally correct in granting higher price to investors.

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