Probe sought into LNG price hike under Petronet’s RasGas contract

Stating that the additional expenditure of Rs2.5 lakh crore involved in the hike was more than the figure floating in the case of the second generation (2G) scam Mukesh B Gadhvi, an MP from Gujarat, said this happened when the petroleum secretary was the chairman of Petronet and the chairman/directors of four leading oil PSUs were members of the company board

New Delhi: A probe has been sought into changes in the contract for import of liquefied natural gas (LNG) from Qatar by a firm headed by the oil secretary, which resulted in gas prices jumping four-fold and entailing an additional outgo of $55.5 billion (Rs2.5 lakh crore) for users, reports PTI.

Member of Parliament from Gujarat Mukesh B Gadhvi has written to prime minister Manmohan Singh seeking a probe into how Petronet LNG (PLL) agreed to a $12.66 per million metric British thermal units (mmBtu) price for 7.5 million tonnes of LNG imported from RasGas of Qatar, instead of the previously agreed $3.04 per mmBtu.

Stating that the additional expenditure of Rs2.5 lakh crore involved in the hike was more than the figure floating in the case of the second generation (2G) scam, Mr Gadhvi said this happened when the petroleum secretary was the chairman of PLL and the chairman/directors of four leading oil PSUs were members of the company board.

“Instead of protecting the country’s interests, these authorities have played role in benefiting RasGas,” he added.

In 1999, in response to a tender, RasGas had offered to sell LNG to PLL at $2.53 per mmBtu at a crude oil price of $20 per barrel.

The LNG price was to rise or fall by 2 cents per mmBtu in tandem with every dollar movement in oil price. At a $100 a barrel oil rate, the LNG price was to be $4.13 per mmBtu.

But strangely, an unsolicited offer from RasGas pricing LNG in a band of $16-$24 per barrel oil price ($2.01 per mmBtu to $3.04 per mmBtu gas price) was accepted by PLL.

Further, in 2003, Petronet renegotiated the price and agreed to having a fixed price at $20 per barrel of oil ($2.53 per mmBtu) for five years from 2004-2009 and indexation with actual crude prices thereafter, he wrote.

This led to the price going up by $1 per year for five years from 2009, and from January, 2014, it would be $12.66 per mmBtu at an oil price of $100 per barrel.

Had Petronet not changed the contract, the price of LNG from Qatar would have been $3.04 per mmBtu for 25 years.

But now, users will have to pay $12.66 per mmBtu for 15 years, beginning 2014. The extra amount to be paid will be $3.7 billion a year and $55.5 billion (about Rs2.5 lakh crore) over 15 years.

Mr Gadhvi, a Member of the Parliamentary Standing Committee on Petroleum and Natural Gas, had previously demanded that joint ventures run by public sector firms like Petronet should be brought under the audit purview of the CAG.

“The public is entitled to expect a very high standard from the government,” he wrote, seeking an enquiry, possibly by the CBI, into the whole issue.

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