by R. Sasankan

The art of good governance is to act with speed and refuse to allow negative externalities like favour and prejudice to cloud one’s judgment. The Modi government has showed remarkable alacrity in the manner in which it has handled the findings of the US consultant DeGolyer and MacNaughton (D&M) which affirmed that there was truth in Oil and Natural Gas Corporation’s suspicions that Reliance Industries had been sucking out gas from its KG-D5 reservoir in the Krishna Godavari basin while drilling in the latter’s adjacent KG-D6 field.

The ONGC management was so convinced about the truth behind its charge that it filed a case in Delhi High Court and even dragged the Ministry of Petroleum and Natural Gas into the controversy. Once the US consultant confirmed ONGC’s suspicion in its report, the government quickly appointed Justice A.P. Shah to look into the issue within the short space of three months. The terms of reference are so comprehensive that the government wants it to find out the “acts of omission and commission” on the part of RIL, ONGC and the regulator, the quantum of unfair enrichment of the contractors of the adjacent block, and actions to make good the loss to ONGC and the government.

This is how a functioning government should act on a matter of national interest. Surprisingly, the government refused to display the same readiness to tackle the crisis arising from the colossal loss that the country suffered under the skewed terms of the long-term LNG deal between RasGas of Qatar and Petronet LNG Ltd (PLL). Petroleum minister Dharmendra Pradhan went on record in parliament a few months ago saying that the government was examining the report of a committee on the charges of corruption in the deal. The so-called report was submitted more than three years ago.

We are raising the issue as it is relevant in the context of the ongoing re-renegotiations between PLL and RasGas over the price of LNG under the long-term supply contract. From all indications, the two sides are ready to hammer out a solution even though the revised formula has not been crafted as yet.

The delivered price of Qatar LNG works out to $ 12-13/mmbtu against the prevailing market price of $ 7/mmbtu. It is in the interest of both RasGas and PLL to save the contract from complete collapse.

True, PLL is technically a private company by virtue of the fact that the stakes of the four state-owned oil and gas companies has been limited to 50 per cent. But it is headed by the secretary in the ministry of petroleum and natural gas as ex-officio chairman. The status of a private company exempted PLL from the purview of enforcement agencies such as the CBI and the Central Vigilance Commission (CVC). The situation was ruthlessly exploited by the then senior executives of PLL and a couple of secretaries of the ministry of petroleum and natural gas who acted like wheeler-dealers.

It was www.indianoilandgas.com which brought out the scam through a series of investigative reports. The then petroleum minister Jaipal Reddy ordered an inquiry into the scam and his information officer, in writing, confirmed this to us. But as it turned out, the investigation was carried out by none other than an additional secretary of the ministry of petroleum and natural gas. It would be ridiculous to assume that an additional secretary would submit a report against an organisation that was headed by his boss, the petroleum secretary. The question will always linger: was Reddy under pressure to cover it up? This was the report that Pradhan spoke about in parliament.

RasGas was guilty of violating two key provisions of the firm contract. RasGas was required to provide 7.5 million tons a year of rich gas – i.e gas from which the higher hydrocarbons had not been extracted. PLL had insisted on such a condition because the country badly needed rich gas for its petrochemical industry. The first tranche of 5 million ton per annum came as rich gas but the second tranche of 2.5 million ton of LNG was lean gas. How could RasGas violate the provisions of a firm contract? There is nothing on record to show that it had compensated PLL for the violation of the contract. www.indianoilandgas.com worked out the loss to PLL at around Rs 25,000 crore (or Rs 250 billion) during the entire contract period of 25 years.

I do not think people who headed the PLL and petroleum ministry were a bunch of clods. They clearly understood the financial implications of their silence. RasGas is too big a company to seek a favour from PLL without compensating it. There is nothing on record to show that PLL got anything on this account. The compensation must have been so huge that neither the PLL leadership including the petroleum secretary would have been able to digest even a fraction of the payoff? So, who pocketed the sum?

The second violation was equally big. At the time of negotiating the original firm contract, the Indian side bargained for and secured the consent of RasGas for a 5 per cent stake in the upstream venture at Qatar at par value. Similar facilities had been extended to Korean and Japanese companies who were buying LNG from RasGas. But for some mysterious reason, the PLL leadership did not exercise this option in the contract. Who prevailed on PLL to stop it from invoking this vital provision in the contract? This obviously is another scam.

We had reported the role of a senior bureaucrat who has been acting as LNG lobby’s ‘ambassador’ in Delhi. He had clambered up the bureaucratic hierarchy to reach the peak and then secured a superannuated assignment that conferred on him the status of a Minister of State. He was instrumental in making the promotion of LNG consumption as a yardstick to measure the performance of Ministry of Petroleum and Natural Gas. He loved LNG immensely.

RasGas has been unkind to PLL. It should make amends because its reputation is at stake for violating the sanctity of international agreements. The Indian market is immense. A company like RasGas should not be seen to be complicit in promoting shady practices. There are dodgy characters in every country and India has its fair share of shenanigans, perhaps in greater measure than most other countries. The Modi government should immediately re-open the entire RasGas deal for investigation by someone of Justice A.P. Shah’s stature.