Policy
Rosneft, Saudi Aramco In Neck And Neck Race For BPCL
more...


Another Extension Of Deadline For BPCL Privatisation
more...


Petronet LNG’s Proposal To Invest In Tellurian LNG Project Revived
more...


Indo-US Strategic Energy Partnership Begins To Make Impact
more...


Demand Down After Spike In Covid, Refineries Reduce Throughput Again
more...

Regulation
Unbundling Of Gas Industry: Dithering, Resolve, Resistance
more...


GRM Of Indian Refineries Touched A New Low In FY 2019-20
more...


Tax On Petrol, Diesel In India Close To European Majors’
more...


Kochi LNG Terminal Capacity Utilization To Touch 40-45%
more...

Alternative Energy / Fuel
GAIL And CCSL Sign MoU For CBG Projects
more...

New Projects
IndianOil To Build $1.8bn Petrochemical Complex
more...


RPP Projects Wins Two Orders From HPCL
more...

Market Watch
Norms For Retailing Petrol And Diesel Clarified
more...

Companies
Agility Fuel Solutions
more...


HPCL Net Profit Up In June Q
more...


Cairn Oil Deploys Honeywell Forge Enterprise Software
more...

Press Release [FREE Access]
Petro Intelligence » Fallout Of A Falling Out

By R. Sasankan

A recent newspaper headline screamed: “Petroleum ministry trying to scuttle Aramco-RIL deal”.

Sobriety in news reporting has gone out of fashion: a lot of it is fevered speculation, often tinged by outrageous comment from so-called analysts. Don’t blame the reporters; most have no access to credible sources of information and, therefore, have to rely on what once used to be classified as Bazaar Gossip. But speculative frippery has now cloaked itself with dignity in venerable newspapers simply because authentic sources of information have all but dried up. The government and its ministers will not entertain reporters; news gatherers have to scuff their shoes on sidewalks hoping to grab a sound bite or two from any officious-looking functionary no matter how low down the pecking order he or she might be. On a bad day, all they can do is call a dial-a-quote analyst to buttress any headline-grabbing point that their editors want them to chase, no matter how far-fetched or outrageous it might be.

So, the story beneath that screaming headline said: “While Prime Minister Narendra Modi and the entire leadership are "encouraging" business to invest in the country with "ease of doing business" reforms, the Petroleum Ministry appears to be using the media to scuttle the Saudi Aramco-Reliance Industries (RIL) deal”.

Narendra ModiOn the face of it, the report sounded incredible. However, I decided to dig a little deeper and discovered that the leadership in the petroleum ministry under Dharmendra Pradhan hasn’t done anything to undermine the policies of Prime Minister Narendra Modi. Analysts have made unfounded inferences from some of his statements and action and suggested that he may be working at cross-purposes with the regime’s agenda.

Stated baldly, Pradhan remains totally committed to the Prime Minister who elevated him to the cabinet rank. He is known to enjoy good relations with the leadership of Reliance Industries as well. But that personal equation will not persuade him to refrain from torpedoing RIL’s interests if either Mr Modi or home minister Amit Shah wants him to do so.

Aramco’s deal to pick up a 20 per cent stake in RIL’s oil-to-chemicals division for which a non-binding letter of intent was signed on August 12 has run into problems with the government seeking court’s intervention to restrain RIL from selling its assets. The controversy stems from the government’s determination to enforce its claim to profit petroleum from the sale of oil from the Panna-Mukta-Tapti fields in western offshore which were being operated by the BG-led consortium in which RIL and ONGC were partners. The dispute over the government’s claim has been before an arbitration tribunal. RIL says the Tribunal has not given the final award but the petroleum ministry has argued that the interim award is enough justification for it to go to the courts to enforce its claim.

Mr Modi had never acted in a manner to hurt RIL’s interests during his first term that began in 2014. In fact, his government’s decision to fix a higher price for domestically produced natural gas from deep water fields and other difficult operational areas went very much in favour of RIL. This is believed to be the highest price for domestically produced gas anywhere in the world.

The Modi government is deeply annoyed with RIL—and this was evident from the way it argued its case in the Delhi High Court while seeking to restrain the sale of the assets of BG (now Shell) and RIL. It argued that RIL already has a debt of Rs 2880 billion and the sale of assets would make it difficult for the country’s largest private conglomerate to pay the estimated Rs 320 billion on account of the arbitration award.

Mukesh AmbaniIt was Modi who took the initiative in inviting Saudi Arabia to invest in India. For long, the Middle East majors have shied away from the Indian market. Even Aramco at one stage was keen to limit its investment to just a minority share in one of the existing refineries. The Saudi petroleum giant’s sudden decision to invest in a 60 million tonne mega refinery in the state of Maharashtra came as a huge surprise. But it was after all a prestigious project for the Modi government which has been to drum up foreign investments into the country. But the subsequent agitation against the preferred location for the refinery and the resultant delay was a big blow to the BJP government in the state.

The question that everyone asked was this: Did RIL play a role in whipping up the agitation against the refinery? No one has made such a severe allegation against RIL. It is possible that the BJP suspects that if Aramco-RIL deal goes through, the Saudi giant may decide not to go ahead with the mega refinery. RIL always enjoyed excellent relations with the Saudi palace. The government’s Income Tax department has gone on record stating that it “exchanged information regarding members of the Mukesh Ambani family over alleged undisclosed foreign income and assets in a quarterly meet this month in Ukraine with seven countries that India has agreements for sharing tax-related information on citizens.” This makes it possible for the income tax department to source information on the bank accounts held by Indian citizens in those countries.

A close examination of the sequence of developments creates an impression that the Modi government is gunning for RIL. But it may have its own reasons for doing so and which it is not obliged to disclose to anyone.

A corporate house is reported to have played a key role in the latest political developments in Maharashtra that led to the formation of the Shiv Sena-led government. But which corporate house was it? It is certainly not the Tatas or the Mahindras. No one has identified RIL either – and probably never will be. But in the corridors of power, whispers can cause a lot of damage. Moreover, Mr Modi and Mr Shah depend a lot on the dope that the government’s Intelligence Bureau provides.

Prime Minister Modi and home minister Amit Shah can be vindictive if they are convinced that someone has deliberately scuppered their party’s interests. Unlike other corporate houses, the Ambanis do not give in easily. Since the days of patriarch Dhirubhai Ambani, they haven’t shied away from fights. Mukesh’s RIL enjoys tremendous clout with almost all political parties and the country’s bureaucracy including the IT department. The Ambanis are known to be generous with their hand-outs.

A compromise cannot be ruled out. Politicians and businessmen hailing from Gujarat are not averse to striking mutually beneficial deals. Even the Congress party did that. During the UPA days, petroleum minister Murli Deora, a politician believed to be a prominent supporter of RIL, suddenly opted for a transfer from the ministry of petroleum and natural gas and was succeeded by Jaipal Reddy. The mandate Reddy got was to weed out pro-RIL elements in the ministry and act against the Ambani-owned conglomerate. Even as Reddy started to act, RIL managed to stage a coup by replacing Reddy with Veerappa Moily. Will history repeat itself?

Modi cannot antagonise Aramco. Probably, Aramco will have to take the leadership into confidence and underscore that its business ties with RIL will not stand in the way of already committed investments in other projects. The situation calls for joint efforts by Aramco and RIL. Political observers reckon that the BJP leadership may not settle for anything less than the Shiv Sena’s return to its fold in Maharashtra. RIL is capable of facilitating such a development. But the political situation in the country is changing so swiftly that RIL may not be in a hurry to negotiate an immediate patch-up between the warring political parties.

 



To download the latest issue 'Volume 27 Issue 9 - August 10, 2020', click here
Petro Intelligence [FREE Access]
BPCL Privatisation Must Be Anchored To A Sectoral Strategy
more...

High Fuel Prices Can Implode A Faltering Economy
more...

LNG Stations: PLL’s Robust Initiative
more...

A Cry For Change Amid Historical Blunders
more...

Foreign Investment
Total’s Indian JV To Seek Fuel Retailing Licence
more...


Total And IOC To Set Up JV For Bitumen Derivatives
more...

Overseas Investment
Reliance Power Signs Loan Agreement For Gas Based Power Plant
more...

Gas Scene
Sector-wise Consumption Of Natural Gas In June 2020
more...


Domestic Natural Gas Scene in June 2020
more...


Changing Fortunes of India’s LNG Regasification Terminals
more...


LNG Consumption By Power Sector Jumps, Power Consumption drops
more...


India’s Rising Gas Import Dependency
more...


Sector Wise Demand And Consumption Of Natural Gas
more...


Competiveness Of Pipelines vs LNG
more...


Transnational Pipelines - Operating or Under Construction
more...


Sector-Wise Consumption of Natural Gas In May 2020
more...


Natural Gas Price Trends: Global And Domestic
more...


Domestic Natural Gas Scene: May 2020
more...


Natural Gas Price Trends: Global & Domestic
more...


Natural Gas Price trends: Global & Domestic
more...


CGD Growth Over The Years
more...


India’s Increasing Gas Import Dependency
more...


Sector-wise Demand And Consumption of Natural Gas - An Update
more...


Surprising Fall In LPG Consumption In February 2020
more...

Data Section
Monthly Upstream Data
Monthly Downstream Data
Historical database
Data Archives
Special Database
Global Rig Count Falls In June 2020, US Worst Hit
more...


Indian Crude Basket prices in July 2020
more...


India’s Crude Oil Import Declines In June 2020, OPEC Share Shrinks
more...


Power supplied and deficit: Region-wise position for June 2020
more...


Negative Growth In Vehicle Sales Impact Consumption Of Petrol, Diesel
more...


Covid-19 Impact Minimum In Offshore Oil and Gas Investments
more...


Impressive Recovery In Petroleum Products Consumption In June 2020
more...


Covid -19 Impacts India’s Crude Oil Demand
more...


Crude Oil Import- Volume And Value
more...


Petroleum Sectors Contribution To Ex Chequer
more...


Declining Demand For PDS Kerosene
more...


Self-Sufficiency In Petroleum Products - An Update
more...


Capital Expenditure Of PSU Oil Companies - An Update
more...


India’s Drilling Activity Rebounds
more...


Indian Basket Crude Price in June 2020
more...


Global Rig Count Declines
more...


Like Crude, Import Of Petroleum Products Too Declined In May 2020
more...


Share Of Domestic Crude Up In Indian Refineries, Total Crude Processed Down In May 2020
more...


India’s Crude Oil Imports Decline In May 2020, OPEC Share Marginally Down
more...


Power supplied and deficit: Region-wise position for May 2020
more...

Tenders [FREE Access]
ONGC
more...


ONGC
more...