The Hindu Business Line : Differences between Govt, GAIL over sharing of `profit gas'

EVEN as the Government is yet to make up its mind on whether it would take in kind rather than in cash its share of `profit gas' under production sharing contracts (PSCs) at privately operated gas fields, differences have cropped up between the private gas producers and GAIL (India) Ltd.

"We are discussing the concept with all parties concerned. The Government is toying with various options. Only if it is found worthwhile will we opt for either of the two concepts depending on the feasibility of the proposal," a Government official told Business Line.

Under the New Exploration Licensing Policy (NELP), all gas producers have signed production sharing contracts agreeing to the arrangement of the Government taking its entitled share of profit gas either in cash or kind.

But private producers, both domestic and foreign, including British Gas, Reliance and Exxon-Mobil, have voiced their opposition to the proposal of paying profit gas in kind.

"The objections raised by the private gas producers is uncalled for as they have already inked production sharing contracts with the Government," a GAIL official said.

Besides, globally, payment in kind is common where the Government as production sharing contract partner takes its share of the gas and then markets it through a nominee, he said. Vietnam, Indonesia and Myanmar are examples where the profit gas is taken in kind. Also, profit gas in kind does not affect the profitability of gas production, the official said. "There is no credible reason given by private players to pay profit gas in cash," he added.

One of the reasons cited by the private gas players is that the move would be a deterrent to natural gas market growth in India. To take profit gas in kind would mean that the producer would no longer have the right to market all gas, according to the players. They have also been arguing that profit gas world over is taken in cash, saying that it would hurt the gas sale agreements and make it difficult for gas majors to make long-term commitments.

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