The Oil Ministry has refused permission to public sector oil companies for acquiring Asian Development Bank's stake in Petronet LNG Ltd (PLL) so as to keep the nation's largest liquefied natural gas importer a private company. The ADB on August 23 last year offered to sell its 5.2 per cent stake in PLL, in which GAIL, Indian Oil (IOC), Bharat Petroleum (BPCL) and Oil and Natural Gas Corp (ONGC) hold 12.5 per cent stake each and have a first right of refusal.
The board of all the four promoter companies approved exercising the first right of refusal over ADB stake and cash buyout of the multilateral lending agency's interest. However, the ministry, whose Secretary is the Chairman of PLL, vetoed the proposal at a March 26 meeting, sources privy to the development said.
"Keeping in view the specific approval of the Cabinet on restricting the aggregate Government/PSU participation to 50 per cent of paid-up capital for providing the desired flexibility to Petronet LNG Ltd to operate in a dynamic LNG import market, the existing shareholding structure in the context of PSU participation, should be retained," minutes of the March 26 meeting stated.
If the ADB stake goes to state firms, PLL would come under scrutiny of official auditor CAG and CVC because of PSU holding exceeding 50 per cent, something that the company and the ministry was opposed to.
The ministry has instead asked the PSUs to offer the ADB stake to a strategic investor, like am LNG supplier, they said.
"The Boards of respective promoter companies would deliberate and decide upon an option which would add long-term value to the business of PLL," the minutes stated. It remains to be seen how the state firms, whose boards have approved of buying ADB stake in proportion of their shareholding, would justify the move.
Sources said the ministry is keen on offering the ADB stake to Qatar in lieu of getting an additional 5 million tons a year of LNG supplies on a long-term contract.
But companies like GAIL are opposed to the idea unless Qatar agrees to sell LNG at a discount to its current asking price of an equivalent to 14.5 per cent of the ruling global oil price, which translates into over four times the predominant domestic price of USD 4.2 per million British thermal unit.
Oil Minister S Jaipal Reddy is believed to be against the idea of overriding the interest of GAIL, IOC, BPCL and ONGC.
Gaz de France International (GDFI) holds a 10% in PLL and also has the right of first refusal over ADB's stake. But the French energy giant has decided to waive this off.
ADB's 5.2 per cent stake was to be split equally among the four PSU promoters.