SPV for hydrocarbon exploration on cards

CM asks APIIC to form a special purpose vehicle

Chief minister YS Rajasekhara Reddy has asked the Andhra Pradesh Industrial Infrastructure Corporation (APIIC) to form a special purpose vehicle (SPV) for exploration and exploitation of hydrocarbon resources in the state.

The Directorate General of Hydrocarbons made a presentation to the chief minister on Tuesday on the need to create a state-owned or participated company in the hydrocarbon sector. The need for an exploration and production (E&P) company was stressed to ensure the energy security of the state.

The business model suggested was creation of an SPV in collaboration with global majors in the field and with equity participation by the state government to play the role of a facilitator.

Keeping this suggestion in view, the chief minister asked the APIIC to form an SPV and prepare an action plan in this regard without delay. He said that his government’s priority was to create as many job opportunities as possible and to provide gas at very affordable cost to the domestic sector, industries, power and fertiliser plants, according to an official press release. 

Director General of Hydrocarbons, VK Sibal, was stated to have informed the chief minister that hydrocarbon deposits to the tune of 6,550 million metric tonnes (mmt) was available in the state, predominantly in the Krishna-Godavari basin. Of this, only 747 mmt have been explored and 89 per cent of the resources were still unexplored.

The presentation suggested that the state can enter the entire supply chain of E&P (upstream), pipeline gas transportation (mid-stream) and the connected service industry (service sector). However, it was revealed that Gujarat and Assam governments have entered the upstream E&P business and the model was a failure. The Gujarat State Petroleum Corporation had invested Rs 6,300 crore and accrued 47 mmt since it was unable to identify the technical partners to overcome operational problems and due to slow approval procedures and delay in decision making.

Major industries minister, Kanna Lakshminarayana, chief secretary, P Ramakantha Reddy, economic adviser to state government, DV Somayajulu, special chief secretary, energy, A K Goel, principal secretary, industries, Sam Bob, MD, APIIC, B P Acharya, MD, AP Genco, K Vijayanand and other officials attended the meeting.