ADB's 5.2% stake in Petronet offered to Qatar
New Delhi: India has offered Qatar a 5.2 percent stake that Asian Development Bank (ADB) held in Petronet LNG Ltd, the nation's largest liquefied natural gas importer.
Petronet, which is registered as a private company even though public sector oil firms hold 50 per cent stake and Oil Secretary is its Chairman, has approached Qatar Petroleum International (QPI) offering ADB's 5.2 percent stake.
The PSUs -- Indian Oil, Oil & Natural Gas Corp, Bharat Petroleum and GAIL India -- had previously evinced interest in buying the ADB stake but the Oil Ministry blocked the move as it would have turned Petronet into a public sector company.
Qatar's Minister of Energy & Industry Mohammed bin Saleh Al-Sada on November 4 wrote to Oil Minister M Veerappa Moily acknowledging Petronet's approach and said "QPI and ADB, with Petronet support have already engaged in preliminary evaluatory discussions."
"I have personally endorsed QPI to move forward as it will be a milestone for strengthening mutual cooperation between our countries," he wrote.
While IOC, ONGC and BPCL quickly retracted from their decision to buy ADB stake after the Oil Ministry diktat, GAIL has continued to stick to its guns that promoters should be allowed to buy the 5.2 percent stake.
"In light of GAIL's stance, there could be a possibility that ADB will not be able to proceed further in selling its shares to QPI," the Qatari Minister wrote.
"I urge the Indian government and look forward to Your Excellency's assistance to help materialise this deal at the earliest in the interest of the mutual business relations between our nations," he told Moily.
The ADB had on August 23 last year offered to sell its 5.2 percent stake in Petronet, in which GAIL, IOC, BPCL and ONGC hold 12.5 percent stake each and the right of first refusal.
Last year, the boards of all the four promoter companies approved exercising the pre-emption right over ADB stake and proposed cash buyout of the multilateral lending agency's interest.
However, the ministry, whose Secretary is the Chairman of Petronet, vetoed the proposal at a March 26 meeting of Petronet board, 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 had stated.
If the ADB stake goes to state firms, Petronet would come under scrutiny of official auditor CAG and Central Vigilance Commission (CVC) because of PSU holding exceeding 50 percent, something the company and the Ministry were opposed to.
The Ministry instead asked the PSUs to offer the ADB stake to a strategic investor like a LNG supplier, they said.
Qatar currently sells 7.5 million tonnes of LNG to Petronet on a long-term contract. The Ministry felt the stake can be used as a bait to get additional 5 million tonnes a year of LNG.
But, GAIL was opposed to the idea unless Qatar agrees to sell LNG at a discount to its current asking price of an equivalent to 14.5 percent 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.
Gaz de France International (GDFI) holds a 10 percent in Petronet and also has the right of first refusal over ADB's stake. But the French energy giant has decided to waive this right off.
The ADB had in fact first proposed to exit Petronet in 2008, but then company CEO Prosad Dasgupta was in favour of a third party like Chevron or steel baron Lakshmi Mittal's group buying the stake instead of the four promoters.