Govt to vet RNRL's 20% sale in methane block
This is in accordance with the requirements of the production-sharing contract (PSC) to which the government is a signatory.
By Rajeev Jayaswal, TNN |
NEW DELHI: Reliance Natural Resources’ — an Anil Dhirubhai Ambani Group company — proposed plan to rope in a strategic investor in its coal bed methane (CBM) business will need to be vetted by the government. This is in accordance with the requirements of the production-sharing contract (PSC) to which the government is a signatory.
RNRL is currently in talks with strategic investors, including two energy majors to offer up to 20% stake in its four CBM blocks. RNRL-Geopetrol combine was awarded these blocks under third rounds of bids for CBM blocks in 2006. The four CBM blocks cover an acreage of 3,266 sq km. Out of the four blocks, two CBM blocks are in Rajasthan, one in Andhra Pradesh and the other in Madhya Pradesh.
Senior officials explained that any company which plans to bring in a partner will need to get government consent as the contract was signed between two parties. Any substantial change in the company, which could lead to changes in operatorship would necessarily need a government approval. However, if it’s a minor change, the government would tend to take a liberal view, provided the commitments are honoured.
According to an expert, the government’s approval would be required to ascertain financial capabilities and the technical competence of the strategic partner among other things. An official nod is also required to ensure that the prospective company is not incorporated in a country which is in the negative list of business and the company would not adversely affect obligations of the contractor.
"A contractor will be required to take the government’s approval before offering participating interest to any company," an official in the government said. According to the Article 25 of the model production-sharing contact (PSC) for CBM, a prior written consent of the government is required for inducting any third party.
The government claims that the current CBM policy provides for attractive fiscal and contractual terms, "which are considered to be one of the best in the world." Salient features of the contract include no participating interest of the government, no upfront payment, no signature bonus, freedom to sell gas in the domestic market, fiscal stability and a seven-year tax holiday.
RNRL is currently in talks with strategic investors, including two energy majors to offer up to 20% stake in its four CBM blocks. RNRL-Geopetrol combine was awarded these blocks under third rounds of bids for CBM blocks in 2006. The four CBM blocks cover an acreage of 3,266 sq km. Out of the four blocks, two CBM blocks are in Rajasthan, one in Andhra Pradesh and the other in Madhya Pradesh.
Senior officials explained that any company which plans to bring in a partner will need to get government consent as the contract was signed between two parties. Any substantial change in the company, which could lead to changes in operatorship would necessarily need a government approval. However, if it’s a minor change, the government would tend to take a liberal view, provided the commitments are honoured.
According to an expert, the government’s approval would be required to ascertain financial capabilities and the technical competence of the strategic partner among other things. An official nod is also required to ensure that the prospective company is not incorporated in a country which is in the negative list of business and the company would not adversely affect obligations of the contractor.
"A contractor will be required to take the government’s approval before offering participating interest to any company," an official in the government said. According to the Article 25 of the model production-sharing contact (PSC) for CBM, a prior written consent of the government is required for inducting any third party.
The government claims that the current CBM policy provides for attractive fiscal and contractual terms, "which are considered to be one of the best in the world." Salient features of the contract include no participating interest of the government, no upfront payment, no signature bonus, freedom to sell gas in the domestic market, fiscal stability and a seven-year tax holiday.
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