Parents are often indulgent when the fledgling takes his first few faltering steps. But the child may find all the cosseting very stifling when he starts to come of age. He often wants to break free from the restrictive boundaries that parents place to curb his independence. Prabhat Singh-led Petronet LNG Ltd has gone a step further: it wants to be the father’s ‘operator’.

PLL is the child of four parents: created by the four mighty state-owned oil companies in the country. In corporate parlance, they are called promoters. IOC is one of the four PSU promoters of PLL along with ONGC, GAIL and BPCL.

PLL wants to break free from the clutches of its parents whose combined stake in this unique entity is limited to 50 per cent. This technicality, a brainchild of Dr Vijay Kelkar, the then petroleum secretary, ensured that PLL functioned as a private company under the Companies Act and, therefore, outside the purview of vigilance and the Central Bureau of Investigation. So far so good.

PLL now wants to be the 'boss' of Indian Oil Corporation(IOC) in its 5 million ton per annum LNG regasification terminal at Ennore near Chennai in the south Indian state of Tamil Nadu. The project is at an advanced stage of construction. PLL has made an offer to IOC that it is willing to be a stake holder in the Ennore LNG project. Obviously, it will be a minority stake. Is its sudden desire for a stake in the LNG venture born out of any love for the promoter? No. The real intention has not been disclosed. There seems to be a deeper calculation: PLL wants to be the operator of the LNG terminal.

IOC is the largest marketing company of the country. Its management has not reacted to the offer so far. The role of an operator is so important in the oil sector that the operator virtually controls the operation of any project including its finance which is the essence of operations.

Permit me to digress a little. About 17 years ago when Enron collapsed, it sold its stake in Panna, Mukta, Tapti(PMT) fields in India's western offshore to British Gas(BG). BG assumed that it would automatically become the operator of the fields – a role that had been given to Enron. The state-owned ONGC, which has a 40 per cent stake by virtue of being the original licensee and the discoverer of the fields, would not hear of it and staked its own claim to become the operator. At that time, ONGC was headed by Subir Raha, who was considered a heavyweight in the oil industry. The matter was ultimately settled in favour of BG with the intervention of Pramod Mahajan, the then cabinet minister in the NDA government. Petroleum was not part of Mahajan's bailiwick but he was influential and resourceful, much like Murli Deora of the UPA.

Among all PSUs, IOC-ians exhibit the strongest clannish streak and consider themselves to the greatest of all marketers in the country. To the best of my knowledge, IOC has never been happy with the way PLL was being run. It tolerated PLL in the initial years because its first CEO, Suresh Mathur, was IOC's finance director. Mathur had been suddenly identified as an LNG wizard by then petroleum secretary Probir Sengupta. Mathur neither applied for the position, which was mandatory, nor had he been shortlisted by the consultant. Sengupta wanted to scuttle the chances of GAIL’s K.K. Kapoor, who was Dr Kelkar’s nominee for the position, from heading PLL. Many consider this move to be the original sin in PLL.

IOC and the other promoters could not pull up the PLL management because it was presided over by the petroleum secretary in his capacity as ex-officio chairman -- a role that wasn’t envisaged in the original scheme of things. Under the Indian system, a director or chairman of a PSU seldom speaks up at a meeting that the secretary presides over. One reason for this is that the secretary writes his Confidential Report which can make or mar his fortunes. There has been only one instance when a PSU representative on the board of PLL tried to assert his views. That worthy was U.D. Choubey, then CMD of GAIL. The petroleum secretary, M.S. Srinivasan, who was in the chair, snubbed him. Since then, no PSU official has ever raised any inconvenient question at the PLL’s board meetings.

Right or wrong, the PLL management believes that it has the expertise in LNG imports by virtue of being the largest importer of LNG after signing a long-term contract with RasGas of Qatar. Does this qualify PLL to become the operator of IOC's projects? PLL is also interested in picking up a part of the stake IOC has been offered by GSPC-Adani combine in the Mundra LNG project. There are quite a few genuine LNG experts outside PLL. For instance, Adani Group has Rajeev Sharma, the founder MD of IGL, and GAIL has Rajeev Mathur who now heads MGL. IOC’s director Planning & Business Development), G.K. Satish, is quite familiar with the LNG trade and the company has been importing LNG using PLL’s Dahej terminal.

How does one assess the expertise of an LNG importer? One yardstick to measure proficiency is to determine whether the price at which it delivers LNG is competitive. Can PLL claim that the LNG it supplies to the Indian customers is the cheapest? It is $ 1- 1.5/mmbtu above the spot price and that too at a time when the world is facing an LNG glut.

PLL’s 5 million ton LNG terminal at Kochi has been rusting since inception which could a world record. Even if the pipelines are laid, the capacity of the terminal will remain underutilised for many years. The Ennore terminal of IOC will complicate matters for PLL’s Kochi terminal. Its deal with Australia’s Gorgon LNG project for 1.4 million tons per annum is considered to be one of the costliest. The price has not been renegotiated as yet. The IOC board will certainly consider PLL’s offer. There is a strong chance of its demand for a stake being accepted without granting operatorship. The ball will then be back in PLL’s court.