Global energy major Enron is planning to represent to the government that it will set up an independent regulator for the liquefied natural gas (LNG) sector. The move comes in view of the government's proposal to set up a committee of bureaucrats, who will regulate the sector.
"The government should either be a regulator or a player. It cannot be both. Consequently, it makes sense to set up an independent regulator," said a senior Enron executive.
The Union government has floated Petronet LNG in which the public sector undertakings, Bharat Petroleum Corporation, Gas Authority of India, Indian Oil Corporation and the Oil and Natural Gas Corporation will hold stake.
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Petronet is planning to set up LNG terminals at Kochi in Kerala and Dahej in Gujarat.
Enron is planning to set up a regassifiaction facility at Dabhol in Maharashtra as a part of its 2,184 mw power project in the state.
Besides, LNG will be carried and distributed from this facility to various parts of the western coast through a pipeline network.
Enron, which has plans to be a major player in the LNG sector, has floated a separate company, Metropolitan Gas, for this purpose. The company is also in favour of light-handed regulation in the sector.
Enron executives felt excessive regulation that is being at present considered by the government will result in difficulties for achieving financial closure for the projects.
"There is no need to regulate the price as prices will be kept down due to the number of players in the sector, especially in the western coast. Besides, alternate fuels like naphtha and distillate too will ensure that the price line is kept low," Enron executive stated.
Enron's argument is that in parts of India apart from the western coast, the price line can be kept low due to alternate fuels.
At present a number of companies such as Shell, Essar, TEC, apart from Petronet LNG are planning to set up LNG terminals in the western part of India.
Enron executives also argue that short term shipping contracts should be done on cost, insurance and freight (c.i.f.) basis and not on free on board basis.
This, they argue, will result in cost savings as it will be possible to take advantage of the developments in the spot market.