NTPC, the country’s largest power producer, and the Union petroleum ministry have presented different interpretations of the production sharing contract (PSC) of the former with Reliance Industries Ltd (RIL).
One view has been given in the follow-on public offer (FPO) document of NTPC, filed recently, as contrasted to the ministry’s affidavit in the recent Supreme Court hearing on the gas dispute between RIL and rival RNRL.
The ministry maintained the government had exclusive rights over all minerals underlying the ocean and in the country’s territorial waters. In addition, it said, according to the PSC, the ownership of the gas cannot be passed on to RIL.
NTPC, on the other hand, said in its offer document: “The model production sharing contract (Model PSC) was notified in the terms of the National Exploration Licensing Policy (NELP), to be regulated under the PNG Rules, between the government and a licensee or lessee. The Model PSC is an agreement between the contractor and government, under which the contractor bears exploration risks and development and production costs, in return for a stipulated share of production resulting from this effort.”
However, the petroleum ministry had told the apex court that it is a revenue-sharing contract and not a production-sharing one.
Further, on marketing freedom under the PSC for the contractor, NTPC said in its red herring prospectus: “A contractor signing a PSC is free to market oil and gas in the domestic market and the option to amortise exploration and drilling expenditure over a period of 10 years from first commercial production. Other benefits under NELP include income tax holiday for seven years from the start of commercial production.”
Interestingly, this view was also maintained by the petroleum ministry, which argued the PSC under NELP provided for marketing freedom to the contractor for commercial production. However, the ministry had taken the opposite stand in the Supreme Court during the RIL-RNRL gas dispute, where it held that a contractor did not have any marketing freedom and was bound by the Gas Utilisation Policy of September 2007.
