Great Eastern Energy Corporation to appeal
The Petroleum and Natural Gas Regulatory Board (PNGRB), the country downstream oil sector regulator, has declared as ‘illegal’ a pipeline being laid by Great Eastern Energy Corporation Ltd (GEECL), the country’s first coal bed methane (CBM) gas producer. In an order passed last week, it imposed a penalty of Rs 25,00,000.
The company says it will appeal. “Under the production sharing contract, we have permission to lay a pipeline to supply gas to our customers. All our actions comply with law. We will file an appeal against this order at an appropriate forum,” Prashant Modi, president and chief operating officer, told Business Standard. Modi added the company had already invested nearly Rs 800 crore in the CBM project, of which Rs 100 crore was spent on the pipeline.
The London Stock Exchange-listed company is operator of the CBM block in Raniganj, West Bengal, that it had won through a bidding process in 2001. Under the contract signed with the central government the company has the freedom and right to explore, develop, produce and market CBM gas in India.
The contract also allows the operator to use CBM for operations like gas lifting and power generation. GEECL commenced gas production from this block in 2007, to become the country’s first gas producer from CBM, a non-conventional source.
It currently sells 0.16 million standard cubic metres of gas per day to industrial consumers in the region. The Board had in 2008 advised the company to apply for pipeline authorisation to PNGRB, since the company did not possess authorisation before the Board came into being. When the Board learnt of the company’s plans to lay two pipelines to Kulti and Durgapur from Asansol for selling CBM gas, a letter was issued to the company in February 2009 to apply to the Board. A reminder was sent that September but there was no response from the company.
In October 2009, the company informed the Board that it was setting up a dedicated pipeline for supply to their customers. In January 2010, the Board informed the company that a pipeline serving more than one customer did not fall under the category of a dedicated pipeline and therefore the company could not apply under Regulation 19 of the Board, meant for dedicated pipelines. GEECL was advised to apply under Regulation 18, that requires an operator to declare the pipeline as a common carrier or contract carrier (one-third capacity for use by other companies).
As the company did not pay heed to this, a show-cause notice was issued in December 2010 that also asked the company to stop incremental activity. However, through a communication dated December 27, 2010, the company informed the Board that were are not covered within the scope of the law and required no authorisation.
GEECL had also approached the Delhi High Court, questioning the Board’s jurisdiction. The Court did not grant a stay and directed that hearings proceed before the Board.
In the hearing that followed at the Board, the company’s counsel stressed that since the CBM contract with the central government pre-dated the establishment of the Board in 2006, the regulations of the PNGRB Act did not apply to the company. In an order dated March 18, the Board said it had no alternative but to declare the pipeline being laid by the entity to be unauthorised and illegal.
