Sunday, February 7, 2010


Andhra Pradesh has at last entered the gas exploration. The long standing demand of people of the state is fulfilled as ONGC led consortium bagged the bids for gas exploration in Krishna Godavari basin . The state government owned Andhra Pradesh Gas Infrastructure Corporation is a 10 percent partner in the ONGC led consortium. The oil and the gas blocks won by the Andhra Pradesh Gas Infrastructure Corporation (APGIC) consortium in K G basin are not only close to Reliance owned D-6 block, but twice as much as Gujarat State Petroleum Corporation (GSPC )

The blocks won by this consortium are over 5378 square kilometers, the GSPC area extended to 2990 sq km. The consortium would meet the gas requirements of the state first before sending It to other states. However, this will be governed by the gas utilization policy of government of India. The Chief Minister of Andhra Pradesh K.Rosaiah said it marked an impressive entry of the state into the exploration and production activities in the K G basin. It also marked the fulfillment of the dream of late Y S Rajashekhar reddy who made a sincere effort to assert the rights of the state over this valuable natural resource. Decision to participate in the upstream exploration and production and the down stream activities like distribution was Infact taken by YSR few days before his tragic demise. The state’s entry into exploration and production of natural gas in the K G basin would lead to optimal utilization of the gas in the state, asserts chief minister . This would lead to greater industrial growth , supply of cleaner fuel for transport, city gas distribution through pipeline . But, all this will happen only if the ONGC led consortium in which state APGIC is a partner strikes gas.

The chances o f finding gas are quite encouraging. The blocks won by the state are besides the Reliance gas fields that has already started producing abundant quantity of gas . The state has also got a deep water block along with shallow water blocks. The deep water blocks need greater investment but there is a greater probability of finding gas in such a block. However, the shallow water blocks need lesser investment and therefore lesser probability of finding gas.

However even if gas is found, it takes five to six years for production to commence. The Gujarat state government led corporation has been in the kg basin for last decade. It invested only 5000 to 6000 crores only that too perhaps taking loan from the banks. But, today Gujarat will get at least 30000 crores if it sells its shares in the KG basin. But decade ago the then government of Andhra Pradesh decided not to enter the exploration activity. It may be because of its obsession not to encourage public sector or fear of making such a huge risky investment.

But , this euphoria should draw our attention away from the basic demands in regard to kg basin . The Reliance has already started production and other companies may begin so soon . As this precious natural resource is found near the shores of the state, the natural expectation of the people is that they should be the principal beneficiary of this gift of the Mother Nature. we accept the fact that petroleum in its natural form is owned by the government of India .The state demands that priority should be given to it . This also makes economic sense.

Andhra Pradesh is the windfall point. If this gas is used in the State, there would not be any transportation cost involved. Within the guidelines of gas utilization policy of the government of India , gas can be allotted to different sectors in the state.

Of course, the most important issue to be resolved is the pricing of the gas. Contrary to repeated appeals made by late YSR, the central government has fixed the gas price benefiting Reliance. The gas pricing formula should be re-examined. Pricing is crucial for utilization as no end user will come forward to use the gas if its cost is prohibitive.

The state has been demanding 50 percent share in the profit gas coming to central government from KG basin. Infact, this was the recommendation of the 12 th finance commission. The centre has not responded positively to this genuine demand of Andhra Pradesh so far.

The state should continue its struggle on these crucial demands- priority in allocation, pricing and sharing the profit gas.


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