Separate transportation, marketing: oil regulator to gas firms

New Delhi: Oil regulator PNGRB wants gas utilities like GAIL India Ltd to separate their gas transportation and marketing businesses so that ownership of a pipeline does not provide any firm with an unfair advantage while selling the fuel.

The Petroleum and Natural Gas Regulatory Board (PNGRB) floated a concept paper on unbundling of activities of transportation and marketing of natural gas and has invited comments from industry by 15 October.[caption id=“attachment_460461” align=“alignleft” width=“380”]  Gas business. Reuters[/caption]

“The purpose of this policy is to ensure that pipeline ownership does not provide any competitive advantage to any gas seller and abuse of market power while establishing an efficient gas grid with open access for all the players on a non discriminatory basis,” the paper said.

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PNGRB said monopoly behaviour is anti-competitive and, therefore, not in consumer interest.

“In case of a monopoly which provides a variety of services, splitting it vertically along the gas value chain is the end towards which all regulators in developed gas markets have endeavoured and also reached. Simply put, what is meant here is that where monopoly and non-monopoly services are

offered, splitting them into two parts is the objective of regulators in different parts of the world,” it said.

Detailing a roadmap, the regulator said accounts of pipeline transportation and gas marketing should first be segregated. This should be followed by creation of separate “identifiable legal entities along functional lines i.e., production, transportation, marketing of natural gas etc.”

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Finally, the ownership and management control of these separate entities should be segregated.

“This structure envisages that the entity and its affiliates do not have common ownership as visualised under the proviso to section 21 of the PNGRB Act, 2006. Management control segregation would ensure that independent decision making processes exist in the entity and its affiliates,” the concept paper said.

It said accounts should be separated by 2013-14 while legal unbundling of the transportation segments of natural gas transmission entities should be completed by 2015-16.

Subsequently, Board would consider declaring a time-line for ownership/management control unbundling, it said.

The regulator said the PNGRB Act provides for separating “the activities of marketing of natural gas and the transportation including ownership of the pipeline within such period as may be allowed by the Board and only within the said period, such entity shall have right of first use”.

It said any firm applying to building and operating a gas pipeline would have to give an undertaking on its business interests in related areas of gas marketing or city or local gas distribution network.