Foreign energy majors waiting to enter India may have to redraw their plans in light of the Supreme Court judgment on Thursday that gives the government sole ownership rights of gas fields.
Experts cautioned that the government will have to carefully walk the wedge as state interference in pricing and marketing carries the risk of making potential investors worried.
“Every foreign investor needs certainty on price fixation of natural resources,” said former petroleum secretary S.C. Tripathi.
Oil giants British Gas, Petrobras and Statoil have expressed their intention to exit from exploration blocks in partnership with state-owned ONGC citing lack of clarity on policy.
The Supreme Court said the government should come out with a legislation on gas sales produced by private parties. Production sharing contracts are signed between the government and an oil and gas exploration company, also called the contractor.
Under the agreement, the contractor bears all exploration risks, production and development costs in return for its stipulated share of production.
“The executive (government) cannot just decide on pricing,” another serving bureaucrat said. “There has to be a binding legislation as existing laws don’t take care of pricing of natural resources in India.” Tripathi termed the move to give marketing and pricing freedom solely to the government as not reform-friendly.