Oil
and Natural Gas Corporation (ONGC) – the state-owned oil firm – is a
behemoth even by international standards. But its record has been patchy
even though it had built up an enviable reputation in the field of oil
and gas exploration and production. Blame this on the political
leadership which, for a variety of reasons, didn’t allow it the full
freedom to operate professionally. Its chequered record was also the
result of some quixotic choices as chief executive of the oil giant –
not all of whom were committed to its progress. The charitable view is
that ONGC’s progress was wrecked by some diabolic machinations both
within and outside.
What prompted us to pick up ONGC as the subject for this column is the
whisper campaign that has been launched against the present ONGC
management headed by D.K. Sarraf after he announced plans to bring its
deep water block, KG-DWN-98/2 (KG D5), into production by 2019. The gas
field was discovered about a decade ago and the upstream major has
waited too long to develop it. The Cassandras are now saying that ONGC
doesn’t have the deep water expertise to bring the field into production
and will need an overseas partner.
As
we started to examine the merits of this criticism, we stumbled across
certain elements that indicated that there was a deliberate strategy to
delay production from KG D5. When polyester manufacturer Reliance
Industries Ltd (RIL), with no experience whatsoever in E&P, ventured
to produce gas from its block, KG D6, without a partner with experience
in deep water production, no one had questioned its wisdom. Its10 per
cent foreign partner, Niko Resources, was picked up mainly to get round a
government stipulation that it should have a foreign partner. The
original government intention, however, was to make the partner as the
operator of the field. How that stipulation was waived in the case of
RIL is an enduring mystery. Niko has not brought in any technology nor
has it made any contribution other than the mandatory investment
proportionate to its stake in KG D6 – which is just peanuts for RIL.
RIL
managed to produce gas from DI, D3 fields and oil from MA field in KG
D6 with the help of consultants. True, production at KG D6 collapsed
soon after it touched 60 MMCMD. The peak production target had been set
at 80 MMSCMD. The production collapse did not occur because of faulty
production technology or strategy; it occurred because of the faulty
assessment of gas reserves. It later turned out that the DI, D3 fields
of KG-D6 had only 3 TCF reserves against RIL’s claimed and DGH’s
endorsed 10-11 TCF.
ONGC’s KG D5, RIL’s KG D6 and GSPC’s Deendayal are adjacent deep water
blocks. Compared to KG D6, the Deendayal block is acknowledged to be
slightly more complicated geologically. Still, GSPC a relatively new
player, which is not older than RIL in the area of E&P, has almost
completed its Field Development Plan (FDP) for its deep water block and
production is likely to commence any time now.
ONGC
has been in existence for close to 60 years. It has specialised
institutes in almost all areas of E&P such as drilling, geology,
exploration and production. If someone tries to build a case that it
requires a foreign partner for deep water production from its KG D5
field, there has to be something fundamentally wrong with the
state-owned company.
Our investigation indicates that the idea of foisting a foreign partner
on ONGC was hatched by outside forces and the oil giant’s internal
leadership buckled under pressure and bought the argument. ONGC went
after companies such as Statoil of Norway and Petrobras of Brazil – and
received proposals from them for collaboration.
That is when all the shenanigans began. The Ministry of Petroleum and
Natural Gas deliberately sat over their proposals and these companies
then withdrew in frustration. BG came up with a proposal to collaborate
with ONGC for a deep water block in the KG basin. This was not approved
by V.K.
Sibal, the then boss of DGH despite the fact that it had the backing of
the then petroleum secretary M.S. Srinivasan. The then petroleum
minister, Murli Deora, preferred to go by V.K. Sibal’s advice in
rejecting BG’s offer. Let us not forget, D.J. Pandian, the then boss of
GSPC, once described regulator V.K. Sibal as a ‘strangulator’.
The pattern must now be clear to our readers. Look at the personalities
involved: Murli Deora, V.K. Sibal and an ONGC CMD whom we do not want to
identify for lack of documentary evidence. First, the ONGC leadership
believed, or was persuaded to believe, that it could not produce gas
from its KG deep water block on its own. It was then made to scout for
partners. And when the partners turned up, they were made to wait for an
inordinately long time. MoPNG under Murli Deora played the role of a
scuttler and not a facilitator. What is astonishing is that successive
chief executives at ONGC were too weak to resist the pressure from the
ministry or too vain even acknowledge that there was a deliberate
conspiracy to scuttle the venture.
We do not
want to comment on the case that ONGC has filed in the Delhi High Court
alleging theft of gas from its KG D5 block. We do not have the
evidence. Nor are we competent to evaluate the claims and counter
claims. However, the decision by the ONGC leadership to go to court was
extremely bold. Fortunately for Sarraf and his team, Veerappa Moily was
out and the present government headed by Narendra Modi is known to
respect those who protect the interests of the PSUs. The international
consultant, D&M, which is looking into the charge of theft, is also
known for its professionalism.
ONGC chairman has announced the target date for putting the field into
production. Sarraf is confident of going ahead without a foreign
partner. The Modi government is expected to back him as it cannot afford
to destabilise someone who is trying to protect the interests of the
country’s blue-chip PSU.
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