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Press Release [FREE Access]
Petro Intelligence » GSPC’s KG Asset: Appalling Spectacle Of Blunders

by R. Sasankan

Don’t shoot the messenger.

Narendra ModiEvery journalist worth his salt gets a fair bit of flak for his choice of targets. So, last week I was not surprised when a former petroleum secretary – who read our Petro Intelligence column titled Saurabh Chandra’s antics in PLL – sent in a terse one-line response: “Your silence so far as GSPC is concerned is deafening.”

There clearly was an imputation of bias in that caustic comment. The suggestion was that www.indianoilandgas.com was deliberately shirking its responsibility as a fair-minded journal from reporting on the supposed shenanigans at GSPC which had touched scandalous proportions. But I quickly set the record straight. I immediately mailed him a few of our reports on the same subject that we had carried over the last two or three months, long before the Comptroller and Auditor General (CAG) came out with its damning report. Our esteemed friend reads only the Free Access column, Petro Intelligence, and not the other columns that are password protected, accessible only to subscribers. The column Regulation in www.indianoilandgas.com was the only one in the Indian media to have carried articles on the problems plaguing the Deen Dayal assets of GSPC in its KG offshore block. Two months ago, we had written in our Regulation column:

D.J. Pandian“GSPC had installed a 16-slot Modular Platform at Deen Dayal. A normal platform has only 12 slots. So far, GSPC could complete only three wells and the fourth is under drilling. GSPC has been thinking of fracturing to increase the permeability of the fields. Even the temperature problem can be overcome as in the case of the Elgin-Franklin field, but the question is who will come forward to invest. Anyone who comes forward to partner GSPC may not take the past cost into consideration. The most sensible option before GSPC, therefore, could be to sell the field outright if there are takers for it.”

My familiarity with GSPC began a few years ago when D. J. Pandian was its MD. In his capacity as the boss of GSPC, he was on the board of the Delhi-based Petronet LNG Ltd (PLL).That was the time when the PLL management declared the payment of a bonus for the first time to the board members. The Government of India rules barred PSU representatives and government officials from accepting such payments. Pandian promptly asked PLL to deposit the amount in the Gujarat government’s account even as the then petroleum secretary, in his capacity as ex-officio chairman of PLL, pocketed the cheque and was about to deposit it in his account in a south Indian city where he was settling down after his superannuation. We highlighted this in our column by recalling how the same secretary had pulled up a former CMD of GAIL for accepting sitting fees from a company on whose board he was a member, and forced him to return the amount. Following our report, a few others also returned the cheques. Our column had praised Pandian for his honesty.

Tapan RayOfficers belonging to the Indian Administrative Service (IAS) are periodically transferred as they climb the bureaucratic ladder. Accordingly, Pandian was replaced by Thapan Ray of the same cadre. I happened to be in Ahmedabad and Gandhinagar soon after that. During my interactions with people in the industry and the government, I discovered that for years Pandian and Ray had a very adversarial relationship within the cadre. GSPC’s KG block was known to be extremely complicated. It has perhaps the lowest permeability (0.1 millidarcy) and an incredibly high temperature of 460 degrees F. (This again was reported exclusively by www.indianoilandgas.com).

It was a colossal mistake on the part of the Gujarat government to entrust such a complicated field to IAS officers who had no knowledge of the E&P sector. IAS officers have one curious failing: they refuse to acknowledge their limitations and try to do the impossible. Here the situation at least called for close interaction between Pandian and Ray, which did not happen. Pandian was the boss during the discovery and appraisal drilling. The field’s character was known and the field development plan should have addressed the issues of low permeability and high temperature first before embarking on development. The fact that GSPC is talking about these issues three years after it missed the FDP’s target date for commissioning amounts to bungling on an unimaginable scale. The massive egos of the two bureaucrats played a very crucial role in ruining the fortunes of GSPC’s block which is now neck deep in financial trouble.

D.K. SarrafGSPC sought ONGC’s help to find its way out of the jam. We tried to determine whether the ONGC management was being pressured by the government. Sources in ONGC confirmed that there was no pressure whatsoever from Prime Minister Narendra Modi. Could the interference have come from the level of the petroleum minister? There was no confirmation of this either. There is nothing unusual in ONGC evincing interest in the Deen Dayal asset because it is developing the adjacent block KG-DWN-98/2 where it discovered gas and oil. A combined development of these fields can reduce the cost of creating infrastructure. The infrastructure already created by RIL in the adjacent KG D6 is rusting. It is an accepted practice in the E&P sector to share infrastructure. Negotiations by an honest ONGC leadership which the present one is rated to be could lead to a mutually beneficial deal.

We understand that ONGC has been carrying out a due diligence exercise on GSPC’s Deen Dayal asset. We learnt about it at least four months ago. What is the need for so much secrecy? ONGC should undertake the due diligence process only through an internationally reputed entity. There are a number of consultants floating around today who are only too eager to come up with a report that incorporates the client’s wishes. Remember the international consultants which misled the country by certifying the gas reserves at RIL’s KG D6’s DI D3 fields at 11 TCF? They have not been blacklisted as yet.

Experts say that in the case of ONGC which is still facing clearly unanswerable questions on the Imperial acquisition, any participation or takeover of the acreage will be fraught with unwanted attention, especially in these lean times for an E&P company. ONGC will, therefore, need to carry out a due diligence process that encompasses both technical and commercial parameters and on an unprecedented scale for any Indian E&P acreage.

This is dictated by the fact that it remains the acreage with the highest expenditure at the exploratory, appraisal and development stage with the lowest current productivity for any shallow water block in India. There is a perception that the GSPC acreage is in deep water, which it is not. These experts reckon that there would not be the slightest room for techno-economic viability if all the preceding investments form part of cost recovery from production. ONGC just cannot afford to bungle at this stage.



To download the latest issue 'Volume 30 Issue 24 - March 25, 2024', click here
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