by R. Sasankan
Don’t shoot the messenger.
Every
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:
“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.
Officers
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.
GSPC
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.
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