Friday, February 20, 2015

Rigged: The Slow Decline Of India's National Oil Company

This article came out last year but I came across it today via twitter. In Caravan magazine Krishn Kaushik  writes about India's flagship oil  company the Oil and Natural Gas Corporation Limited and its failure over the years to live up to its mission of finding and producing fuel for the country.

This failure has many causes as Kaushik explores- institutional inertia is one important one, government interference in company functioning is another. But there are also a host of private interests trying to exploit the company's wealth. Reliance comes under particular criticism for its alleged manipulation of the bidding process.

Here is one example:

Things only got better for Reliance with the introduction of the New Exploration Licensing Policy. The former ONGC director told me that during his tenure under the NELP regime, both the Directorate General of Hydrocarbons and the petroleum ministry—then headed by VK Sibal and the Congressman Murli Deora, respectively—made at least three unconventional decisions that disadvantaged ONGC and awarded contracts to Mukesh Ambani.

Bids for oil and gas blocks are given points according to various criteria, he explained. One of these is meterage, the depth of the wells a company offers to drill. In principle, the deeper the better—but every hydrocarbon field has a natural “basement,” based on its geological ability to retain hydrocarbon fuels, beyond which it doesn’t make sense to go. In the Cambay Basin, the director said, “everybody knows that the depth cannot be more than 3,500 metres.” But Reliance “bid 5,000 metres stroke basement”—whichever came first. “They got marks for 5,000, whereas ONGC couldn’t write more than 3,500 because we knew we would hit the basement below that.”

There are also points for how much territory a contractor will explore with three-dimensional seismic surveys. In another NELP round, Reliance offered to survey more than the total area of the block on offer, the director claimed. “So they got marks on that.”

There are also allegations that Reliance is  sucking out natural gas from adjacent blocks under ONGC control in the Krishna Godavari offshore basin. ONGC has taken the government to court over this! .. and the list goes on..

Between all these shenanigans is a bizarre episode of how Russian geologists helped discover Mumbai High,  India's biggest off shore oil field-

Discussing its aleatory nature, Sunjoy Joshi, the director of the Observer Research Foundation, a Reliance-funded think tank, told me a story he heard from Subir Raha, a former chairman and managing director of ONGC. “I don’t know if there is any record of this story,” Joshi said, before relating how Raha, who died in 2010, used to say that the Russians had been engaged to do the surveys far out to sea, “where geologists thought there was better possibility of finding oil and gas. But they had to justify coming to the shore more and more often, to screw all the girls in Kamathipura,” Mumbai’s oldest and largest red-light district. Moving their operations closer to land, they eventually found India’s most prolific oil field to date. “The discovery of Mumbai High,” Joshi continued, chuckling, “owes a lot to those poor women.”

Its a long read but well worth it.

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