ONGC losing focus; raising LPG cap mistake: Oil Min

In a presentation prepared for the incoming Narendra Modi-government, the ministry lists national oil companies losing focus on domestic exploration as well as legal disputes around signed contracts with private explorers.

PTI| Updated: May 22, 2014, 19:40 PM IST

New Delhi: As subsidy bill balloons to USD 26 billion and oil and natural gas production stagnates, Petroleum Ministry feels national oil companies like ONGC losing focus on their core competence has led to this insipid situation.

In a presentation prepared for the incoming Narendra Modi-government, the ministry lists national oil companies losing focus on domestic exploration as well as legal disputes around signed contracts with private explorers among the five things that went wrong during the UPA regime.

Alongside, it also said increasing cap on supply of subsidised domestic LPG cylinders from 6 to 9 and then to 12 per household in a year should not have happened, sources privy to the development said.

Also, keeping the landmark scheme of Direct Benefit Transfer on LPG or DBTL where customers got subsidy in cash so they could buy cooking gas at market rates, was a mistake, it felt.

Other shortcomings listed included production sharing contracts (PSCs) beset by legal disputes and no clarity on engagement with Iran in view of US sanctions that not just delayed participation in a mega gas field but also cost the Iran-Pakistan-India gas pipeline.

Oil Ministry has been at loggerheads with explorers like Reliance Industries over a variety of issues - from output not matching targets to how a discovery should be judged commercially viable. The time it should have spent on encouraging more investment into the sector so that oil and gas production can be raised, was spent in courts fighting legal disputes.

The ministry in the presentation, that have been requested by the Cabinet Secretary Ajit Seth to be prepared for Modi, states that production sharing contracts (PSC) should have been revised based on experience derived from working of existing PSCs, sources said.

The ministry and RIL are engaged in legal fight over reasons for natural gas output from eastern offshore KG-D6 block falling to a tenth of planned 80 million standard cubic metres per day, a development that cast shadow on the entire investment climate.

Sources said the ministry felt Oil and Natural Gas Corp (ONGC) moving into downstream business of petrochemicals and oil refining and midstream activities of LNG terminals diverted its focus from its core job of finding and producing more oil and natural gas.

It also listed state refiner Hindustan Petroleum Corp Ltd (HPCL) setting up sugar mills as example of diversion from core activities.

On the ministry's achievements, the presentation points to 40 million tonnes of refinery capacity added in last five years - from 175 million tonnes per annum to 215 million tonnes. New refineries at Bina in Madhya Pradesh and Bathinda in Punjab have been commissioned and a one at Paradip in Odisha is nearing completion while approval has been accorded for another at Barmer in Rajasthan.

Sources said it also lists the decisions to deregulate petrol price from June 2010 and the January 2013 decision for staged decontrol of diesel through small monthly increase in rates to wipe out entire subsidy.

The ministry also lists construction of 5.33 million tonnes of crude oil storages that would serve as buffer during emergencies and roll out of cleaner Euro-III and IV petrol and diesel in the country.

Making domestically produced cheaper natural gas for CNG supplies in cities and construction of new LNG import terminals at Dabhol in Maharashtra and Kochi in Kerala are other highlights of the achievements the ministry has listed, they said.

Aggressive pursuit for equity oil and gas aboard with over USD 7 billion of acquisitions in last one year is also listed as big achievement of the ministry, they added.

For the next five years, the ministry has suggested fixing a target for raising domestic production of crude oil and natural gas by at least 25 per cent and adding 25 million tonnes of refining capacity.

All of the sedimentary area in the country needs to be mapped for oil and gas as also setting up of a National Gas Grid, extending supply of of Euro-IV fuel all over the country and making operational at least one transnational pipeline to bring gas from Iran, Oman or Central Asia are other targets the ministry lists.