CAG pulls up ONGC, says co tardy in exploration activities

The CAG has hauled up ONGC for inefficiencies in developing oil and gas finds and tardy exploration .

Updated: Aug 28, 2012, 20:03 PM IST

New Delhi: The Comptroller and Auditor General (CAG) has hauled up Oil and Natural Gas Corp (ONGC) for inefficiencies in developing oil and gas finds and tardy exploration, a charge that the state-run firm said was not reflective of its achievements.

CAG`s report on Hydrocarbon Exploration Efforts of ONGC, which was tabled in Parliament on Tuesday, expressed concern at the company`s lack of adequate efforts and results in new fields and wanted the Oil Ministry to reset annual targets set out in MoU that the firm signs with the government.

Despite getting 89 prospective blocks out of 120 blocks auctioned in the first eight rounds of New Exploration Licensing Policy, ONGC made only 11 discoveries in 8 blocks and did not complete work commitments elsewhere.
"ONGC did not place the desired emphasis on its core exploration activity.

Coupled with the low priority on exploration are the anomalies in MoU target setting and reporting as well as performance measurement which can potentially mislead the stakeholder," it said.

The CAG said ONGC showcases a healthy reserve replacement ratio while production continues to remain static.

"ONGC was also tardy in monetising its discoveries which contributed to low production," CAG said.
"While external benchmarking of performance was not done, nationally ONGC had among the lowest efficiency in drilling compared to private as well as central public sector enterprise (Oil India Ltd) which led to non-achievement of work commitments and payment of liquidated damages," it said.

ONGC Chairman and Managing Director Sudhir Vasudeva declined to comment on findings of the CAG report but said the company was responsible for discovering 6 out of 7 producing basins in the country and has established nearly 8 billion tonnes of in-place hydrocarbon reserves.

Stating that ONGC had lesser discoveries than private
sector giant Reliance Industries, CAG said the firm had a cost overrun of 129-648 per cent in its finding or explorations costs and shortfall in survey and drilling targets.

"A comparison of discoveries ... Shows that despite its large acreage and rich experience in exploration and production sector, ONGC made lesser discoveries than new entrants like Gujarat State Petroleum Corporation," the CAG report said.

While Vasudeva said ONGC was studying the CAG report and would respond to it at appropriate forums, the company`s former Chairman and Managing Director R S Sharma said the official auditor was "only bringing out negativity while glossing over good things".

"They say the performance should be benchmarked. Very good, it should be. Even CAG`s accounting practices should also be benchmarked to global practices," he said.

"ONGC has been following international best practices in exploration and production and if some blocks it had not drilled (of) the required number of wells, it was a conscious decision so that resources can be focused on other priority areas," he said.

CAG report, which pertains to the time when Sharma was the head of the company, will now be examined by the Parliament`s Public Accounts Committee (PAC).

"I do not want to jump to any conclusion. We are examining the CAG report," Vasudeva said.

The official auditor also said there were several deficiencies in operations (procurement, hiring and contracting).

"Though ONGC operates in a field of cutting edge technology, it did not have a system of independent assessment of its technical capacity which fails to assure its stakeholders," it said.