'CBI cases, CAG comments led to policy paralysis in Oil Min'

CBI cases against DGH and adverse comments by CAG had led to near policy paralysis in the oil ministry, its Joint Secretary (Exploration) has said.

In a presentation to investors in Mumbai last week, Aramane Giridhar, Joint Secretary (Exploration) gave detailed reasons for pendency of decisions in the Ministry of Petroleum and Natural Gas where officials approved of decisions but refused to issue formal orders, resulting in delays in production of oil and gas.

"Adverse CAG comments on several PSCs (production sharing contracts)" as well as "CBI cases on DGH and staff and MoPNG staff and resulting demoralisation" were responsible for the pendency, he said in a 25-slide presentation.

The Comptroller and Auditor General (CAG) in a September 2011 report on the working of PSCs that government had signed with companies like Reliance Industries, castigated the Oil Ministry for poor administration and not monitoring spendings by companies.

It had stated that the PSC provides "substantial incentive" to companies like RIL to "increase capital expenditure or front-end capital expenditure" so that government's take from the blocks is lower.

Separately, the Central Bureau of Investigation (CBI) is investigating alleged irregularities and favouritism by the Directorate General of Hydrocarbons (DGH) in handling of issues related to the KG-D6 block of RIL.

Giridhar also listed "policy issues (remaining) unresolved since 2009" as reasons for pendency in New Exploration and Licensing Policy (NELP) blocks. "Failure to understand that rigid PSC needed systemic remedy and not quick fixes," he said in presence of Oil Minister M Veerappa Moily and Petroleum Secretary Vivek Rae.

In the presentation, a copy of which was made available here, he said industry has been raising concerns about PSC administration like time taken for clearances/approvals, backlog of decision which had been taken but not signed and micro management of approvals for discoveries being declared commercial and field development plans.

He, however, did not cite any particular company or PSC but industry sources said the most number of pendency, or decisions taken but not signed, pertained to RIL.
"Ministry is focussing on addressing these concerns (by) clearing pending approvals, develop and streamline policies for future, and ensure fair and equitable pricing for hydrocarbons," he said.

As on April 1, 2012, there were as many as 95 decisions that had been taken by block oversight panels, called Management Committees (MC) but the resolutions reflecting them were not signed by concerned ministry officials.
These have now been pursued and resolutions signed.

The MC resolutions, which were not signed, pertained to approvals of annual work programmes and budgets, commercialities of discoveries, approval of drilling locations and reporting of discoveries.

These have been pursued and the pendency brought to zero by October 30, 2013, the joint secretary said adding 85 other pending cases of giving contractual extensions and FDP approvals were cleared in one year.

The Ministry, he said was empowering MC, which is headed by the DGH and where the companies operating the oil and gas block as well as ministry is represented. "MC being given powers to give relaxation to some PSC timelines," he said, adding that the sanctity of signed production sharing contracts (PSC) will be maintained.

"MC is designed to function as the board of directors. Both the parties have a veto right. PSC is the sole arbiter in decision making process," he added.

So far, the government has awarded 254 blocks or areas under NELP since 2000 for exploration and production of oil and gas. For each block, a separate PSC is signed.