Now ONGC comes under CAG scanner

After the Centre, which received brickbats on coal blocks issue, now it’s the turn of the Oil and Natural Gas Corporation to face flak from the Comptroller and Auditor General.

The government auditor has taken to task the Maharatna public sector unit for its failure to execute work commitments and doing a tardy job of monetising its discoveries.

In its report on “Hydrocarbon exploration efforts of ONGC,” tabled in Parliament on Tuesday, the CAG said lack of adequate efforts and results in new fields, coupled with the ageing of producing fields, was a matter of concern.

The actual reserve accretion through exploratory, wildcat and appraisal wells accounted for only 13-38 per cent of the MoU targets. The finding cost was also understated by $4.48 to $21.7 barrel of oil equivalent.

Despite acquiring 89 prospective blocks out of 120 up to the 8th round of the New Exploration Licensing Policy (NELP), ONGC made only 11 discoveries in 8 blocks. It did not complete its committed work in 25 prospective blocks and drilled only 30 out of 90 committed wells within the specified period. In 74 per cent of highly prospective blocks acquired by it under the NELP I to V rounds, it could not complete its work commitments, the report pointed out.

Similarly, though ONGC made 99 discoveries in the NELP and nomination blocks over 2007-11, it accreted a reserve of only 80.93 million metric tonnes. A comparison of discoveries in the NELP regime showed that despite its large acreage and rich experience in the exploration and production sector, ONGC made lesser discoveries than new entrants such as Gujarat State Petroleum Corporation. ONGC had monetised only 73 out of its 158 discoveries made during 2002-11. The company succeeded in monetising only 2 out of the 56 offshore discoveries. In fact, non-monetised offshore discoveries contained major reserve accretion.

Reserve replacement ratio

The auditor said ONGC had been maintaining a reserve replacement ratio (RRR) of more than 1. However, the RRR showed an increasing trend mainly on account of upward trend in reserve accretion (due to reinterpretation and development drilling) and downward trend in production due to ageing fields and delay in monetisation. The CAG also pointed out several deficiencies in operations (procurement, hiring and contracting) stating that though the ONGC operated in a field of cutting-edge technology, it did not have a system of independent assessment of its technical capacity, which failed to assure its stakeholders.

The CAG said less than 50 per cent of the basins were able to meet only 2D/3D survey targets as the company was tardy in purchase of a seismic survey vessel.