The Comptroller and Auditor-General (CAG) of India has rapped the Gujarat government’s blue chip Gujarat State Petroleum Corporation (GSPC) for its KG basin project, which is yet to see any production of gas, a decade after then CM, Narendra Modi, declared that it had struck “20 TCF gas in the KG basin block” in 2005.
After Mr. Modi’s tall claims on the GSPC’s success, the State PSU acquired dozens of blocks in India and overseas.
The CAG noted that without any experience and expertise in exploration and production, the company acquired the blocks and then surrendered them, leading to Rs. 2,514.65 crore being written off. “The company went ahead acquiring overseas blocks during 2006-10 mainly as an operator with considerably high participating interests without any experience overseas,” the report said, recommending, “risks associated with cost, technology and price realization be properly considered while venturing into exploration and development activities.”
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“Out of the 64 blocks on hand as on April 1, 2011, the company surrendered 37 between 2011 to 2015, and wrote off exploration expenditure worth Rs. 2514.65 crore for 29 surrendered blocks,” it said.
In its performance audit report tabled in the Assembly on Thursday, the auditor has said the “company’s borrowings jumped from Rs. 7126.67 crore as on March 2011 to Rs. 19,716 crore as on March 2015, a jump of 177 per cent,” while its interest burden rose to Rs. 1,804.06 crore in 2014-15 from Rs. 981.71 crore in 2011-12.”
‘Dues not recovered’
The CAG has slammed the company for “not recovering Rs.2,329.52 crore in dues from joint venture partners.” The two joint venture partners are Geo Global Resources Inc and Jubilant Group.
On the KG basin block, where the GSPC has invested Rs 12,249.06 crore between 2011 and 2015, has seen a huge delay in commissioning the project which was supposed to go for commercial production in 2011-12.
“The viability of the project was further stressed due to underestimation of costs in the field development plan (FDP), non-addressing the technological risks in the KG block and deficiencies in the implementation of the project,” the report observed.
“As against the capital costs of Rs. 13,122 crore estimated in the FDP, the cost incurred in the block up to March 2015 was Rs.17,025.45 crore.”
However, the GSPC and top officials of the Gujarat government have defended the investment in the KG basin on the ground that its “high temperature high pressure (HTHP) area where even British Petroleum (BP) in partnership with Reliance Industries (RIL) is struggling to produce the gas. We have developed the technology now and commercial production will start soon,” a senior official said.
“To overcome low permeability, the GSPC has in well no. 4 successfully carried out hydro-fracture operations 5,000 metres deep, a feat almost unmatched in petroleum engineering in the world,” a top official of the company said.