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Press Release [FREE Access]
Petro Intelligence » ONGC Resists Niti Aayog, Regains Its Mojo

By R. Sasankan

The Niti Aayog – the government think-tank that the Narendra Modi government created out of the detritus of the Nehruvian-era Planning Commission – has started to spur controversies. Even before the furore over the job data subsided, it has virtually shocked the petroleum industry with its bizarre and ill-conceived proposal to find private and foreign companies who could relieve the Oil and Natural Gas Corporation of the responsibility of operating the largest oil and gas producing fields.

Last week, the Press Trust of India, the country’s leading English news agency, broke the story that “a high-level committee headed by Niti Aayog vice chairman Rajiv Kumar late last year had considered ‘transferring’ western offshore oil and gas fields of Mumbai High, Heera, D-I, Vasai East and Panna as well as Greater Jorajan and the Geleni field in Assam, Baghewala in Rajasthan and Kalol oil field in Gujarat to private/foreign companies.”

At a time when newspapers are awash with tiresome articles every other day that eviscerate political personalities and their reputations ahead of a bitterly-fought general election, it was but natural for print media editors to pounce on the PTI story. The report gained some credence as neither the Niti Aayog nor the Ministry of Petroleum and Natural gas ( MoPNG) denied it.

So, it now appears that the Niti Aayog’s recommendation, which was strongly opposed by the management of Oil and Natural Gas Corporation (ONGC), met with resistance at the cabinet level as it could turn out to be politically disastrous. But more importantly, it once again cast serious doubts on the competence of the government’s policy think-tank to develop a coherent strategy on vital economic issues. Its outlandish suggestion on the ONGC fields proposes a remedy that is worse than the disease.

Under the leadership of K.D. Malaviya, ONGC came up very well during its formative years with its success ratio almost at par with the best in the world. ONGC was helped immensely by the Russians in making almost all commercial discoveries, starting with Ankaleshwar in the state of Gujarat. The Russians had identified the precise location of Bombay High, the country’s largest commercial oil field, and recommended the spot where drilling should take place. The subsequent discoveries on the west coast, such as Panna, Mukta and Tapti, were also made on the advice of the Russians. The preliminary survey they did along with ONGC officials indicated the presence of gas reserves on the east coast.

The problem with ONGC began with the discovery of Bombay High. The Russians were practically bundled out. The development of Bombay High threw open the opportunity for high value purchases and the irresistible prospect of awarding high value contracts.

It wasn’t long before the canker of corruption fostered kickback-oriented purchases and contracts, completely compromising the political leadership and the senior executives of ONGC. Import of crude oil was another source of funds for the ruling party. That is how the ministry of petroleum and natural gas became one of the most attractive portfolios for any politician keen on making money for himself and the party.

Appointments to senior posts in ONGC were made on the basis of their ability to raise additional resources for the party. I do not believe that corruption was the monopoly of any political party. Successive governments recklessly abused ONGC in order to make money for the ruling party. Honest officials found it difficult to rise to the top. Even so, a couple of competent officers rose to the top – but they had to close their eyes to misdeeds.

The biggest tragedy that hit ONGC was the damage to its Bombay High reservoir which happened during the accelerated production plan of the 1980s. I had the privilege of reporting on ONGC in those days. The government, led by Mrs Indira Gandhi, was facing an acute balance of payment crisis with the crude import bill being the largest item on the list involving foreign exchange outgo. The big jump in domestic crude production following the accelerated production plan brought a sense of relief. However, crude oil production has to be in tune with the character of the reservoir which had to be regularly monitored by production experts. ONGC was headed by a former military official who knew nothing about production. The senior executive in charge of production [back in those days this worthy was designated as Member (offshore)] was a structural engineer without any expertise whatsoever in production.

The ministry of petroleum and natural gas set its face against any proposal suggesting a cutback in production from Bombay High as the country was going through a severe balance of payments crisis. The upshot of this intransigent stand was that excessive production damaged the sensitive Bombay High reservoir. The gas-oil ratio increased. ONGC, which could have managed Bombay High with a maximum of 300 wells, ended up drilling more than 900 wells on which it spent over Rs 300 billion.

It was during this period that a legendary production expert within ONGC offered to put together a plan to double production from Bombay High at a very low cost. The suggestion was brave and even cocky, but what amazed me was the total indifference of the then ONGC management and the political leadership to it. The cynic in me claims to know why everyone was cool to the proposal: there was no scope for any kickback as the offer was based on a low budget plan. I was the country’s only journalist who had access to this plan. The ONGC official subsequently opted for voluntary retirement.

My submission is that ONGC can still be revived and turned into a robust company if politicians are not allowed to meddle in its affairs. The company has to be fully professionalized. There are professionals even in the present management.

What has privatization achieved in India’s oil sector? Precious little. Under pressure from the IMF, the oilfields discovered by ONGC were handed over to private companies such as Enron and RIL, Command Petroleum and Hardy. They made profits with no value addition either in terms of reserves or technology. Even the Barmer field, which now belongs to Vedanta, was originally discovered by ONGC. To recommend the same course for the remaining fields of ONGC is nothing but a blatant attempt to kill the public sector company which, despite all the ills, still remains a blue-chip company. There is no evidence to suggest that there will be any appreciable gain to the government by selling these fields to private players.

The Niti Aayog ought to have come up with certain short-term measures to streamline ONGC’s operations. It should have baulked at the idea of re-moulding the organization. A short-term package can be worked out with the help of some outside professionals, if necessary.

The truth is that crude is stolen from ONGC in a myriad ways and its performance can easily be improved at least by 25 per cent cumulatively by halting theft, improving operations, enhancing exploration and slashing its bloated and overpaid bureaucracy. These are the reasons why ONGC Videsh Ltd (OVL) on paper looks better than its parent. But even OVL finds itself upstaged when it comes to striking deals by entities like Imperial Oil.

The solution does not lie in selling its oil fields. The answer is to reform the Public Sector and bring in professionals who can stand up to politicians and be rewarded for competence and performance instead of kowtowing to their political masters. So I am glad that good sense prevailed and the plan to sell off ONGC’s biggest exploration assets was abandoned. The present ONGC management deserves to be congratulated for resisting the move to undermine the raison d’etre for its existence.



To download the latest issue 'Volume 26 Issue 7 - July 10, 2019', click here
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