Policy
Why Russian Crude When Ample Supply Available Nearby?
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External Environment Deteriorates As BPCL’s Strategic Sale Nears
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IEA Projects Doubling Of Oil Demand In India By 2040
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Policy On Divesting Public Sector Oil Companies
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Refineries To Maximise Diesel Exports To Avert Throughput Loss
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Regulation
ONGC Monetizes 8 Marginal Fields, More In Offing
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Shale Exploration: To Abandon Or Not To Abandon Is the Question
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Domestic Crude Production Declines, Overseas’ Edges Up
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IOC’s Panipat Refinery Produces Special Grade Diesel
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Alternative Energy / Fuel
ONGC Floats Tender For A 15 MW Solar Project
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New Projects
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KBR’s Proprietary Technology Selected For Refinery Modernization Project
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IndianOil To Set Up 2G Ethanol Plant
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IndianOil Bottling Plant To Enhance Storage Soon
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Market Watch
Essar, Adani, GAIL Buy Bulk Of Reliance Gas
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Companies
NGC Energy
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Petronas Strengthens Presence In India
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Petrofac Recruits 60 Indian For Its Global Graduates Programme
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Adani Gas Q2 Net Doubles To Rs 1.2 Billion
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Asian Oilfield To Acquire Majority Stake In Optimum Oil And Gas
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Press Release [FREE Access]
Petro Intelligence » Corruption Stance: Soft On Some, Harsh On Others

By R. Sasankan

The petroleum industry has always been a big money-spinner for political parties which have a gargantuan appetite for funds. Most negotiations take place outside the pale of public scrutiny. These deals are often esoteric – and only an expert can really comprehend the true nuances of these complicated, technically tortuous negotiations. Most generate massive kickbacks but are very difficult to prove. Political parties love the fact that there is a lot of moolah in these deals and very few understand true nature of the deals. That is why over the past 50 years, there has been no big scandal that has erupted in the petroleum sector. The political class likes to keep it that way. Except for the Kuo Oil deal in the 1970s and Imperial Energy agreement in 2009, there has never been any major scandal that has rocked the establishment.

One reason for this cloak of secrecy is that alternating political regimes have found it convenient not to delve too deeply into these deals that have provided financial sustenance to various parties. Two years ago, there were reports that the Narendra Modi government was ready to bust this racket when it decided to closely investigate ONGC Videsh’s acquisition of Imperial Energy’s assets in Russia. But there has been no overt sign that they will do so. Not yet.

The Modi government has now blocked, for the time being, further investment by the state-owned Bharat Petroleum Corporation Ltd (BPCL) in the Mozambique gas block, suspecting foul play by the company at the time it acquired a 10 per cent stake. No specific charge of kickback has been made so far but an informal investigation continues.

Preabhat SinghAmong the various state-owned downstream companies which diversified into E&P activities, BPCL has been remarkably successful in wealth creation overseas. Its most rewarding investment was the one it made in the Mozambique block. In August 2008, Bharat PetroResources Ltd (BRPL) -- BPCL’s E&P subsidiary -- bought a 10 per cent stake in Area-1 Offshore of the Rovuma Block from the US energy major Andarko Petroleum for $ 75 million. During that month, Videocon also acquired a 10 per cent stake in the same block, through a subsidiary, for an equivalent sum. The government now claims that it has received information that Andarko had originally offered a 20 per cent stake in Area-1 to BPCL but the state-owned form bought only half of it. The rest was picked up by Videocon.

But five years later, in 2013, Videocon sold the stake to ONGC Videsh for $ 2.475 billion – making a profit valued at 33 times its original investment. ONGC Videsh, in turn, roped in Oil India by selling a 4 per cent stake. At around the same time, ONGC also acquired an additional 10 per cent stake in the gas block. Thus, three Indian PSUs currently hold a 30 per cent stake in Mozambique block at a total investment of $ 6 billion. The Modi government has been suspecting corruption in the deal but has decided not launch a formal inquiry.

It is difficult to understand why BPCL spurned the original offer to purchase a 20 per cent stake that the US company had proferred. An outside observer cannot comment on this inexplicable decision. The government is well within its rights to proceed against the PSU if it believes the PSU acted against national interest. But in doing so it has to convince the public that it is opposed to all forms of corruption, both real and speculative.

One can of course argue that BPCL’s investment was entirely speculative at that time and it may have baulked at the opportunity that was fraught with risks. The investment in Mozambique was speculative in nature as Rovuma was an exploration block and there was no certainty that it would discover either gas or oil at that stage. But it is still an investigation well worth pursuing. But what about the blatant instances of colossal corruption in the petroleum sector which the Modi government is fully aware of? Can a government go soft on certain forms of corruption and be harsh the others?

Last year, Prabhat Singh, the CEO of Petronet LNG Ltd (PLL), disclosed that the 5 per cent equity stake at par value which Qatar’s RasGas committed to Indian PSUs was scuttled by vested interests in India. While negotiating the 7.5 million tonne per annum LNG deal with RasGas, the Indian side bargained for and secured a commitment in the contract that it would give PLL a 5 per cent equity stake in Qatar’s upstream company. RasGas had already accommodated KosGas, the Korean company, another major LNG importer, with a similar equity stake. PLL, which has been floated by the four Indian oil and gas PSUs, urged ONGC, one of its promoters, to acquire the committed stake.

Over the last 54 years, ONGC’s overseas subsidiary, ONGC Videsh Ltd, has been desperately scouting for viable oil and gas assets overseas. It has turned out to be an extremely difficult job and, in the process, it ran into problems with certain assets which were in geopolitically insecure places.

In comparison, the asset in Qatar -- and that too at par value -- could have been a highly valuable asset for it. Why did ONGC shy away from the opportunity? Who persuaded ONGC not to exercise the contractual provision? A powerful formal bureaucrat – who was the country’s cabinet secretary – acts as the ambassador of the LNG lobby. He was known to be a very close friend of the then ONGC chairman. Obviously, this could not have been possible without the consent of the political boss who must have got a monetary reward for not invoking this provision in the contract. RasGas also ducked its commitment to supply the entire 7.5 million tonnes of LNG “without extracting higher hydrocarbons”. The second tranche of 2.5 million tonnes happens to be lean LNG.

This is a case where the Modi government should have ordered an investigation. Why did it shy away from doing so? True, the Prime Minister of the country cannot be expected to know the nitty-gritties of the case unless his attention is drawn to it. The secretary in the Ministry of Petroleum and Natural Gas, who reports to the petroleum minister, presides over the affairs of Petronet LNG. For some inexplicable reason, he also chose to stay mum.



To download the latest issue 'Volume 26 Issue 16 - November 25, 2019', click here
Petro Intelligence [FREE Access]
BPCL Selloff: Indian Oil Corp Holds The Key To Price Bid
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Corruption Stance: Soft On Some, Harsh On Others
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Are Energy Sector Initiatives Missing Energy Imperatives?
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Here We Go Again – Tellurian LNG,More Questions Than Answers
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Foreign Investment
NGC Energy To Build LPG Terminal In Krishnapatnam Port
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Overseas Investment
ONGC Videsh Qualifies To Bid For Block In Colombia
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Gas Scene
Global and Domestic Natural Gas Price Trends
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Asia’s (excluding China) gas production remained flat from 2010
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Natural Gas - Import Dependency
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Evolution of natural gas consumption in India
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Sector Wise Demand And Consumption Of Natural Gas - September 2019
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Domestic Gas Scene in September 2019
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Gas Demand: Potential & Actual*
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Natural Gas consumption pattern - India (2018-19)
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Coal Bed Methane (CBM) Gas Development In India
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The Global LNG Market - Rising Capacity
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A ‘Realistic’ Sector-wise Gas Demand Projection
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Historical Production & Consumption Pattern Of Natural Gas
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Natural Gas Price Declines Globally And In India
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Performance Story Of Petronet LNG’s West Coast Regasificaction Terminals
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Domestic Natural Gas Scene in August 2019
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PNG Penetration Seems Hitting LPG Marketing
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Trends in Natural Gas Price: Global and Domestic (June 2019)
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Sector-wise Demand And Comsumption Of Natural Gas
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Demand & Fuel Mix For Indian Power Sector, Alternative Scenario’s For Gas Demand
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Data Section
Monthly Upstream Data
Monthly Downstream Data
Historical database
Data Archives
Special Database
Oil Demand & Supply: An OPEC Projection
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Surge In Petroleum Products Import In October 2019
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Crude Oil Import Falls In October Reflecting Slowdown In Economy
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Power Deficit: Region-wise Position For October 2019
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Indian Rig Count vs. Indian Basket Crude Price In September 2019
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Finally, Passenger Vehicle Sale Registers Marginal Growth In October
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Trend In Indian crude oil basket price in October 2019 (in $ per bbl)
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Crude Processing company-wise, sector-wise and processing against capacity
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Update : Refining capacity, total, company-wise, refinery-wise and sector-wise
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India’s Energy Outlook 2040
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Update: Oil Import - Volume And Value
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Petrochemical Business Outlook
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Weightage of crude oil, natural gas and petroleum products in Wholesale Price Index (WPI)
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Petroleum Products Consumption Growth: The Present And History
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Oil India Limited: Reserve Base, Operating Performance
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Indian Basket Crude oil price In September 2019
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Oil India’s Domestic & Overseas E&P Assets: An Update
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Tenders [FREE Access]
ONGC
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ONGC
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