CAG pulls up ONGC for slackness in monetising finds

Says firm shows healthy reserve replacement ratio, but output remains static

The Comptroller and Auditor General (CAG) has pulled up state-owned Oil & Natural Gas Corp (ONGC) for not placing desired emphasis on discovering oil and gas and being tardy in monetizing its discoveries.

CAG's report on Hydrocarbon Exploration Efforts of ONGC, which was tabled in Parliament today, expressed concern at the company's lack of adequate efforts and results in new fields and wanted the Oil Ministry to reset annual targets set out in MoU that the firm signs with the government.

"ONGC did not place the desired emphasis on its core exploration activity. Coupled with the low priority on exploration are the anomalies in MoU target setting and reporting as well as performance measurement which can potentially mislead the stakeholder," it said.

CAG said ONGC showcases a healthy reserve replacement ratio while production continues to remain static.

"ONGC was also tardy in monetizing its discoveries which contributed to low production," CAG said. "While external benchmarking of performance was not done, nationally ONGC had among the lowest efficiency in drilling compared to private as well as central public sector enterprise (Oil India Ltd) which led to non-achievement of work commitments and payment of liquidated damages," it said.

The official auditor also noted several deficiencies in operations (procurement, hiring and contracting).

"Though ONGC operates in a field of cutting edge technology, it did not have a system of independent assessment of its technical capacity which fails to assure its stakeholders," it said.

"Ministry of Petroleum and Natural Gas/ONGC ought to do ade-novo review of MoU targets placing desired emphasis on performance parameters directly linked to exploration."

"It should also be ensured that such targets and achievements are measured and reported on an appropriate basis to avoid misleading the stakeholders," CAG said.

Listing out deficiencies, CAG said less than 50% of the Basins were only able to meet 2D/3D survey targets as ONGC was tardy in purchase of seismic survey vessel.

ONGC lost the weather window for doing such surveys in offshore areas, due to delay in giving away of survey contracts.

"There was a shortfall of 332,855 metres and 109 wells in ONGC's exploration performance. Except Western Offshore Basin, none of the other Basins could drill the targeted exploratory wells," it said.

While ONGC-owned rigs were less efficient than the hired ones, the company took 7% to 16% extra days for drilling when compared to its own norms.

It recommended a review of Reserve Replacement Ratio (RRR) as a performance parameter for ensuring performance in exploration efforts.

"ONGC should formulate Basin wise norms...Speed up its processes for placement of survey contracts and efficient coordination to bridge the gap between requirement and availability/utilisation of the equipment and services procured to meet its exploration goals," it said.

The company, CAG said, should introduce transparency and competitive tension in the process of hiring consultants/experts.

"As suggested by the Planning Commission and as decided by its Board, ONGC must carry out an independent assessment of technology in vogue in the company to provide an assurance that it is indeed up-to-date," CAG report added.