CBI lens on Videocon's Dhoot: Was Rovuma offshore a joy ride for oil firms?

Videocon's dealing with an SBI-led consortium being probed; complaint filed at instance of petroleum ministry which in 2013 under Veerappa Moily oversaw 10% of Videocon stake bought over by ONGC, OIL

In the volatile world of oil and gas, it is said the ability to take different calls based on the same geological risks is what creates a success story. Videocon exited its Mozambique asset in 2014 by selling 10 per cent to Oil and Natural Gas Corp (ONGC) and Oil India (OIL) for about $2.5 billion. ONGC Videsh (OVL) is still bearing the burden of the Imperial Energy asset in Russia.

But the success of Videocon Group Chairman Venugopal Dhoot in realising value out of the Mozambique deal is proving to be costly. The Central Bureau of Investigation (CBI) has booked Dhoot for alleged corruption in the financing of Mozambique oil and gas assets. The complaint, reportedly, has been filed at the instance of the petroleum ministry, which, in 2013, under M Veerappa Moily oversaw 10 per cent of Videocon stake being bought over by ONGC and OIL. The deal was done with Videocon Mauritius Energy after the group held a stake sale auction along with US firm Anadarko.

Even then, the group needed to reduce debt and the cash was needed to invest in its Brazil upstream properties. The group’s consumer business had stopped giving returns. But Dhoot’s company exited Mozambique after it had made good use of the risk it had taken in investing along with Anadarko in the virgin Rovuma Area 1 offshore block. When Videocon bought into the block in 2008, it was not known that the licence area had 75 trillion cubic feet natural gas. On being asked why OVL didn’t take part in the auction, a retired ONGC executive said they “didn’t want to risk on an unexplored field”. 

Bharat Petroleum Corporation had picked up 10 per cent, too, but when asked to bail out Videocon, it refused to take the risk. “ONGC and OIL decided to take the plunge after due process was followed. A committee of secretaries with at least 10 members approved the investment,” said a senior government official who was in the ministry then. “A third party was engaged to validate the reserve claims, so officers cannot be blamed with the benefit of hindsight,” he said.

By the time, ONGC via OVL and OIL bought the stake, the licence holders had finished seismic exploration and intended to commence exploratory drilling of up to three wells in the next one year. Videocon’s exit and the deal closure took about that much time, too.

The story goes that Dhoot’s brother R K Dhoot, a Rajya Sabha member belonging to Shiv Sena from 2002-2008, was close to the Congress. In late 1990s, when the Congress liberalised the oil and gas business, the group got a stake in the prolific Ravva field that was already discovered. 

These were days when stake purchase norms required that ONGC, the original licence holder, continues with 40 per cent share, while a foreign partner was mandatorily required in order to bring in the best in technology. Australia’s Command Petroleum that later sold its stake to Cairn India was the foreign partner initially. The son of one of ONGC’s earlier chairman, quite known in the oil industry as a go-to-man, was crucial in bringing this opportunity to the Dhoot family’s notice.

Videocon’s 25 per cent stake in Ravva field, now being held by insolvency professionals, is what lifted the sagging fortune of the group, which was earlier a pure consumer durable firm. “Ravva was a profitable investment from Day One. It was supposed to give 100 million barrels of oil but ended up producing 300 million barrels,” said an executive who spent a good part of his oil industry experience in that field. The group minted gold without even being an operator in the field.

The CBI case is reportedly covering only the financing aspect of the deal. At the time of giving a clearance to the OVL-OIL buyout of Videocon stake in the Rovuma Area 1, it was found that the lenders did not indulge in proper due diligence. The probe on the lending aspect could, however, just be a start point to further dig into the political connections of the group, said a former ONGC executive. Sources, however, warn a witch hunt of officials in the petroleum ministry or in the firms should not be done, especially at this juncture, since China has great influence in another block in the area. Area 4 is operated by Mozambique Rovuma Venture, a JV of Eni, ExxonMobil, and China National Petroleum Company.