CAG raps ONGC for Rs 8K cr loss due to poor rig management

The Comptroller and Auditor General of India (CAG) has rapped India's largest oil and gas producer ONGC for poor planning in hiring and use of drilling rigs that resulted in a loss of Rs 7,995 crore.
In a report tabled in Parliament today, CAG said the state-owned firm lacked uniformity in preparation of annual rig requirement plan (RRP), delayed rig acquisitions and hiring, was inconsistent in deployment and had inefficient repair and refurbishment policy.
ONGC's non-productive time or idling time of rigs ranged between 19 and 23 per cent over 2010-14. "The bulk of idling time costing Rs 6,418 crore was due to factors which could have been controlled by the company," CAG said.

The company also did not adhere to safety procedures and continued to do drilling/testing operations even after one anchor of its rig Sagar Vijay had snapped.
As a result, another anchor of the rig snapped which caused drifting of the rig from its location. Consequently, the well had to be closed and abandoned. As a result, expenditure of Rs 1,577.27 crore incurred by ONGC on drilling of the original location and drilling of a relief well by using another rig proved avoidable.
"The insurer did not honour the claim of ONGC on the ground that the latter had not followed recognised safe operating practice," the report said.

Also, the company did not adhere to the repair schedule for dry dock management and major lay-up repairs of jack-up rigs which was against an efficient operational practice.

Failure on the part of the company led to a situation wherein rigs were being operated with outdated/obsolete equipment, CAG said.
CAG said ONGC had prepared 5-year rig requirement on the basis of RRP, which included non-operational idling time of rigs that was entirely controllable by the company.
Annual Rig Deployment Plans (RDPs) were prepared on the basis of RRP. "Therefore, the Annual Rig Deployment Plans had an in-built inefficiency," it said.

While there was no uniformity in preparation of annual RDPs among the Assets and Basins of ONGC, the company failed to decide a policy on acquisition of new offshore rigs for over a decade -- from 2002 to 2015.
Meanwhile, four out of six owned offshore rigs outlived their economic usable life of thirty years.
CAG asked ONGC to ensure that the plans (five year plan, annual plan, rig requirement plan, rig deployment plan) are complete and consistent with each other and are complied with.
The situation where one out of every three wells drilled is un-planned needs to be corrected, it said, adding that the controllable non-productive time of past periods should not be loaded to future rig requirement plans and efforts to be taken to reduce such non-productive time.