Govt examining CAG report on irregularities in ONGC's rig hiring procedure

CAG had stated in Sept 2012 that ONGC deviated from standard tendering procedure and hired a rig from RIL without calling for competitive bids

The government is examining CAG allegations of irregularities in ONGC hiring a deep sea drilling rig from Reliance Industries and will take appropriate action, Oil Minister Dharmendra Pradhan said today.

The Comptroller and Auditor General (CAG) had in September 2012, stated that Oil and Natural Gas Corp (ONGC) "deviated from the standard tendering procedure and hired a rig viz Dhirubhai Deepwater KG-1 (DDKG-1) from RIL without calling for competitive bids for a period of four years on untenable grounds".

"The alleged irregularity in hiring of the rig DDKG-1 as observed by C&AG is being examined by the government and based on the outcome of the examination, appropriate action will be taken in the matter," Pradhan said in a written reply to a question in Lok Sabha.

ONGC had in May 2009 hired DDKG-1 from RIL for four years ending July 2013 without calling for competitive bids at an operating day rate of $495,000 for first 180 days and at $510,000 from 181st day onwards.

The effective day rate worked out to $563,488.

"ONGC informed that rig DDKG-1 was hired on assignment basis as an outcome of shortage of rigs in the market for drilling ultra-deep water acreages, subsequent to approvals in Executive Committee, Executive Purchase Committee and ONGC Board," he said.

The rig was hired to complete minimum work programme of drilling exploratory wells. "ONGC has also stated that rig DDKG-1 was hired on assignment basis on such rates, terms and conditions that there is no loss to ONGC," he said.

Stating that ONGC did not obtain competitive bids before hiring the rig from RIL, CAG had in its September 2012 report said the state-owned firm had in July 2009 projected "a situation of emergency" to acquire an ultra-deep water rig by deviating from the standard tendering procedure of competitive bidding.

The company drilled seven ultra-deep wells using DDKG-1 rig till December 2010. Of these seven well, three were appraisal wells, drilled to confirm previous finds.

CAG had not accepted the ONGC management reply that the rig was hired due to shortage of rigs in the market.

"Considering the rig moratorium granted by the government and availability of an alternate rig by December 2010, the situation did not warrant acquiring of the rig on emergency basis by deviating from the standard bidding procedure".

Pradhan said ONGC was liable to pay penalty as cost of unfinished committed work programme and so hired DDKG-1 to complete that.