Operational error costed GSPC Rs 513 crore: CAG report

An operational error in drilling an offshore gas exploration well has costed Rs 513.35 crore to the state-run GSPC, a CAG report tabled on the floor of the Gujarat Assembly today noted.
The observation was made by the Comptroller and Auditor General of India (CAG) in its audit report on the functioning of Public Sector Undertakings of Gujarat.
The CAG was referring to the faulty drilling work carried out by the Gujarat State Petroleum Corporation (GSPC) in one well, named KG-21, in the KG Basin.
As per the audit report, the company had incurred an expenditure of Rs 478.98 crore on the offshore drilling work at the KG-21 offshore well.

However, due to an operational error during the drilling, which was noticed by the company at much later stage, the well may not yield any gas despite the expenditure of Rs 478.98 crore, noted the CAG.
In addition, the GSPC had to spend an additional Rs 34.37 crore to make some adjustments due to the faulty work, said the report.

"The company found gas reserves in the KG-21 well in exploration stage, but, may not be able to develop the same for commercial purpose. This was due to the KG-21 well being drilled outside the template," said the audit report.

"As the KG-21 well could not be developed at present due to the operational errors as conceded by the management, the exploration cost of Rs 478.98 crore incurred on the same remained idle," said the CAG.
Apart from this unfruitful expenditure, the CAG also noted that the GSPC spent Rs 34.37 crore for alignment works, which was necessitated due to the drilling error.
In its explanation GSPC said the exploration cost was not wasted as the objectives were met and "converting an exploration well into a development well was not always practicable in the offshore oil fields".
Not convinced with the answer, the CAG said "..Exploration objectives were fully met only when the gas discovered in a well was developed for commercial extraction.