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Moily leaves ONGC, OilMin, DGH in the lurch

Former oil minister in a note to petroleum secretary had said ONGC taking the Centre to court showed 'signs of systemic failure' and 'matter was never brought to my notice'

S C Anantharaman  |  New Delhi 

M Veerappa Moily

Often, you hear of a scion taking his/her family to court over internal family disputes. But can you imagine a leading public sector organisation taking its major stakeholder, the central government, to court?

Unprecedented perhaps, but this is what Oil and Natural Gas Corporation (ONGC) has done; it has dragged the Centre to the Delhi High Court. The kernel of ONGC's complaint is the alleged theft of 18 billion cubic metres of natural gas since 2009 by Reliance Industries Ltd (RIL) from adjacent ONGC blocks in the Krishna-Godavari basin.

(A PTI report has said that at the hearing on May 29, ONGC told the court it had lost gas worth Rs 30,000 crore as a result of RIL exploiting gas from the corporation's blocks in the KG basin. The Centre's counsel told the court officials of RIL, ONGC and Directorate General of Hydrocarbons (DGH) met on May 23 and decided to appoint an expert panel to study the issue. A hearing on the matter is scheduled for August 12).

ONGC had moved court on May 15, when the entire nation's attention was focussed on the results of the general elections, to be announced the following day (May 16). Therefore, the ONGC move did not get the attention it deserved. Naturally, the entire media was focused on the unprecedented political event.

But one man was rattled by the ONGC move - then petroleum minister M Veerappa Moily. But more on Moily later.

In its petition, ONGC alleged the theft had occurred due to lack of vigilance of the DGH and the petroleum ministry and their failure to take precautionary steps. ONGC also alleged the ministry and RIL didn't adhere to the globally-accepted mechanism mentioned in the production-sharing contract signed between the Centre and RIL for Block KG-DWN-98/3.

ONGC believes RIL's D6-A5, D6-A9 and D6-A13 wells, drilled close to the KG-DWN-98/3 block boundary, may be draining gas from the G-4 field, while well D-6-B-8 may be draining gas from the DWN-D-1 field of the KG-DWN-98/2 block.

Thus, ONGC is specific on where the gas drainage is believed to have taken place. Its petition, therefore, seeks the court directs the Centre to set up an independent agency to establish the amount of gas drawn by RIL and apportion ONGC's share. Now, it is for the court to consider the merits of the case and decide what steps need to be taken if it finds ONGC's grievances to be genuine.

To return to Moily, he was shaken. He knew the implications of ONGC's writ; it was not a small company, without any reputation of its own. ONGC is a public sector corporation, designated as one of the coveted Navaratna companies by none other than the government.

But Moily was helpless. The election results were out and he knew he was losing the petroleum and natural gas portfolio. So, the only thing he could do was send a note to Petroleum Secretary Saurabh Chandra. This is what he did on May 22, seven days after the writ was filed by ONGC and four days before a new minister was appointed.

Why he did this only Moily can explain. But the contents of the note are interesting, and revealing. Moily begins by saying "it is an extremely serious matter, in which the government-owned company has taken recourse to a writ petition against its largest stakeholder, the Union of India, and its regulatory agency, DGH, alleging omissions and commissions on their part".

Second, Moily wanted the petroleum secretary to inquire and take appropriate action on whether ONGC was justified in filing the petition. Third, the minister wanted to fix responsibility, either within the ministry, DGH or ONGC, for mishandling the matter and allowing it to escalate to this level.

Fourth, he said ONGC's move to make the Centre (through the petroleum secretary) and DGH respondents in the case showed "signs of systemic failure" and "needed immediate correction". Fifth, Moily said the "matter was never brought to my notice and I am not sure whether the secretary was briefed about the development".

Sixth, that Moily was furious with ONGC was obvious; he said, "It will be absolutely necessary to examine at what level this decision (to file a petition) was taken in ONGC and why the company did not feel it appropriate to give an advance intimation/notice to the ministry before taking such a drastic step."

It is for readers to judge why Moily wrote the note. But one thing is clear - when he says the matter was never brought to his notice, he has, at a go, left in the lurch the ministry, ONGC and DGH.

Only time will tell how far this is right. But this particular dispute was already public knowledge. A book (titled Gas Wars) released in March this year has almost a page (page 403) devoted to this. The authors say: "There was, in late 2013 and early 2014, a major dispute between RIL and ONGC, with the public sector company accusing its private sector counterpart of 'encroaching' on its territories in the KG basin…This dispute had first cropped up in October 2013 and was continuing till the time this book was being completed in March 2014." The book adds on February 11, ONGC "wrote to its administrative ministry, asking for a 'neutral expert' to be appointed" to ascertain whether RIL was draining oil from ONGC's wells.

The book goes on to give details (too lengthy to reproduce here) about the actual wells involved and efforts to resolve the dispute. But suffice it to point out if the authors of the book were aware of the dispute in February, it is strange Moily, as petroleum and natural gas minister, was not.

The nation is bound to hear more of this case in the days to come. The previous government had already decided to increase the price of natural gas from the KG basin from April 1. But the increase could not be implemented from that date, owing to the general elections and rulings in this regard by the Election Commission. Now, after, two months have passed, there is bound to be pressure to effect the increase.

Apart from the ONGC writ, there is a first information report filed by the Kejriwal government on the basis of complaints by T S R Subramanian, former Cabinet Secretary; E A S Sarma, former secretary; R H Tahiliani, former chief of naval staff; and Kamini Jaiswal, advocate, Supreme Court. This, too, relates to contracts given for exploration and drilling in the KG basin.

Since ONGC has made a plea to the Delhi High Court to set up an independent agency to establish the amount of gas allegedly drawn by RIL and apportion its share, the price factor may also come into the picture. It will, therefore, be interesting to watch how the cases take shape and how the Modi government resolves the gas pricing issue.

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First Published: Wed, June 04 2014. 00:49 IST